Ether has suffered a sharp decline in early 2026, falling 21% so far this quarter, yet Fundstrat’s head of research Tom Lee argues the sell-off is not driven by weakening fundamentals. Instead, he points to structural market factors that have temporarily weighed on prices despite growing network activity.
Ethereum Fundamentals Remain Strong
According to Lee, Ethereum’s on-chain data continues to show expansion rather than contraction. Daily transactions reached a record 2.8 million in mid-January, while active addresses climbed to roughly 1 million per day during 2026. This trend contrasts sharply with previous downturns in 2018 and 2022, when declining prices were accompanied by falling usage and wallet activity.
Lee notes that the divergence between price and network growth suggests Ether’s weakness is not fundamentally driven, but instead reflects broader shifts in investor behavior.
Lack of Leverage and Gold “Vortex”
Two main forces are suppressing Ether’s price, according to Lee. First, leveraged trading has yet to return to crypto markets following the October liquidation event, limiting speculative upside. Second, surging interest in precious metals has redirected capital away from risk assets, creating what Lee describes as a gold-driven “vortex” pulling liquidity from crypto markets.
Despite the downturn, Ethereum-focused treasury firms have continued accumulating ETH. Lee described the pullback as attractive relative to Ethereum’s long-term role in financial infrastructure, suggesting current prices may not reflect its underlying utility.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.