Is Ethereum Falling Below $1,600 a Red Flag or a Green Signal to Buy?

Ether (CRYPTO: ETH), the native token of the Ethereum blockchain, reached its all-time high of $4,946 on Aug. 22, 2025. But as of this writing, it trades below $1,600. Does that pullback represent a buying opportunity for long-term investors, or will it sink even lower this year?

Why did Ether plunge nearly 70%?

Ether was originally a proof-of-work (PoW) cryptocurrency like Bitcoin (CRYPTO: BTC), which could be mined with powerful computer chips. But in 2022, Ethereum transitioned into a proof-of-stake (PoS) blockchain, which no longer supported mining. However, it added support for smart contracts, which allowed developers to create decentralized apps on its blockchain, and staking, which enabled investors to lock up their Ether to earn interest-like rewards.

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After that transition, Ether was valued by the growth of its developer and staking ecosystem rather than its scarcity. As of last September, Ethereum hosted 31,869 active developers, making it the largest blockchain-based developer platform. Ethereum's Layer 1 (L1) blockchain is slower than newer PoS blockchains like Solana (CRYPTO: SOL), but it's keeping up with its Layer 2 (L2) rollups, which bundle its transactions and process them off-chain at higher speeds.

The market's enthusiasm for Ethereum's booming developer ecosystem propelled its price to record highs last year. Still, it fizzled out as inflation, elevated interest rates, high Treasury yields, geopolitical conflicts, and other macro headwinds chilled the crypto market. Many investors also took profits in Ether to invest in AI stocks and upcoming IPOs, such as SpaceX.

As Ether's price fell, some companies -- like Bitmine (NYSE: BMNR) -- bought more tokens for their Ethereum treasuries. However, those purchases couldn't prop up Ether's price, and they're now sitting on billions of dollars in unrealized losses. If those Ethereum treasury companies liquidate their holdings to raise more cash, they could drive Ether's price even lower. That sell-off could trigger even more leveraged liquidations.

Is it smarter to buy or avoid Ether?

I'm bullish on Ether's long-term prospects, but I don't think its sell-off is over. The wave of hot IPOs -- including SpaceX, OpenAI, and Anthropic -- could pull more cash out of the crypto market, and the persistent macro headwinds could keep new investors on the sidelines.

That said, it might be worth nibbling on if you don't plan to sell your tokens for at least a few more years. But if you can't stomach the near-term volatility, it's better to wait for those headwinds to dissipate and its price to stabilize before starting a new position.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.