Why is Citi Group Bearish on ETH?

2025-09-16

Ethereum remains the second-largest cryptocurrency by market capitalization, yet Wall Street heavyweight Citigroup has delivered a cautious outlook.

According to a recent report, the bank expects ETH to trade at $4,300 by year-end, a decline from current levels near $4,500. While Citi’s base case suggests only a mild retracement, its bear scenario points to $2,200, while the bull case allows for a surge toward $6,400.

So why is Citi bearish on Ethereum in the near term? The reasoning ties to network fundamentals, the rise of layer-2 scaling solutions, and limits on ETF-driven demand.

Key Takeaways

Citigroup projects ETH at $4,300 by year-end, with a wide forecast range of $2,200 to $6,400.
Layer-2 adoption clouds valuation, as only 30% of activity is assumed to flow back to Ethereum’s base layer.
ETF inflows remain smaller than Bitcoin’s, despite having outsized impact per dollar.
Macro support is limited, with equities near Citi’s S&P 500 target.
Current ETH price sits above Citi’s model estimates, making the bank cautious.

Citi’s Price Targets for Ethereum

Citigroup’s analysts laid out three scenarios for Ethereum’s price trajectory:

Base Case: $4,300 by year-end, slightly below current prices.
Bear Case: $2,200, reflecting weaker network activity and risk-off sentiment.
Bull Case: $6,400, supported by higher adoption and stronger ETF inflows.

While this wide range acknowledges uncertainty, the bank emphasizes that the base case points to limited upside in the short term.

The Layer-2 Effect

Ethereum’s success has always been tied to network activity. Transaction fees, on-chain applications, and liquidity all flow into ETH demand. However, much of the recent growth in activity has shifted to layer-2 solutions like Arbitrum, Optimism, and Base.

These networks settle on Ethereum but capture significant value themselves, reducing the “pass-through” effect to the base chain. Citi assumes that only about 30% of layer-2 activity translates into ETH valuation, which means the token may be trading above what its activity-based model suggests.

This layer-2 dominance is a double-edged sword. It scales Ethereum’s ecosystem but dilutes the direct revenue and demand drivers for ETH.

ETF Inflows: Helpful but Limited

Ethereum ETFs have been launched in several markets, and while inflows have boosted sentiment, Citi notes they are much smaller than Bitcoin’s. However, each dollar flowing into ETH ETFs has shown a greater price impact than Bitcoin’s, owing to Ethereum’s smaller market cap.

Even so, the bank expects ETF inflows to remain relatively muted, limiting their ability to sustain a significant rally in ETH prices.

Macro Conditions Offer Little Extra Help

From a broader perspective, Citi is not banking on equities or risk assets to provide strong tailwinds for Ethereum. With the S&P 500 already near the bank’s year-end target of 6,600, they see limited upside from risk-on flows. This caps Ethereum’s near-term bullish potential from macro factors.

Why Citi Sees ETH as Overvalued Right Now

The heart of Citi’s bearish call lies in valuation. By the bank’s models, ETH is currently trading above what network activity would justify, especially once the dilution effect of layer-2 scaling is factored in. While strong inflows and optimism around tokenization and stablecoins have kept prices elevated, Citi views these as temporary drivers rather than sustainable long-term fundamentals.

Final Thoughts

Citigroup’s cautious stance on Ethereum highlights a key tension for the asset. On one hand, ETH remains at the center of tokenization, DeFi, and stablecoin ecosystems. On the other, the shift of activity to layer-2s and limited ETF inflows are capping its near-term valuation.

For investors, the key takeaway is that Ethereum may face short-term downside risk, but long-term potential remains strong if adoption continues and more activity flows back to the base layer. Whether ETH leans toward Citi’s bear case or its bullish scenario will depend on how the network captures value from its scaling solutions in the months ahead.

FAQ

What is Citi’s Ethereum price prediction?

Citi forecasts ETH at $4,300 by year-end, with a bear case of $2,200 and a bull case of $6,400.

Why is Citi bearish on Ethereum?

The bank believes Ethereum’s valuation is stretched because much of the activity is on layer-2 networks, with only 30% passing through to the base chain.

How do ETFs impact Ethereum’s price?

Ethereum ETFs boost demand, but inflows remain smaller than Bitcoin’s. Their price impact per dollar is higher, but Citi expects overall flows to stay limited.