Citigroup has revised its Ethereum price projections, forecasting that under a baseline scenario, the cryptocurrency will decline to $4,300 by the end of this year, down from its current level of $4,515. However, the bank also outlined alternative scenarios, predicting Ethereum could reach $6,400 in a bullish environment or fall to $2,200 under bearish conditions.

According to Citigroup analysts, network activity remains a crucial driver of Ethereum's value, though much of the recent growth has occurred on Layer 2 networks. The "transmission effect" of this value to Ethereum's mainchain remains unclear.

In blockchain terminology, Layer 1 refers to the underlying infrastructure (mainchain), while Layer 2 encompasses off-chain systems or independent blockchains built on top of Layer 1. Citigroup assumes that only 30% of Layer 2 activity contributes to Ethereum's value, suggesting the current price exceeds the bank's activity-based model valuation, primarily due to strong capital inflows and enthusiasm surrounding tokenization and stablecoins.

The bank noted that while Ethereum ETF inflows are smaller in scale compared to Bitcoin, they generate a greater price impact per unit of capital. However, given Ethereum's smaller market capitalization and lower recognition among new investors, Citigroup expects Ethereum ETF inflows to remain limited.

Citigroup analysts believe macro-level support factors are limited. Additionally, with the S&P 500 approaching the bank's 6,600-point target, analysts do not anticipate significant gains in risk assets.