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Music has its cycles, and obviously nothing lasts forever... But aside from Kurt’s death, what do you think was the real reason the Seattle scene started to lose momentum?
It was a mix of things. Alice In Chains had a large gap between 1992's "Dirt" and 1995's self-titled album, and then they didn't release another album until the 2000s. Soundgarden broke up in 1997, but "Down on the Upside" was already less grungy than their previous albums. Pearl Jam was consistent but by 1994, they had hit singles that didn't really resemble Grunge as much anymore (still great though). And the other bands, like The Melvins and Mudhoney weren't mainstream enough to carry the scene like that.
On top of that, you had all these other styles of Alternative music that were breaking into the mainstream (Nine Inch Nails, Smashing Pumpkins, Green Day, The Offspring, etc.). Not to mention the non-Seattle bands that were deemed "too" influenced by Grunge were not treated great by music critics (Bush, silverchair, Days of the New, etc.).
Seattle itself was also starting to become heavily gentrified and move expensive to live in which is never a great thing for a music scene.