StanChart revises Ethereums 2025 projection to $4000, warns of value destruction caused by L2s
Standard Chartered has revised its year-end price target for Ethereum (ETH) to $4,000 down from its previous forecast of $10,000 citing structural weaknesses in the networks economic model.
In a research report titled Ethereum Midlife Crisis, the lenders head of digital assets research, Geoffrey Kendrick, argued that Ethereums shift to proof-of-stake and the rise of Layer-2 (L2) networks have resulted in an erosion of the value captured by the main blockchain.
He estimated that Base, the leading L2, alone has removed $50 billion in market capitalization from Ethereums core ecosystem.
According to the report:
Layer 2 blockchains were meant to improve ETH scalability, but we estimate that Base, a key Layer 2, has removed $50 billion from ETHs market cap. Assuming no change in direction from the Ethereum Foundation, we see ETH-BTC continuing to head lower.
Concerns over L2 impact
The report pointed to multiple factors contributing to Ethereums underperformance. It stated that while the network still dominates in DeFi, NFTs, and tokenized assets, its ability to capture value has diminished.
According to Kendrick, the launch of the Dencun upgrade in March 2024 exacerbated the trend by further empowering L2 solutions, which now extract a larger share of transaction fees while reducing users costs.
He wrote:
A Layer 2 that was developed to address the problem of scalability in Ethereum is passing up all of the growth, while the main protocol is recording less.
The report suggested that Ethereums GDP loss to L2s could surpass $50 billion over time unless measures are introduced to redirect more economic value back to the main chain.
Kendrick proposed that Ethereum consider a super tax on L2s, similar to how some governments tax foreign-owned mining companies extracting excess profits.
ETH-BTC ratio decline
Due to these structural concerns, Standard Chartered also cut its Ethereum-Bitcoin (ETH-BTC) forecast despite the ratio being at all-time lows.. The lender predicted that the ratio would decline to 0.015 by year-end a significant drop from the banks previous target of 0.05.
The reports bearish outlook comes amid a broader debate over Ethereums long-term viability and whether its scaling solutions, designed to improve transaction efficiency, could end up benefiting third-party networks more than the Ethereum base layer itself.
Despite the downgrade, the bank maintained a more optimistic outlook for Ethereums long-term prospects, forecasting a recovery to $6,000 by 2026 and $7,500 by 2027.
The post StanChart revises Ethereums 2025 projection to $4000, warns of value destruction caused by L2s appeared first on CryptoSlate.
Text source: CryptoSlate
