Standard Chartered has lowered its Ethereum value forecast for the tip of 2025, citing the growing dominance of layer-2 networks comparable to Base.
Recall that in January, the main international financial institution forecasted Ethereum to attain $10,000 by the tip of this yr, with Bitcoin (BTC) probably hitting $200,000. In a latest report, the financial institution slashed the Ethereum estimate to $4,000, representing a 60% drop.
This revision comes as ETH has underperformed massively amid the continuing market downturn in contrast to different high altcoins. For example, the asset is down by greater than 42% year-to-date, making it one of many greatest losers this yr.
Nevertheless, Standard Chartered‘s revised estimate is essentially due to the rising dominance of Layer-2 options, significantly Base, which the financial institution argues is extracting substantial worth from Ethereum with out reinvesting proportionally.
Standard Chartered: L2s Like Base Inflicting Monetary Pressure on Ethereum
The financial institution’s newest analysis calls consideration to the monetary pressure Ethereum faces as Layer-2 networks seize an growing share of transaction charges whereas contributing little to Ethereum’s core ecosystem.
Amongst these networks, the financial institution has recognized Base, developed by Coinbase, as a significant factor in Ethereum’s declining market capitalization. The research estimates that Base alone has redirected round $50 billion in worth away from Ethereum by retaining a good portion of its charge income.
In accordance to Standard Chartered, this development has weakened Ethereum’s total financial place and contributed to its underperformance in contrast to Bitcoin. For context, ETH is down 35.77% towards BTC this yr and 13.43% in March alone.
Standard Chartered identified that Ethereum’s personal community upgrades, together with the transfer to proof-of-stake in 2022 and the more moderen Dencun update in 2024, have inadvertently fueled this development.
These enhancements, whereas designed to improve scalability and scale back transaction charges, have additionally allowed Layer-2 options to flourish at Ethereum’s expense.
One subject raised within the financial institution’s evaluation is the idea of blockchain “GDP,” a metric used to consider financial exercise inside Ethereum’s ecosystem.
The findings point out {that a} rising portion of worth era is occurring exterior of the Ethereum mainnet, significantly on Layer-2 networks like Base. This has led to issues that Ethereum’s community is shedding its financial energy as extra earnings stream away from its core infrastructure.
Potential Measures
Standard Chartered means that Ethereum’s declining market share may speed up until proactive measures are taken. One proposed answer is the introduction of a tax on Layer-2 networks that retain extreme earnings with out reinvesting in Ethereum’s mainnet.
This may be comparable to the windfall taxes imposed on foreign-owned mining corporations that extract vital assets from a rustic with out offering equal native advantages.
The analysis additionally predicts that Ethereum’s relative worth to Bitcoin will proceed to drop, with the ETH-BTC ratio probably hitting 0.015 by 2027. If this projection holds, it will mark Ethereum’s lowest relative standing towards Bitcoin since early 2017.
Standard Chartered maintains that with out intervention from the Ethereum Basis or broader business motion, Ethereum’s underperformance relative to Bitcoin is probably going to persist.
DisClamier: This content material is informational and shouldn’t be thought of monetary recommendation. The views expressed on this article could embody the creator’s private opinions and don’t mirror The Crypto Primary opinion. Readers are inspired to do thorough analysis earlier than making any funding selections. The Crypto Primary just isn’t accountable for any monetary losses.
