StanChart revises Ethereum’s 2025 projection to $4000, warns of ‘value destruction’ caused by L2s

Standard Chartered has revised its year-end terms people for Ethereum (ETH) to $4,000 — down from its erstwhile forecast of $10,000 — citing structural weaknesses successful the network’s economical model.

In a probe study titled “Ethereum — Midlife Crisis,” the lender’s caput of integer assets research, Geoffrey Kendrick, argued that Ethereum’s displacement to proof-of-stake and the emergence of Layer-2 (L2) networks person resulted successful an erosion of the worth captured by the main blockchain.

He estimated that Base, the starring L2, unsocial has removed $50 cardinal successful marketplace capitalization from Ethereum’s halfway ecosystem.

According to the report:

“Layer 2 blockchains were meant to amended ETH scalability, but we estimation that Base, a cardinal Layer 2, has removed $50 cardinal from ETH’s marketplace cap. Assuming nary alteration successful absorption from the Ethereum Foundation, we spot ETH-BTC continuing to caput lower.”

Concerns implicit L2 impact

The study pointed to aggregate factors contributing to Ethereum’s underperformance. It stated that portion the web inactive dominates successful DeFi, NFTs, and tokenized assets, its quality to seizure worth has diminished.

According to Kendrick, the motorboat of the Dencun upgrade successful March 2024 exacerbated the inclination by further empowering L2 solutions, which present extract a larger stock of transaction fees portion reducing users’ costs.

He wrote:

“A Layer 2 that was developed to code the occupation of scalability successful Ethereum is passing up each of the growth, portion the main protocol is signaling less.”

The study suggested that Ethereum’s GDP nonaccomplishment to L2s could surpass $50 cardinal implicit clip unless measures are introduced to redirect much economical worth backmost to the main chain.

Kendrick projected that Ethereum see a “super tax” connected L2s, akin to however immoderate governments taxation foreign-owned mining companies extracting excess profits.

ETH-BTC ratio decline

Due to these structural concerns, Standard Chartered besides chopped its Ethereum-Bitcoin (ETH-BTC) forecast contempt the ratio being astatine all-time lows.. The lender predicted that the ratio would diminution to 0.015 by year-end — a important driblet from the bank’s erstwhile people of 0.05.

The report’s bearish outlook comes amid a broader statement implicit Ethereum’s semipermanent viability and whether its scaling solutions, designed to amended transaction efficiency, could extremity up benefiting third-party networks much than the Ethereum basal furniture itself.

Despite the downgrade, the slope maintained a much optimistic outlook for Ethereum’s semipermanent prospects, forecasting a betterment to $6,000 by 2026 and $7,500 by 2027.

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