ETH’s Existential Crisis: Greedy L2s and the Death of a Dream

by

ETH‘s Existential Crisis: Greedy L2s and the Death of a Dream

ETH’s Existential Crisis: Greedy L2s and the Death of a Dream

As the Ethereum (ETH) community continues to grapple with the reality of its declining appeal as an investment, a crypto venture capitalist has identified the root cause of this existential crisis: the insatiable greed of layer-2s.

“The #1 cause of this is greedy Eth L2s siphoning value from the L1 and the social consensus that excess token creation was A-OK,” Castle Island Ventures partner Nic Carter said in a March 28 X post, his words dripping with the sarcasm of a disappointed lover.

The Self-Inflicted Wound

“ETH was buried in an avalanche of its own tokens. Died by its own hand,” Carter said, his words echoing the tragic fate of a once-promising investment that has been ravaged by its own excesses.

“A $225 billion market cap network that is seeing declines in transaction activity, user growth and fees/revenues. There is no investment case here. As a network with utility? Yes. As an investment? Absolutely not,” Lekker Capital founder Quinn Thompson said in a March 28 X post, his words a stark reminder of the harsh realities of the crypto market.

The ETH/BTC ratio — a metric that measures Ethereum’s relative strength compared to Bitcoin — has hit a five-year low, according to TradingView data. At the time of publication, Ether is trading at $1,894, down 5.34% over the past seven days, according to CoinMarketCap data.

As CryptoMoon Magazine reported in September 2024, the fee revenue for Ethereum had “collapsed” by 99% over the previous six months, a victim of the very layer-2s that were supposed to be its saviors.

Cinneamhain Ventures partner Adam Cochran had once held out hope that Based Rollups could solve the issue of Ethereum’s layer-2 networks pulling liquidity and revenue from the blockchain’s base layer. But it seems that hope has been extinguished, leaving only the cold, harsh reality of a dying investment.

Despite the optimism that had built up towards the end of last year, with some even predicting that Ether would reach $10,000 in 2025, the reality is that the crypto market has been in a downward spiral, and ETH has been dragged down with it.

Standard Chartered’s revised end-of-year price estimate for ETH has been slashed from $10,000 to $4,000, a 60% reduction. But amidst all the doom and gloom, some crypto traders remain “insanely bullish” and argue that Ether could be the “best opportunity in the market.”

Read More

2025-03-29 09:02