Key Takeaways:
Structural challenges and rising Layer 2 use fuel renewed market discussions.
The focus shifts toward protocol refinements and asset tokenization to adjust investor views.
Broader technical debates open new questions on Ethereum’s evolving market role.
Standard Chartered lowered its Ethereum (ETH) price forecast for the end of 2025 to $4,000, down from its previous estimate of $10,000, citing structural weaknesses and increasing competition.
In its latest research report, the bank points to several factors weighing on Ethereum’s long-term outlook, including the growing impact of Layer 2 (L2) solutions and declining dominance relative to Bitcoin.
Ethereum Faces Pressure from Layer 2 Solutions
The report attributes much of Ethereum’s decline to the rapid expansion of Layer 2 solutions, such as Coinbase’s Base, which were designed to improve Ethereum’s scalability but have inadvertently diluted demand for ETH itself.
Instead of supporting ETH’s price, the adoption of L2 networks has shaved off $50 billion from its market capitalization.
Standard Chartered expects this trend to continue, further diminishing Ethereum’s influence.
Ethereum’s ETH/BTC Ratio Projected to Fall Further
The bank also highlights Ethereum’s weakening position relative to Bitcoin.
The ETH/BTC ratio, which measures Ethereum’s value against Bitcoin, is projected to drop to 0.015 by the end of 2027.
This suggests that Ethereum may continue underperforming compared to Bitcoin, reinforcing Bitcoin’s dominance as the leading cryptocurrency.
While Ethereum’s comparative weakness against Bitcoin raises concerns, there remains one area that could stabilize its position.
Tokenizing Real-World Assets (RWAs) Could Stabilize Ethereum
Despite facing structural challenges, Ethereum could retain its 80% share of blockchain security if the tokenization of real-world assets (RWA) accelerates.
However, Standard Chartered suggests that the Ethereum Foundation would need to implement assertive policies to counteract declining demand.
One proposal outlined in the report involves imposing taxes on Layer 2 solutions to redirect value back to Ethereum’s main chain. However, the report considers this approach unlikely.
Buterin Suggests Layer 1 Gas Scaling to Strengthen Ethereum
While Standard Chartered focuses on macroeconomic factors, Ethereum co-founder Vitalik Buterin has proposed technical solutions to strengthen the network.
In a February blog post, Buterin argued that scaling Layer 1 gas fees by approximately ten times could enhance long-term network value, even as L2 solutions continue to grow.
Buterin lists several use cases requiring increased Layer 1 capacity, including enhanced censorship resistance for L2s, efficient cross-L2 transfers, streamlined mass exits, ERC-20 token issuance, keystore wallet operations, and L2 proof submissions.
He contends that expanding L1 gas capacity within the next one to two years could improve Ethereum’s performance, security, and cost efficiency, making the network more resilient amid rising competition.
Rethinking Ethereum’s Trajectory
The revised outlook for Ethereum prompts a reevaluation of what drives value in digital assets.
Structural shifts and technological adjustments now form the foundation of the conversation, steering it toward a more nuanced understanding.
This moment encourages investors to question longstanding assumptions and consider alternative perspectives.
Engaging with these insights can lead to more adaptive strategies in the face of uncertainty.
The narrative is shifting, inviting each participant to contribute to a more informed and reflective investment approach.
Frequently Asked Questions (FAQs)
Changing legal frameworks can alter Ethereum’s appeal by shifting investor risk profiles and cost dynamics. Tightened guidelines may force network upgrades and modify long-term adoption trends, affecting market outlook.
An active developer network fuels protocol enhancements that boost efficiency and security. Collaborative coding efforts may introduce unique features, fostering network robustness and diverse user participation.
Global economic shifts, like inflation and interest rate changes, affect crypto investments. These trends can shift market risk profiles and liquidity, clearly influencing Ethereum’s overall valuation.
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