ETH's Declining Appeal: L2s and Token Inflation?

Ethereum's Investment Appeal Under Scrutiny

Concerns are rising about Ethereum's (ETH) decreasing attractiveness as an investment. A prominent crypto venture capitalist, Nic Carter of Castle Island Ventures, points to two key factors: the siphoning of value from the main network by Layer-2 (L2) solutions, and a lack of community resistance to excessive token creation.

"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," Carter stated in a recent X post.

ETH's Market Performance

Lekker Capital founder Quinn Thompson went as far as declaring Ether "completely dead" as an investment, citing a $225 billion market cap network experiencing declines in transaction activity, user growth, and fees/revenues. The ETH/BTC ratio, currently at its lowest point in nearly five years (0.02260), supports this bearish sentiment. At the time of writing, Ether is trading at $1,894, down 5.34% over the past seven days.

This decline is further emphasized by a 17.94% drop over the past 30 days, according to CoinMarketCap data. Standard Chartered recently slashed its 2025 ETH price forecast by 60% to $4,000, highlighting the bearish market outlook.

Layer-2's Impact and Potential Solutions

A previous Cointelegraph Magazine report highlighted a 99% collapse in Ethereum's fee revenue over six months, largely attributed to L2 networks absorbing users, transactions, and revenue without contributing to the base layer. Adam Cochran of Cinneamhain Ventures suggested that "Based Rollups" could offer a solution by altering the incentive structures and impacting Ethereum's monetization.

Conflicting Perspectives

While some remain pessimistic, several traders express strong bullish sentiments. Prominent figures like Doctor Profit and Merlijn The Trader see Ether as a potentially significant investment opportunity.

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Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. The cryptocurrency market is highly volatile.