VanEck analyst says Ethereum bulls have reason to worry if L2 remains dominant

EthereumRecruitment of layer 2 network According to Matthew Sigel, head of digital asset research at VanEck, if the dynamics involved remain out of balance, ETH's potential market cap could reach trillions of dollars in the coming years.

In a post on Twitter (also known as X), the analyst said: assumed On Thursday, it announced that “changes in Ethereum’s fundamentals suggest that a model update is appropriate.” If “current realities” are reflected, Ethereum’s price projections would see it plummet 67% to $7,300 by 2030, instead of rising to $22,000, Siegel wrote.

VanEck’s model takes into account the expected growth in the total locked value of Ethereum, which reflects the value of assets used in decentralized finance (DeFi) applications. It also takes into account the amount of Ethereum consumed by the network as a result of transaction fees, and the amount of Ethereum that is burned or removed from circulation.

Data collected over the past four months shows that Layer 2 networks are “extracting more value from Ethereum” than previously thought, Siegel said. Rather than Ethereum benefiting from a large amount of user activity compared to Layer 2 networks, the trend has largely reversed.

“Our original model is [a] We will split transaction revenue 90:10 between Ethereum and L2,” Sigel explained. “Currently the track record is 10:90, favoring L2.”

Earlier this year, the layer 2 network that helps Ethereum scale Denkun. The Ethereum upgrade introduces so-called BLOBs, which provide dedicated storage space for posting transactions to the Layer 2 network. cost reduction For network expansion. Previously, Layer 2 networks were forced to post in the form of relatively costly “bundled transactions.”call data”

As a network like Coinbase base and optimism Despite continuing to attract users and developers, Ethereum's supply is inflating. While transaction fees exceeded Ethereum issuance in the year before Dencun, the asset's supply has increased by 318,000 ETH since mid-April. ultrasound.money.

Siegel's predictions showed a surprising drop in Ethereum's projected price, but he later clarified: decryption He said his post was “just a sensitivity analysis to show the impact on price if ETH does not regain some margin from L2, all else being equal.”

“We expect the weak token price to trigger the community to tweak the ETH roadmap to reverse some of the decline in profitability,” he added. “We're already seeing some evidence of this happening.”

As an example, Siegel pointed to the potential fee-sharing model between Ethereum's mainnet and Layer 2 networks, recently proposed by Ethereum co-founder Vitalik Buterin.

“We need to maintain an ecosystem where people on Ethereum feel like they are on the same team. This includes technical interoperability, values ​​and culture, and economic In part,” Buterin tweeted.

Buterin published a blog post Thursday outlining his vision for Layer 2 networks. He supported Ethereum's rollup-centric roadmap, writing that a flaw in the current ecosystem is that it is “difficult for users to navigate.”

Critics argue that having many layer 2 networks separates users and liquidity, creating silos of activity and assets. Buterin emphasized the need for “maximum interoperability,” writing that “Ethereum should feel like one ecosystem, not 34 different blockchains.”

Among major cryptocurrencies, Ethereum's performance has lagged behind other cryptocurrencies over the past year. The price of the asset is increased by 65% During that time, it fell to $2,591, Bitcoin's 135% increase up to $67,000, and Solana's 517% jump According to CoinGecko, up to $148.

Ethereum’s relationship with the Layer 2 network is not the only one negatively impacting asset prices. The cryptocurrency’s recent struggles can be partially explained by the performance of the Spot Ethereum ETF, said Tim Ogilvie, head of Kraken Institutional Investment Corporation. decryption. Aside from the lack of staking yield for ETF investors, Ogilvie said the thesis on Ethereum is not as clear-cut as it is with Bitcoin from an institutional investor perspective.

He explained that the notion that Ethereum is a “programmable computer” powered by smart contracts, or “sonic money” based on burned fees, is not as favorable as digital gold. So far, the Spot Ethereum ETF has seen a total of $160,000 in outflows since its launch in July. coin glass.

“ETH is in a weird place right now, that's for sure,” Ogilvie said. “If you're building a pension fund portfolio, are you really investing in the future of blockchain? Maybe some people think so, but it's an odd foot to add.”

Edited by Andrew Hayward