A significant revision has been made to the projected year-end price for Ethereum in 2025, lowering it from $10,000 to $4,000 due to ongoing structural issues within the Ethereum framework.
Analysts from the bank explain that this revision is largely due to the influence of Layer 2 solutions, particularly Coinbase’s Base network, which has reportedly caused a decline in Ethereum’s (ETH) market capitalization by around $50 billion.
Layer 2 networks, such as Base, were created to improve Ethereum’s scalability by alleviating transaction expenses and network congestion.
Nonetheless, research indicates that these Layer 2 solutions could be shifting revenue away from the core Ethereum network.
For example, the profits generated by Base are directed to Coinbase, possibly undermining Ethereum’s overall market share.
Falling ETH/BTC Ratio
The bank also predicts a drop in the ETH/BTC ratio, estimating it will hit 0.015 by the end of 2027, a level not seen since 2017. This indicates that Ethereum may lag behind Bitcoin in performance in the years ahead.
Despite the lingering concerns, Ethereum remains at the forefront in several crucial sectors, such as decentralized finance, stablecoins, and tokenized commodities.
However, its market dominance has been slowly waning. The bank suggests that without proactive steps from the Ethereum Foundation, such as potentially taxing Layer 2 solutions, this trend is likely to continue.
While the bank recognizes that Ethereum’s price could still appreciate from its current level of around $1,900, especially if Bitcoin sees substantial gains, they warn that Ethereum’s relative underperformance might persist in the near to medium term.