The waning attractiveness of Ether (ETH) as an investment is attributed to layer-2 solutions extracting value from the primary network and the community’s indifference to the excessive creation of tokens, according to a crypto investor.
“The primary reason for this shift is that avaricious Eth L2s are draining resources from the L1, coupled with a social consensus that excessive token issuance was acceptable,” a partner at Castle Island Ventures stated on March 28.
Ether “perished by its own decisions”
“ETH has been overwhelmed by a surge of its own tokens. It perished by its own hand,” he remarked, referencing claims from another industry leader who declared Ether “totally dead” as an investment.
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In his remarks, the founder of Lekker Capital pointed out that “A network with a market cap of $225 billion is seeing drops in transaction activity, user growth, and fees/revenues. There’s no investment case here. It has utility as a network? Certainly. As an investment? Definitely not.”
Currently, the ETH/BTC ratio, which indicates Ether’s strength relative to Bitcoin (BTC), stands at 0.02260, marking its lowest point in almost five years.
As of this writing, Ether’s trading price is $1,894, reflecting a decline of 5.34% over the last week.
Ether has seen a 17.94% drop over the last 30 days. Image Credit: CoinMarketCap
Additionally, reports from September 2024 highlighted that fee revenue for Ethereum had plummeted by 99% in the preceding six months, as “extractive L2s” captured all users, transactions, and fee revenue without contributing to the basic layer.
In response, a venture partner proposed that Based Rollups might address the issue of Ethereum’s layer-2 networks pulling liquidity and revenue from the blockchain’s core layer.
This advocate asserted that Based Rollups could “significantly affect the monetization of Ethereum by fundamentally altering its incentive structures.”
Discussion: Is now the time to invest in Ether as the futures market shows unique shifts?
Despite the positive sentiment at the end of the previous year regarding Ether hitting $10,000 by 2025—especially following a surge to $4,000 in December—there has been a steep decline in value, paralleling the broader downturn in the crypto market.
Adding to the bearish perspective, a financial institution revised its end-of-2025 ETH price forecast downward from $10,000 to $4,000, marking a significant 60% reduction.
Nonetheless, some crypto traders remain “extremely bullish,” arguing that Ether could represent the “best opportunity in the market.”
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