Ethereum Layer-2 Boom Is Killing ETH’s Value, Say Analysts
Ether (ETH), the native token of Ethereum, is facing growing criticism and waning investor confidence as concerns mount over its diminishing value proposition.
Leading crypto venture capitalists and analysts attribute this decline to the aggressive expansion of Ethereum’s layer-2 (L2) networks and unchecked token issuance, which they claim are undermining the main network’s financial strength.
Also read: Is Ethereum the Next Amazon?
On March 28, Nic Carter, partner at Castle Island Ventures, voiced sharp criticism of Ethereum’s current trajectory on X. Carter argued that Ethereum’s loss of appeal stems largely from “greedy Eth L2s siphoning value from the L1 and the social consensus that excess token creation was A-OK.” According to him, Ether has effectively “died by its own hand,” drowned under the weight of its own ecosystem’s policies.
Carter’s remarks were in response to Lekker Capital founder Quinn Thompson, who took an even harsher stance, declaring Ether “completely dead” as an investment. Thompson highlighted Ethereum’s $225 billion market cap but pointed to falling transaction activity, stagnant user growth, and plummeting fee revenues as clear signs that the asset lacks any meaningful investment case. “As a network with utility? Yes. As an investment? Absolutely not,” Thompson wrote.
Make no mistake, $ETH as an investment is completely dead. A $225 billion market cap network that is seeing declines in transaction activity, user growth and fees/revenues. There is no investment case here. As a network with utility? Yes. As an investment? Absolutely not. pic.twitter.com/XjZNjPjy2s
— Quinn Thompson (@qthomp) March 28, 2025
The data backs their concerns. Ethereum’s ETH/BTC ratio — a key indicator of Ether’s relative strength to Bitcoin — recently fell to 0.02260, marking its lowest level in nearly five years.
How Layer-2 Networks and Token Issuance Hurt Ether’s Value
The core of Ether’s diminishing investor appeal appears to stem from the rise of layer-2 scaling solutions, which have rapidly gained traction at the expense of the base layer. These L2 networks, designed to improve transaction speed and reduce fees, are now accused of siphoning off user activity, liquidity, and revenue from Ethereum’s primary blockchain without adequately contributing to its economic model.
Also read: Will Ethereum Hit 10K? Examining ETH’s Potential
Some within the Ethereum community, however, believe there are ways to reverse the trend. Adam Cochran, partner at Cinneamhain Ventures, has championed “Based Rollups” as a potential solution. These rollups, he argues, could re-align incentives to benefit Ethereum’s base layer directly by fundamentally altering how revenue and liquidity flow through the network.
The decline in the blockchain’s metrics has also impacted broader market sentiment. Once-high predictions that Ether would surge to $10,000 by the end of 2025 have been revised downward. Standard Chartered, in a March 17 client letter, slashed its forecast by 60%, setting a new target of $4,000.
Still, not everyone shares the bearish view. Some crypto analysts and traders remain optimistic about Ether’s long-term prospects. Pseudonymous traders like Doctor Profit and Merlijn The Trader recently stated that Ether could present the “best opportunity in the market” despite the current downturn, citing potential future developments and market cycles.
Ethereum is on the VERGE of a MAJOR move!
— Merlijn The Trader (@MerlijnTrader) March 27, 2025
If this week closes strong, we’ll see the FIRST weekly bullish divergence since September!
Buckle up, $ETH bulls! pic.twitter.com/Nimd1ZVCfx
Can Ether Recover Its Investment Case?
The question now facing the Ethereum community and broader crypto market is whether Ether can regain its position as a compelling investment asset. Much depends on whether Ethereum’s leadership and developers can address the structural issues raised by critics — particularly the erosion of value at the base layer caused by L2 dominance and unchecked token supply growth.
Also read: Ethereum Enters NASDAQ Treasury: BioNexus Leads the Charge
While Ethereum’s technological utility and ecosystem development remain strong, its future as an attractive investment asset will likely hinge on resolving these underlying economic challenges. For now, the debate over Ether’s viability continues to divide the crypto world.
