Ethereum (ETH) Investment Case is "Dead" as Layer-2 Networks Drain Value From Base Layer

Article: Ethereum (ETH), once viewed as a powerhouse in the crypto investment space, is now facing growing skepticism from industry experts.

Crypto industry experts are expressing growing skepticism over Ethereum (ETH) as an investment, attributing the declining appeal to layer-2 (L2) networks siphoning value from the base layer and a lack of pushback from the community against excessive token creation.

As a result, many investors now question whether ETH still holds long-term investment potential.

Experts Call Ethereum’s Investment Case ‘Dead’

Castle Island Ventures partner Nic Carter took to X (formerly Twitter) on March 28 to highlight his concerns over Ethereum’s diminishing value proposition.

According to Carter, L2 networks are draining liquidity and transaction fees from the base layer, while the unchecked creation of new tokens is further eroding its value.

“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 wrote.

In a striking statement, Carter declared that Ethereum had “died by its own hand,” claiming that the network was effectively buried under an avalanche of its own tokens.

His comments came in response to Lekker Capital founder Quinn Thompson, who called Ethereum “completely dead” as an investment.

“It’s almost incredible how quickly people have soured on ETH. I suppose lack of pushback vs. L2s siphoning value and a tokenization spree will do that,” Carter added.

On-chain metrics also support a bearish outlook on Ether.

According to CoinMarketCap, Ether was trading at $1,894 at the time of publication, down 5.34% over the previous week.

The ETH/BTC ratio, which measures Ether’s strength against Bitcoin, dropped to 0.0220 — its lowest level in nearly five years, according to TradingView data.

The sharp decline highlights how Ethereum is underperforming relative to Bitcoin, raising questions about its competitiveness as a long-term investment.

Layer-2 Networks Absorbing Value

Ethereum’s current struggles are largely linked to the proliferation of layer-2 networks. L2 solutions such as Arbitrum, Optimism, and Base were initially designed to improve Ethereum’s scalability and reduce transaction fees.

However, these networks are now absorbing a significant portion of the activity, leaving the base layer with dwindling fee revenues.

As Cointelegraph Magazine reported in September 2024, Ethereum’s fee revenue collapsed by 99% over the previous six months. This drop is largely attributed to L2 networks processing most transactions while contributing little to the base layer’s revenue.

Crypto venture capitalist Adam Cochran of Cinneamhain Ventures has suggested that Based Rollups could offer a solution. According to Cochran, Based Rollups could directly impact Ethereum’s monetization by reshaping incentive structures, potentially restoring value to the base chain.

Revised Price Predictions Reflect Bearish Sentiment

The bearish outlook on Ethereum is also reflected in price forecasts. Standard Chartered Bank recently revised its year-end 2025 ETH price target downward from $10,000 to $4,000, marking a 60% reduction.

The downgrade reflects the bank’s pessimism over Ethereum’s ability to regain its former investment appeal.

This shift is a sharp contrast to the optimism seen in late 2024, when many crypto analysts predicted ETH could reach $10,000.

In December 2024, Ethereum briefly crossed $4,000 as Bitcoin soared past $100,000 for the first time. However, the broader market downturn has since dampened those expectations.

Bullish Voices Still Remain

Despite the pessimism, some traders remain bullish on Ethereum. Pseudonymous crypto traders Doctor Profit and Merlijn The Trader continue to view ETH as a strong buying opportunity.

They argue that the current downturn is temporary and that Ethereum’s fundamentals, including its widespread adoption and ongoing development, remain strong.

These traders believe that ETH could still be one of the best-performing assets in the massively diverse cryptocurrency market, especially if future upgrades or solutions like Based Rollups successfully restore value to the base layer.