David Edwards
Ethereum’s investment appeal is under scrutiny as prominent venture capitalists highlight concerns over the impact of Layer-2 (L2) solutions and token proliferation on the network’s value.
Nic Carter, partner at Castle Island Ventures, attributes Ethereum’s diminished investment attractiveness to “greedy Eth L2s siphoning value from the L1 and the social consensus that excess token creation was A-OK.” He further asserts that Ethereum “was buried in an avalanche of its own tokens. Died by its own hand.”
Quinn Thompson, founder of Lekker Capital, echoes this sentiment, stating that Ethereum is “completely dead” as an investment. He points to a “$225 billion market cap network that is seeing declines in transaction activity, user growth, and fees/revenues,” concluding, “There is no investment case here.”
The ETH/BTC ratio, a measure of Ether’s performance relative to Bitcoin, has declined to 0.02260, its lowest level in nearly five years. As of March 28, 2025, Ether is trading at $1,894, down 5.34% over the past week.
The rise of Layer-2 solutions, designed to enhance Ethereum’s scalability by processing transactions off the main chain, has inadvertently diverted transaction fees and activity away from Ethereum’s base layer. This shift has led to a 99% collapse in fee revenue for Ethereum over a six-month period, as “extractive L2s” absorbed users, transactions, and fee revenue without contributing back to the main network.
Despite these challenges, some analysts remain optimistic about Ethereum’s future. They argue that Layer-2 solutions are essential for Ethereum’s scalability and long-term growth, suggesting that the network’s current struggles may be a temporary phase in its evolution.
