These Choices Are Causing Ethereum to Collapse

Ethereum is dead. For many venture capitalists, Ethereum is no longer a relevant investment asset. Layer-2 solutions, poorly managed inflation, lost revenue… Ethereum seems to be caught in a whirlwind that raises doubts about its long term financial viability. Decoding a major strategic shift. Ethereum Has Died As An Investment…? Criticism comes from within. Quinn Thompson, the founder of Lekker Capital, is blunt: “Ethereum is dead as an investment.” According to him, the lack of growth in the number of cryptocurrency users, the decline in chain activity, the drop in revenue, and poorly adjusted tokenomics have caused ETH to lose its status as a safe haven asset. And he is not the only one who thinks this way.

Since Layer-2 solutions like Arbitrum and Optimism have exploded, a large part of Ethereum’s economic value has shifted. Of course, these secondary networks lighten the main layer, but they also absorb an increasing portion of the value being created. Nic Carter from Castle Island Ventures summarizes the situation: “L2 sucks value from Layer-1 […] it has effectively committed suicide.” As a result, Ethereum has captured very little of the transaction boom that it initially sparked. Furthermore, there is another issue: token inflation. EIP-1559, which was supposed to make Ethereum deflationary, no longer holds that promise. The recent Dencun update has even restarted the net issuance. Has the story of “ultrasound money” come to an end? Perhaps. In any case, this complicates the argument for an ETH designed to preserve long term value. Ethereum Foundation Reaction In response to this dissatisfaction, the Ethereum Foundation is reacting. Vitalik Buterin proposed a roadmap focused on security and improving L2. The goal: to enhance the network’s interoperability, attract cryptocurrency developers back, and regain weight in the overall infrastructure. But the question remains: will it be enough to rekindle the interest of cryptocurrency investors? As long as the mainnet does not capture value better and the economic model remains unclear, ETH risks remaining in the shadows of its own ecosystem. Ethereum remains a driving force behind the innovation of Web3, and the $850 billion in stablecoins proves this. However, its position as an investment asset is fluctuating. Between value dilution and poorly managed inflation, ETH needs to reassess its fundamentals if it wants to regain the trust of the cryptocurrency market. Without rapid development, it risks becoming a mere infrastructure tool.