Standard Chartered Adjusts Ether Price Forecast Downwards by 60% to $4,000

Summary

• Price Target Reduction: Standard Chartered significantly reduced its 2025 price forecast for Ether by 60%, bringing it down to $4,000 from the previous $10,000 target.

• Layer-2 Dominance Impact: The primary reason for the price target cut is the growing dominance of Ethereum Layer-2 solutions, particularly Base, which are seen as extracting value and market capitalization from the Ethereum main chain.

• Uncertainty for Ether’s Future: The report suggests that without changes to Ethereum’s economic structure, Ether may continue to underperform Bitcoin, with a declining ETH/BTC ratio projected in the coming years.

Standard Chartered has revised its projection for the price of ether in 2025, decreasing it to $4,000.

This adjustment, a 60% reduction from the previous $10,000 target, is attributed to factors such as the increasing market presence of Base, an Ethereum layer-2 scaling solution.

Geoffrey Kendrick of Standard Chartered stated, “Our analysis suggests that Base, as the leading layer 2 network, has effectively shifted $50 billion of market capitalization away from the Ethereum main chain.”

The financial institution’s revised forecast highlights concerns that the growth of layer-2 solutions, with Base as a prominent example, is impacting Ethereum’s economic model and future price potential. Kendrick’s report, titled “Ethereum — Midlife Crisis,” details these considerations.

According to Kendrick, Ethereum is becoming economically less central within its own expanding layer-2 ecosystem.

A growing portion of transaction revenues is now being processed outside of the original Ethereum Layer 1 chain.

Kendrick proposed a potential remedy involving taxation of layer-2 profits, similar to how governments sometimes tax excessive profits of foreign mining companies.

He argues this could rebalance the value distribution. However, he deems such taxation unlikely, which casts doubt on Ether’s long-term performance relative to Bitcoin.

Ether’s current trading price hovers around $1,900. This is more than 60% lower than its peak value of approximately $4,878 achieved in November 2021, as per market data tracked by The Block.

The underperformance of Ether is linked to strategic modifications implemented within the Ethereum network over recent years.

Kendrick points out that Base, an initiative incubated by the cryptocurrency exchange Coinbase, directs all of its profits—derived from fee revenues minus essential data recording expenses—directly to its parent company, Coinbase.

“Layer 2 networks lead to (1) a decrease in economic activity (GDP) on the Ethereum primary network and (2) a reduction in fee income, at least in the short term,” Kendrick elaborated.

“However, the intended longer-term outcome is enhanced scalability and more competitive fees, aiming for a more sustainable market position for Ethereum and potential growth in future economic activity and fees.”

A spokesperson for Base countered this view, stating that “Base improves accessibility to on-chain activity with faster and lower-cost transactions.

Economic reforms by the Ethereum Foundation, such as imposing levies on layer-2 networks leveraging Ethereum’s infrastructure, are another theoretical solution, though Kendrick considers this improbable.

In summary, while reducing the near-term price expectation, Standard Chartered maintains a longer-term positive outlook for ether, forecasting a price of $7,500 by 2028-2029.

Nevertheless, without fundamental adjustments to Ethereum’s economic model or market strategy, the report anticipates ether will continue to underperform bitcoin, projecting the ETH/BTC ratio to potentially decrease to 0.015 by 2027, levels not seen since early 2017.

Also Read: Ethereum’s Shrinking Influence Market Dominance at 2020 Levels

Ethereum (ETH), the “altcoin bellwether,” is experiencing an unprecedented downturn in its market. Financial analysts predict the current quarter may be the most challenging period in its history of valuation. A consortium of market observers has identified several core challenges that are causing Ethereum’s decline in market prominence and reduced… [Read More]

*Disclaimer*: We at Bitcoinleef.com present you with the latest information in the crypto market. However, this information should not be regarded as financial advice and viewers should consult their financial advisors before investing.