Ethereum’s adoption of layer-2 networks could cost ETH trillions of dollars in potential market capitalization over the next few years if its associated dynamics remain unbalanced, according to VanEck Head of Digital Assets Research Matthew Sigel.

In a Twitter (aka X) post, the analyst posited Thursday that Ethereum’s “changing fundamentals suggest a model update is in order.” Instead of climbing to $22,000 by 2030, Ethereum’s price projection would plummet 67% to $7,300 if “the current reality” was reflected, Sigel wrote.

VanEck’s model factors in Ethereum’s expected growth in total value locked, reflecting the value of assets used in decentralized finance (DeFi) applications. It also considers the amount of Ethereum consumed by the network—and burned, or removed from circulation—as a result of transaction fees.

Data gathered over the past four months indicates that layer-2 networks are “taking more value from Ethereum” than previously thought, Sigel said. Instead of Ethereum benefiting from the bulk of user activity compared to layer-2 networks, the trend has been vastly reversed.

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Author: André Beganski