Standard Chartered has revised its year-end price target for Ethereum (ETH) to $4,000 — down from its previous forecast of $10,000 — citing structural weaknesses in the network’s economic model.

In a research report titled “Ethereum — Midlife Crisis,” the lender’s head of digital assets research, Geoffrey Kendrick, argued that Ethereum’s shift to proof-of-stake and the rise of Layer-2 (L2) networks have resulted in an erosion of the value captured by the main blockchain.

He estimated that Base, the leading L2, alone has removed $50 billion in market capitalization from Ethereum’s core ecosystem.

According to the report:

“Layer 2 blockchains were meant to improve ETH scalability, but we estimate that Base, a key Layer 2, has removed $50 billion from ETH’s market cap. Assuming no change in direction from the Ethereum Foundation, we see ETH-BTC continuing to head lower.”

Concerns over L2 impact

The report pointed to multiple factors contributing to Ethereum’s underperformance. It stated that while the network still dominates in DeFi, NFTs, and tokenized assets, its ability to capture value has diminished.

According to Kendrick, the launch of the Dencun upgrade in March 2024 exacerbated the trend by further empowering L2 solutions, which now extract a larger share of transaction fees while reducing users’ costs.

He wrote:

“A Layer 2 that was developed to address the problem of scalability in Ethereum is passing up all of the growth, while the main protocol is recording less.”

The report suggested that Ethereum’s GDP loss to L2s could surpass $50 billion over time unless measures are introduced to redirect more economic value back to the main chain.

Kendrick proposed that Ethereum consider a “super tax” on L2s, similar to how some governments tax foreign-owned mining companies extracting excess profits.

ETH-BTC ratio decline

Due to these structural concerns, Standard Chartered also cut its Ethereum-Bitcoin (ETH-BTC) forecast despite the ratio being at all-time lows.. The lender predicted that the ratio would decline to 0.015 by year-end — a significant drop from the bank’s previous target of 0.05.

The report’s bearish outlook comes amid a broader debate over Ethereum’s long-term viability and whether its scaling solutions, designed to improve transaction efficiency, could end up benefiting third-party networks more than the Ethereum base layer itself.

Despite the downgrade, the bank maintained a more optimistic outlook for Ethereum’s long-term prospects, forecasting a recovery to $6,000 by 2026 and $7,500 by 2027.

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