Ethereum Price Target Cut 60% by Standard Chartered Amid Layer-2 Challenges

Standard Chartered has significantly reduced its price forecast for Ethereum by the end of 2025, citing the growing influence of layer-2 networks such as Base. The bank now predicts that Ethereum will reach $4,000 by the end of 2025, a sharp decrease from its previous target of $10,000. This revision comes as Ethereum faces structural challenges, including the increasing dominance of layer-2 solutions that are siphoning value away from the main network.

The bank's analysts attribute this underperformance to several factors. One key issue is the Ethereum Foundation's governance structure, which has been criticized for being more cooperative than business-oriented. This has led to a situation where layer-2 blockchains, like Base, are able to capitalize on Ethereum's open-source nature, effectively cannibalizing the network's economy. Base, for instance, has been passing all its profits to its corporate owner, which has resulted in a significant reduction in Ethereum's market capitalization.

Geoff Kendrick, the global head of digital assets research at Standard Chartered, highlighted that Ethereum is currently in a "midlife crisis" as it approaches its 10-year anniversary. Despite the 2024 Dencun upgrade, which aimed to enhance the network's speed and reduce transaction costs, Ethereum has struggled to maintain its competitive edge. Kendrick noted that around 80% of Base's GDP is removed from the Ethereum ecosystem, treating it as lost value. This situation underscores the need for a proactive change in the Ethereum Foundation's approach to commercial direction, such as taxing layer-2 solutions, although Kendrick views this as unlikely.

The bank's revised outlook for Ethereum is part of a broader assessment of the cryptocurrency market. Ethereum's tokens have depreciated by 48% over the past year, while rivals like Bitcoin and XRP have seen significant gains. This performance disparity has raised concerns about Ethereum's long-term viability and its ability to compete with other blockchain technologies.

Despite the bearish outlook, Kendrick sees potential for optimism. He points to the underwhelming first year of Ethereum exchange-traded funds as a potential pivot point if they can attract more value. However, to truly turn things around, the Ethereum Foundation will need to adopt a more commercial approach, which Kendrick believes is unlikely in the near future. The bank's revised price target for Ethereum reflects these structural challenges and the growing influence of layer-2 networks, signaling a cautious outlook for the cryptocurrency's future.

Ethereum is also struggling on the technical side. On-chain data shows weak network activity, declining total value locked (TVL), and continuous outflows from spot Ethereum ETFs. Over the past month, Ethereum-based investment products have seen outflows totaling $265 million, marking the worst streak since 2015. Meanwhile, Ethereum’s total value locked has dropped by 47% since January, hitting just $46.37 billion. Leading protocols like Lido, EigenLayer, and Maker have seen sharp declines in deposits. This has made investors doubt Ethereum’s ability to maintain its DeFi dominance.

Chart analysts aren’t optimistic either. Ethereum’s price remains pinned below $2,000, with a bearish flag pattern pointing to a potential drop as low as $1,530 if support at $1,880 breaks. This could mean another 20% downside from current levels.