Market analysts are debating the investment potential of Ethereum.
Some suggest that the proliferation of tokens and Layer-2 networks on Ethereum has weakened ETH’s performance as an investment.
Ether’s (ETH) performance continues to invite criticism and discussion in the crypto space. Many are voicing concerns about the Ethereum network’s current direction.
Quinn Thompson, founder of Lekker Capital, a macro hedge fund, argues ETH is now a poor investment.
While some analysts disagree, others share this view, citing various reasons.
Investment Case for ETH Questioned
Thompson supports his position by pointing out that ETH, despite a $225 billion market capitalization, experiences decreasing transaction activity, user growth, fees, and revenue.
While acknowledging Ethereum’s ongoing utility as a network, he deems it unappealing as an investment.
“There is no investment case here. Network utility? Yes. Investment? Not,” Thompson of Lekker Capital stated.
Nic Carter, co-founder of Coinmetrics and partner at Castle Island Ventures, supports Thompson’s perspective.
Carter attributes ETH’s diminished investment appeal to value extraction by Ethereum Layer-2 networks.
He adds there is a community acceptance of excessive token creation within the Ethereum ecosystem.
Carter contends ETH is harming itself, becoming buried “in an avalanche of its tokens.”
L2s, VCs, and Bitcoin Maxis Blamed
Responding to Carter’s statement, Thompson claimed that the tolerance for excess tokens arose because Layer-2 chains, staking, and restocking protocols benefited developers and teams financially.
Now, as the market shows negative consequences, admitting the initial concept was flawed is difficult.
Furthermore, a pseudonymous analyst suggests that “Solana scammers” and Bitcoin maximalists encouraged excess token creation on Ethereum.
They argue venture capitalists, unable to heavily promote ETH, chose to fund numerous Layer-1 networks for later sales to retail investors.
Ethereum Price Under Pressure
“If we unified around ETH as a community, it would be inherently strong and independent of external banks or institutions.
Bitcoin maximalists feared this, as ETH embodies what Bitcoin aspires to be,” the analyst stated.
Currently, ETH trades for around $1,830. Its value has decreased by approximately 50% from a year prior.
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