Standard Chartered Cuts Ethereum 2025 Price Target 60% Due to Layer 2 Networks

Standard Chartered has revised its year-end 2025 price target for Ethereum (ETH) from $10,000 to $4,000, citing the increasing influence of Layer 2 networks as a primary factor. Geoffrey Kendrick, the bank’s global head of digital assets research, attributes this shift to the rise of Layer 2 networks, particularly Base, which has significantly impacted Ethereum’s market dominance.

Kendrick notes that Layer 2 networks, such as Base, have begun to extract substantial profits from the Ethereum ecosystem. This shift in activity away from the main Ethereum network reduces the transaction fees that would otherwise go to the Ethereum Foundation, thereby lowering the overall economic activity on the Ethereum blockchain. As a result, the Foundation is compelled to mint more new coins to cover expenses, which in turn affects the price of ETH.

Despite these challenges, there are potential measures that could help Ethereum regain its lost ground. One such measure is the growing popularity of tokenized real-world assets, where Ethereum maintains an 80% market share. This trend could increase demand for the network. Additionally, the highly-anticipated Pectra upgrade, which aims to enhance scalability and fee dynamics, could provide a significant boost to Ethereum’s performance. Developers plan to deploy a final testnet, Hoodi, later this month, with the mainnet launch scheduled for April 25, if all goes according to plan.

Kendrick also suggests that taxing Layer 2 networks could mitigate some of the issues and improve Ethereum’s market share. However, he acknowledges that this is unlikely to happen, leaving Ethereum’s long-term trajectory uncertain. Despite the near-term challenges, Kendrick remains optimistic about Ethereum’s future, predicting a price of $7,500 by 2028-2029. However, he warns that without major economic reforms, Ethereum will continue to lag behind Bitcoin, with the ETH/BTC ratio potentially falling to 0.015 by the end of 2027, the lowest level since 2017.

Ethereum’s structural changes over recent years, including The Merge and Dencun upgrade, have empowered Layer 2s but reduced direct revenue to Ethereum’s mainnet. Base, for instance, directs all its profits to coinbase, creating "super-profits" for its corporate owner. This raises concerns about Ethereum’s value retention, as more activity moves off-chain while Ethereum bears the infrastructure costs. While Ethereum still dominates the DeFi sector, stablecoins, and tokenized assets, its market share has been declining. Kendrick suggests that taxing Layer 2s, similar to how governments tax foreign mining firms, could be a solution—but he believes this is unlikely to happen.

Despite the short-term downgrade, Standard Chartered still expects ETH to reach $7,500 by 2028-2029, though it predicts the ETH/BTC ratio will fall to its lowest level since 2017. Kendrick acknowledges Ethereum’s continued dominance in key areas, stating that Ethereum still leads in tokenized real-world assets, where it holds an 80% market share. However, he warns that if Ethereum cannot adapt to the growing power of Layer 2s, its long-term revenue and sustainability could be at risk.

Ethereum is at a crossroads, balancing the benefits of Layer 2 scalability with the risk of eroding its mainnet’s economic value. The dominance of Base and other Layer 2s raises questions about Ethereum’s long-term sustainability, as more activity moves off-chain while Ethereum bears the infrastructure costs. This debate extends beyond Ethereum, as other blockchain ecosystems may face similar challenges as they scale. The Ethereum Foundation could consider economic reforms, but major changes—such as taxing Layer 2 networks—would be controversial and difficult to implement. While Ethereum’s growth trajectory on-chain remains strong, the question now is whether its current model is sustainable—or if a structural shift is needed to maintain long-term value.

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