Key Takeaways
- Standard Chartered reduced its Ether year-end target to $4,000 due to a structural decline.
- Layer 2 blockchains have contributed to reducing Ether’s market cap by $50 billion.
- Standard Chartered predicted that Ethereum could hit $10,000 by the end of 2025 in a forecast made in January. Now the bank has revised its year-end target for the digital asset, reducing it by 60%.
According to a report released today, the adjustment is based on Standard Chartered’s observation that Ethereum is facing increasing competition from layer 2 solutions, prominently Base. Plus, Dencun, Ethereum’s recent upgrade, does not help the network maintain its market dominance.
Standard Chartered stated that Ethereum still leads in many key blockchain metrics, but its dominance has declined over time.
Layer 2 blockchains, originally designed to help Ethereum by improving scalability and reducing transaction fees, have shifted economic value away from Ethereum, the report noted.
Base’s model of sharing profits with its owner, Coinbase, is seen as a particularly effective competitive strategy. Standard Chartered estimates it has caused Ethereum’s market cap to decline by $50 billion and expects this downward trend to continue.
“Ether is at a crossroads,” the report said, noting that while it “still dominates on several metrics,” this dominance has been declining.
Despite ongoing challenges, Standard Chartered sees the tokenization of real-world assets as a potential growth driver for Ethereum.
According to the bank, Ethereum’s strong security framework could allow it to maintain an 80% market share in this emerging sector, which could stabilize or even reverse its structural decline.
Geoff Kendrick, head of digital assets research at Standard Chartered, suggests that “a proactive change of commercial direction from the Ethereum Foundation,” like taxing layer 2 solutions, could help counteract the ongoing loss of value to these networks. However, he believes the EF is unlikely to change its business model.
Standard Chartered forecasts the ETH/BTC ratio to fall to 0.015 by year-end 2027, which would mark its lowest level since 2017.
While the bank expects Ether’s price to recover from current levels due to a broader Bitcoin-led rally lifting all digital assets, it maintains that Ether will continue to underperform.
Last year, Standard Chartered projected that Ethereum would reach $8,000 by the end of the current year and $14,000 by the end of 2025.
Analysts at the bank believed that the primary catalyst for these price increases would be the approval of spot Ethereum ETFs in the US. They also considered the Dencun upgrade as another positive factor contributing to Ethereum’s potential price growth.
Earlier this year, Standard Chartered predicted that Ethereum could reach $10,000 by the end of 2025 as a result of a favorable environment for crypto growth under the new administration.
Ethereum traded at around $1,900 at press time, up slightly in the last 24 hours, per TradingView. The digital asset is down around 42% year-to-date and is still 60% off its all-time high.
Ethereum’s next major upgrade is the Pectra upgrade, which is scheduled to go live on the Ethereum mainnet next month. This upgrade aims to enhance network performance, improve validator participation, and introduce several key features like EIP-7702 and EIP-7251.
