VanEck, a leader in asset management, has significantly reduced its long-term price forecast for Ethereum’s ETH token. The adjustment comes amid concerns about the cryptocurrency’s network dynamics and economic model. The head of digital asset research at VanEck, Matthew Siegel, announced on October 17 that the company had revised its 2030 price target for ETH from $22,000 to approximately $7,300, marking a 67% decrease from the previous estimate.
This year has been challenging for Ethereum, as it has lagged behind major competitors like Bitcoin and Solana despite the SEC’s unexpected approval of spot ETH ETFs in May 2024. The revised forecast highlights the disparities between VanEck’s initial assumptions and the actual performance of the network, particularly in revenue distribution between Ethereum’s main network and its scaling solutions.
VanEck’s original model anticipated Ethereum capturing up to 90% of layer 2 revenue through various fees. However, recent data reveals that only about 10% of revenue has flowed into Ethereum in the last four months, significantly impacting the network’s economic model.
The Dencon upgrade unintentionally facilitated the establishment of layer 2 chains on the main network at minimal cost, leading to what many perceive as excessive value extraction from layer 1. This has reduced ETH burns and pushed the assets into an inflationary state.
Looking ahead, VanEck analysts suggest potential solutions to rebalance incentives between layer 1 and layer 2 chains. These include base sequencers with ETH holding requirements, additional rewards for layer 2 chains that contribute more value to the main chain, and ETH collateralization requirements for using blobs.
Siegel mentioned a promising development, EIP 7781, which could expedite finality for the Ethereum mainnet and sequencer-based rollups.
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