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Standard Chartered has drastically revised its Ethereum (ETH) price forecast for 2025, cutting its target from $10,000 to $4,000. The bank attributes this sharp downgrade to the expanding influence of Layer 2 solutions, particularly Base, which has been siphoning value from Ethereum’s main network.
Layer 2's Impact on Ethereum’s Market Cap
According to Geoffrey Kendrick, Standard Chartered’s global head of digital assets research, Base—the dominant Layer 2 network—has extracted an estimated $50 billion from Ethereum’s market capitalization. In a report titled Ethereum — Midlife Crisis, Kendrick argues that Ethereum’s self-created Layer 2 framework has led to a “commoditization” of the blockchain, reducing transaction fees on the mainnet and diverting economic value elsewhere.
The Case for Taxing Layer 2s
Kendrick suggests that Ethereum could counteract these losses by imposing a tax on Layer 2 profits, much like governments levy super-taxes on foreign-owned mining firms reaping excess profits. However, he concedes that such a tax is unlikely to materialize, which could further weaken ETH’s performance relative to Bitcoin (BTC).
“The structural changes Ethereum has undergone—including The Merge, the rise of Layer 2s, and the Dencun upgrade—while necessary, have ultimately been value-destructive,” Kendrick stated.
Coinbase’s Role in Layer 2 Profits
One of the main beneficiaries of Ethereum’s evolving structure is Base, a Layer 2 incubated by Coinbase. Kendrick highlights that Base channels its fee revenues directly to Coinbase, extracting profits that might otherwise circulate within the Ethereum ecosystem.
Layer 2 solutions have driven down transaction costs and mainnet activity, at least in the short term. While proponents argue that these changes will eventually enhance scalability and increase Ethereum’s long-term market share, Kendrick remains skeptical about their immediate impact on ETH’s valuation.
Can ETH Regain Its Strength?
Despite Ethereum’s continued dominance in decentralized finance (DeFi), stablecoins, and tokenized real-world assets (RWAs), its overall market share has been slipping. Kendrick believes ETH’s trajectory could improve through key developments, including the expansion of tokenized RWAs—where Ethereum maintains an 80% market share—and upcoming network upgrades like Pectra in 2025. However, he remains doubtful that the Ethereum Foundation will pursue economic reforms such as Layer 2 taxation.
Long-Term Outlook
While Kendrick has slashed his short-term forecast, he still expects ETH to appreciate in the long run, projecting a price of $7,500 by 2028-2029. However, Ethereum’s comparative strength against Bitcoin remains uncertain, with Kendrick predicting the ETH/BTC ratio could drop to 0.015 by 2027—the lowest level since early 2017.
Ethereum’s future hinges on its ability to adapt to the Layer 2 landscape while maintaining value within its own ecosystem. Whether the network can reclaim its lost ground remains to be seen.