Are Ethereum Venture Capitalists Losing Hope In ETH?

Ethereum enterprise capitalists (VCs) are “not silly” and know that investing on this planet’s largest sensible contract platform gained’t end result within the “multiples” they want, in keeping with a crypto consumer. Going by the deal with R89Capital, claims that VCs at the moment are taking a look at Ethereum layer-2 belongings as autos to exit the market, dumping “Ponzi tokens.”

Ethereum VCs Exiting ETH For “Ponzi” Tokens?

The consumer opines that the first cause why ETH costs could not surge in multiples like rising tokens, together with meme cash like PEPE, for example, is due to the comparatively giant market cap. 

In accordance with trackers on October 31, ETH has a market cap of over $215.8 billion and is the second largest after Bitcoin (BTC). Usually, cash with increased market caps are more durable to govern and normally have discovered extra institutional adoption than rising tokens. 

It is because initiatives with increased market cap are extra liquid, have extra identify recognition, and have seen extra adoption. Even so, whereas they’re simpler to purchase within the second market as a result of increased ranges of liquidity, they are typically much less risky than low market cap tokens. 

These low-market tokens may also be held for speculative causes primarily as a result of their upside potential, particularly in trending markets. Which means that low-market tokens, whatever the issuing platform, attraction to profit-seeking speculators, not as a result of underlying fundamentals.

R89Capital aligns with this preview to allege that VCs, seeking to recoup their funding, are launching Ponzi tokens on general-purpose layer-2 platforms earlier than dumping them for ETH and finally exiting for USD. 

On this case, Ponzi tokens, as claimed, are low-market cash that may be meme cash or different well-marketed initiatives. These tokens have increased upsides, are liquid sufficient, and could be bought for ETH in layer-2 decentralized exchanges or in style ramps like Binance or Coinbase. 

The Ethereum Technical Debt: Scaling Stays A Large Problem

Nonetheless, R89Capital didn’t point out which layer-2 initiatives are “Ponzis” however mentioned the first cause ETH is capped is because of Ethereum’s technical debt.

Through the years, Ethereum builders have been launching new merchandise and scaling options, of which the transition from a proof-of-work to a proof-of-stake system and adoption of layer-2 options stand out. Even so, scaling stays a problem impacting consumer expertise, particularly when token costs start rallying. 

It’s not uncommon for gasoline charges on Ethereum to spike to double-digits in a bull market, discouraging deployment whereas catalyzing migration of some transactions to competing platforms like Solana or layer-2 scaling options like Base or Optimism.

Characteristic picture from Canva, chart from TradingView