Revised Price Projections and Market Analysis
Geoff Kendrick, Global Head of Digital Assets Research at Standard Chartered, has revised the bank's Ethereum (ETH) price target for 2025 downward from $10,000 to $4,000. This adjustment reflects a projected "structural decline" in ETH's value relative to Bitcoin (BTC), with the ETH-to-BTC ratio expected to gradually decrease through 2027.
Key Factors Driving Ethereum's Decline
Layer-2 Network Impact:
The proliferation of Ethereum Layer-2 solutions like Base, Arbitrum, and Optimism has diverted transaction fees away from the Ethereum Foundation. Kendrick estimates Base alone has reduced ETH's market cap by $50 billion.- Mechanism: L2s route fees to third parties (e.g., Coinbase) instead of Ethereum's native ecosystem.
- Economic Effect: Lower fee revenue forces increased ETH minting to cover operational costs.
Blob Fee Dynamics:
Post-Pectra upgrade, increased blob capacity may further reduce fees paid to Ethereum, exacerbating revenue pressures. Kendrick notes:"Layer-2 profits could rise after Pectra, which is net bad for ETH."
Potential Counterbalances
- Tokenized Real-World Assets (RWAs):
Ethereum's security features may sustain its dominance in RWA tokenization, though Kendrick cautions this alone won't offset medium-term declines. - Foundation Policy Changes:
Taxing Layer-2 networks could theoretically redistribute value, but such measures are deemed unlikely.
Ethereum Pectra Upgrade: Mixed Expectations
Scheduled for late April 2025, the Pectra upgrade introduces:
- Enhanced staking limits
- Multi-asset gas fee payments
- Expanded blob capacity (lowering L2 operational costs)
Despite its technical ambitions, Kendrick argues Pectra will accelerate Ethereum's competitive challenges by further reducing core network revenue.
Market Performance Metrics
- 24-hour change: +1.3%
- Monthly decline: -29.6%
- Year-to-date loss: -46.7%
FAQs
Why is Standard Chartered lowering Ethereum's price target?
The bank cites structural issues like Layer-2 adoption diverting fees and the ETH/BTC ratio reaching historic lows.
Could the Pectra upgrade improve Ethereum's price outlook?
Analysts suggest Pectra may worsen ETH's position by reducing blob fees—a key revenue stream—while benefiting Layer-2 profitability.
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What role do RWAs play in Ethereum's future?
While RWAs leverage Ethereum's security, their growth alone is insufficient to reverse the projected decline against Bitcoin.
Disclaimer: Market predictions involve inherent uncertainties. Always conduct independent research before investing.