VanEck, the American asset management giant, has adjusted its price target for Ethereum in 2030, lowering it by 67% from $22,000 to $7,334. This adjustment is due to the fact that Layer 2 has been generating more transaction revenue from the Ethereum mainnet, accounting for 90% of the total.
The phenomenon of Layer 2 “sucking blood” from Ethereum has been widely discussed and appears to be affecting Ethereum’s future valuation. Matthew Sigel, the Director of Digital Asset Research at VanEck, has adjusted his price prediction for ETH in 2030 as a result.
He points out that if the imbalance in transaction revenue between Ethereum and its Layer 2 continues, the price target for ETH in 2030 will be significantly reduced by 67% from the original $22,000.
The new price target for ETH in 2030 is $7,334.
Sigel states that with the changes in Ethereum’s fundamentals, the price prediction model for Ethereum should be updated.
Sigel maintains the assumption of a 50:50 distribution of TVL (Total Value Locked) between Ethereum mainnet and Layer 2. Additionally, the model predicts that MEV (Miner Extractable Value) accounts for 0.10% of TVL annually, and this data remains unchanged as well, as these assumptions align with the current situation.
However, there has been a significant adjustment in the distribution of transaction revenue in the model. The original model assumed a 90:10 distribution between Ethereum and Layer 2, with Ethereum extracting 90% of the value from Layer 2’s blob fees, verification fees, and other fees. However, data from the past four months indicates that the actual distribution is 10:90, with Layer 2 capturing the majority of the transaction revenue.
In light of this change, Sigel states that the latest price target for ETH in 2030 will be reduced from $22,281 to $7,334.
Following the Dencun upgrade in mid-March, which introduced Blobs (EIP-4844), the cost of Ethereum Layer 2 has significantly decreased, incentivizing a substantial increase in transaction volume and user count on Layer 2. However, this has led to a decrease in network activity on Ethereum Layer 1, resulting in a sudden drop in gas fees and revenue, posing challenges to the deflation narrative of ETH.
Data shows that in the past 30 days, Ethereum has burned only 566,000 ETH, lower than the newly minted 958,000 ETH, resulting in a supply inflation of 0.325% in the past 30 days. From April until now, the supply of ETH has increased by 318,000 ETH.
While Sigel’s prediction indicates a significant decrease in the expected price of Ethereum, it reflects the current situation. It is expected that the Ethereum community will adjust the roadmap of ETH to reverse the trend of declining profitability. Ethereum co-founder Vitalik Buterin also acknowledges in his latest article that the failure to further expand Ethereum itself could lead to a decline in ETH’s value, thereby affecting the long-term security of the network.
Related Reports:
– Analyzing the True Value of Ethereum and Layer 2 from a Business Model Perspective
– Ethereum Ends Deflation and Returns to Inflation: CryptoQuant Reports the Burning is Unrelated to Network Activity
– Spot ETF Battle Begins! VanEck and BlackRock Invest $72.5 Million and $10 Million in Seed Funding Respectively