Ethereum
Ethereum’s crisis: How leadership’s mixed messages affect ETH
What’s next for ETH as community show mixed signals on key issues?
- Ethereum community members had divergent views on ETH’s value and road map.
- The mixed signals from Ethereum leadership could dent ETH’s sentiment.
The Ethereum [ETH] leadership has hit the headlines following its long-term roadmap and ETH’s value accrual views. One of the Ethereum community members, Justin Drake, suggested that ETH was like Nvidia and Apple and could attract multi-trillion valuations based on its fees.
Drake stated,
“Ethereum is like a very large business like Nvidia, Apple..we can muster multitrillion valuations purely based on the flows [fees]. And then you know there’s a whole different topic on top of this base valuation of trillions of dollars for ETH to be money, collateral..for decentralized stablecoins.”
Mixed views on ETH’s value
However, some builders and founders in the Ethereum eco-system disagreed with these perceived leadership views. Sam Kazemian, Founder of DeFi protocol Frax Finance, was one of the critics.
Kazemian felt that comparing ETH to Nvidia or Apple would limit the altcoin’s growth potential compared to Bitcoin. He claimed that this valuation wouldn’t be a win for the altcoin asset.
‘ETH currently has $1B annual revenue. If we 385x this revenue to match Apple’s that means ETH would 11x to match Apple’s valuation. Does this seem like a winning roadmap for ETH?”
He believed this was a flawed way for the leadership to gauge ETH’s value and might not compete with BTC.
“Ethereum as a big business where its ‘base valuation’ is measured as cash flows from fees give it a fighting chance to catch up or ever overtake BTC?”
He added,
“Apple has $385B annual revenue, it’s worth $3.3T. BTC has 0 annual revenue & never will have a single dollar of revenue. It’s worth $1.1T already.”
Kazemian, like most protocol founders, championed that ETH’s primary value should be based on its ‘store of value’ (SoV) and DeFi ecosystem.
ETH leadership says…
Unlike BTC’s “digital gold” tagline, ETH has struggled to have an impactful and unified pitch deck for potential investors. The leaders’ push for “programmable money” and “digital oil” hasn’t grabbed the expected appeal.
Ethereum’s DeFi vision has also seen divergent visions from leaders. For example, Vitalik Buterin has been skeptical of pure DeFi as the only crypto growth catalyst.
This was opposed to other community members like Kazemian and Uniswap’s Hayden Adams, who believed DeFi was critical to the growth of ETH’s value.
According to Coinbase analysts, this divergent vision for Ethereum’s DeFi has made it hard for new investors to understand the asset and dented its market sentiment.
Besides, ETH’s fees have declined considerably since the Dencun upgrade in March, as low-cost blobs prompted users to migrate to L2s.
Source: Galaxy Research
This has also divided the community on whether to tweak blob fees to help ETH L1 gain value from L2s as ETH’s inflation problem compounds post-Dencun upgrade.
The above community issues have shattered investor sentiment around ETH even further.
That said, ETH has lost ground to BTC. The underperformance was illustrated by a yearly low on the ETH/BTC ratio, which tracks the altcoin’s price performance relative to BTC. ETH’s value has dropped 44% compared to BTC in the past two years.
