Standard Chartered has reduced its Ethereum price forecast for the end of 2025, citing the increasing dominance of layer-2 networks such as Base.

Recall that in January, the leading global bank forecasted Ethereum to reach $10,000 by the end of this year, with Bitcoin (BTC) potentially hitting $200,000. In a recent report, the bank slashed the Ethereum estimate to $4,000, representing a 60% drop.

This revision comes as ETH has underperformed massively amid the ongoing market downturn compared to other top altcoins. For instance, the asset is down by more than 42% year-to-date, making it one of the biggest losers this year.

However, Standard Chartered‘s revised estimate is largely due to the growing dominance of Layer-2 solutions, particularly Base, which the bank argues is extracting substantial value from Ethereum without reinvesting proportionally. 

Standard Chartered: L2s Like Base Causing Financial Strain on Ethereum

The bank’s latest research calls attention to the financial strain Ethereum faces as Layer-2 networks capture an increasing share of transaction fees while contributing little to Ethereum’s core ecosystem. 

Among these networks, the bank has identified Base, developed by Coinbase, as a major factor in Ethereum’s declining market capitalization. The study estimates that Base alone has redirected around $50 billion in value away from Ethereum by retaining a significant portion of its fee revenue. 

According to Standard Chartered, this trend has weakened Ethereum’s overall economic position and contributed to its underperformance compared to Bitcoin. For context, ETH is down 35.77% against BTC this year and 13.43% in March alone.

Standard Chartered pointed out that Ethereum’s own network upgrades, including the move to proof-of-stake in 2022 and the more recent Dencun update in 2024, have inadvertently fueled this trend. 

These improvements, while designed to enhance scalability and reduce transaction fees, have also allowed Layer-2 solutions to flourish at Ethereum’s expense. 

One issue raised in the bank’s analysis is the concept of blockchain “GDP,” a metric used to evaluate economic activity within Ethereum’s ecosystem. 

The findings indicate that a growing portion of value generation is happening outside of the Ethereum mainnet, particularly on Layer-2 networks like Base. This has led to concerns that Ethereum’s network is losing its economic strength as more profits flow away from its core infrastructure.

Possible Measures

Standard Chartered suggests that Ethereum’s declining market share could accelerate unless proactive measures are taken. One proposed solution is the introduction of a tax on Layer-2 networks that retain excessive profits without reinvesting in Ethereum’s mainnet. 

This would be similar to the windfall taxes imposed on foreign-owned mining companies that extract significant resources from a country without providing equivalent local benefits.

The research also predicts that Ethereum’s relative value to Bitcoin will continue to drop, with the ETH-BTC ratio potentially hitting 0.015 by 2027. If this projection holds, it would mark Ethereum’s lowest relative standing against Bitcoin since early 2017. 

Standard Chartered maintains that without intervention from the Ethereum Foundation or broader industry action, Ethereum’s underperformance relative to Bitcoin is likely to persist.