Quinn Thompson, CIO of Lekker Capital, recently stirred the crypto community by declaring Ethereum (ETH) "dead" as an investment.
In a post on X, Thompson criticized the second-largest cryptocurrency by market cap, citing a decline in key metrics like transaction activity, user growth, and fees. He argued that, while Ethereum continues to serve a functional purpose as a network, it no longer justifies its $225 billion market valuation.
Thompson’s comments sparked a wave of counterarguments from prominent figures in the space. Nic Carter from Castle Island Ventures took issue with the idea that Layer 2 solutions were draining value from Ethereum’s core. Carter suggested that Ethereum’s troubles stemmed from an excess of Layer 2 tokens, which contributed to the network’s inflation. Thompson backed this argument, claiming that Ethereum’s community had pushed for the proliferation of tokens, which he believes weakened the network’s investment prospects.
On the other hand, Columbia Business School’s Omid Malekan defended the role of Layer 2s, arguing they were essential for blockchain scalability and not necessarily detrimental to Ethereum’s value. Malekan questioned whether it made sense for a widely adopted utility like Ethereum to fail in generating meaningful financial returns, suggesting that any network with utility would eventually be monetized.
Thompson responded by acknowledging that Ethereum’s network effects were being realized, but not enough to justify its current market cap. He likened the situation to the oil market, where network effects are monetized but don’t always translate to value for the underlying asset, like Ethereum’s ETH token.
Scott Johnsson of VB Capital took issue with Thompson’s analogy, arguing that Ethereum’s tokenomics are fundamentally different from oil’s. He pointed out that Ethereum’s supply decreases as demand rises, creating a deflationary system that rewards usage, unlike oil, which has a responsive supply-demand balance. Thompson, however, rejected this, stating there was no historical precedent for the inverse relationship between ETH production and usage that Johnsson suggested.
While the debate rages on, it seems clear that Ethereum’s future, particularly in terms of its investment appeal, will be shaped by how the community addresses these internal tensions, especially regarding its tokenomics and the role of Layer 2 scaling solutions.
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