Ethereum enterprise capitalists (VCs) are “not silly” and know that investing on this planet’s largest sensible contract platform gained’t consequence within the “multiples” they want, in accordance with a crypto consumer. Going by the deal with R89Capital, claims that VCs at the moment are Ethereum layer-2 belongings as autos to exit the market, dumping “Ponzi tokens.”
Ethereum VCs Exiting ETH For “Ponzi” Tokens?
The consumer opines that the first purpose why ETH costs might not surge in multiples like rising tokens, together with meme cash like PEPE, as an illustration, is due to the comparatively giant market cap.
In line with trackers on October 31, ETH has a market cap of over $215.8 billion and is the second largest after Bitcoin (BTC). Usually, cash with larger market caps are more durable to govern and often have discovered extra institutional adoption than rising tokens.
It’s because tasks with larger market cap are extra liquid, have extra title recognition, and have seen extra adoption. Even so, whereas they’re simpler to purchase within the second market because of the larger ranges of liquidity, they are usually much less unstable than low market cap tokens.
These low-market tokens will also be held for speculative causes primarily as a consequence of their upside potential, particularly in trending markets. Which means that low-market tokens, whatever the issuing platform, attraction to profit-seeking speculators, not as a consequence of underlying fundamentals.
R89Capital aligns with this preview to allege that VCs, trying to recoup their funding, are launching Ponzi tokens on general-purpose layer-2 platforms earlier than dumping them for ETH and ultimately exiting for USD.
On this case, Ponzi tokens, as claimed, are low-market cash that may be meme cash or different well-marketed tasks. These tokens have larger upsides, are liquid sufficient, and might be offered for ETH in layer-2 decentralized exchanges or fashionable ramps like Binance or Coinbase.
The Ethereum Technical Debt: Scaling Stays A Large Subject
Nonetheless, R89Capital didn’t point out which layer-2 tasks are “Ponzis” however mentioned the first purpose ETH is capped is because of Ethereum’s technical debt.
Over time, Ethereum builders have been launching new merchandise and scaling options, of which the transition from a proof-of-work to a proof-of-stake system and adoption of layer-2 options stand out. Even so, scaling stays a problem impacting consumer expertise, particularly when token costs start rallying.
It’s not uncommon for fuel charges on Ethereum to spike to double-digits in a bull market, discouraging deployment whereas catalyzing migration of some transactions to competing platforms like Solana or layer-2 scaling options like Base or Optimism.
Function picture from Canva, chart from TradingView