Market Expert Says Ethereum Is “Cooked,” Here’s Why

Market analyst Justin Bons has stirred conversation with his recent statements on Ethereum, expressing skepticism about its future. Bons, a vocal figure in the crypto space, points to issues around Ethereum’s approach to scaling and what he describes as a shift away from its original vision. He suggests that ETH’s current reliance on Layer 2 (L2) solutions over scaling its Layer 1 (L1) has placed it on a challenging path. This situation could hinder its growth prospects in a rapidly competitive market.

Justin Bons Argues ETH Layer 1 Scaling Has Stagnated

In a recent thread on the X platform, analyst Justin Bons criticized Ethereum’s trajectory, claiming that its Layer 1 development has stalled while Layer 2 solutions take priority. Bons attributes this stagnation to the financial incentives driving developers and venture capitalists (VCs) to focus on Layer 2 projects. 

According to Bons, developers can earn significantly more from launching L2 projects than from contributing to Layer 1 enhancements, creating what he calls a “perverse incentive” structure that could impede ETH price and the network’s growth.

This incentive, Bons argues, has led to Ethereum’s Layer 1 being purposely held back to benefit profit-driven L2 projects. He contends that with L2 projects offering quick financial gains, developers have limited motivation to improve Ether’s foundational infrastructure. This will be detrimental to users seeking decentralized and censorship-resistant solutions.

The analyst noted,

“A sad end for such a beautiful chain that once promised to change the world. Today ETH could not be further away from that original cypherpunk dream, as L1 capacity is so limited.”

Venture Capital Interests in L2s Create Centralization Concerns

Bons further claims that venture capitalists have influenced Ethereum’s development by capitalizing on L2 transaction fees, leading to a more centralized structure. Unlike Layer 1, which is community-governed, L2 platforms are often for-profit entities where fees benefit investors and VCs, sparking concerns over censorship and fund freezes. 

According to Bons, this structure restricts Ether’s potential to scale autonomously, as L2 projects dominate with centralized controls over transactions.

These dynamics, Bons suggests, have caused many users to move toward alternative platforms that prioritize decentralized principles. Citing Solana as an example, he highlights how it has gained popularity due to its centralized resistance and competitive network features, which attract users.

In addition, market analysts have pointed to several reasons why ETH Price has remained below the $3,000 mark throughout 2024. Among the key reasons for the stagnation was competition from Layer 1 blockchains like Solana. The emergence of L2 networks has siphoned liquidity from Ethereum, impacting its overall adoption and market position.

However, while some voices like Bons question Ether’s future, other analysts counter the idea that the network is “dead.” According to 10X Research, Ethereum shows signs of resilience, with technical indicators suggesting a price bottom may be forming. Notably, Ether’s daily trading volume, nearly $12.2 billion, is second only to Bitcoin.

Analysts also observe that Ethereum continues to register higher highs and lows on technical charts, hinting at potential recovery. At the time of writing, ETH price is $2,515, a slight 1% surge in the last 24 hours.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.