Ethereum enterprise capitalists (VCs) are “not silly” and know that investing on this planet’s largest good contract platform received’t consequence within the “multiples” they want, in keeping with a crypto consumer. Going by the deal with R89Capital, claims that VCs are actually taking a look at Ethereum layer-2 property as automobiles to exit the market, dumping “Ponzi tokens.”
Ethereum VCs Exiting ETH For “Ponzi” Tokens?
The consumer opines that the first motive why ETH costs might not surge in multiples like rising tokens, together with meme cash like PEPE, for example, is due to the comparatively massive market cap.
In keeping with trackers on October 31, ETH has a market cap of over $215.8 billion and is the second largest after Bitcoin (BTC). Sometimes, cash with greater market caps are more durable to govern and often have discovered extra institutional adoption than rising tokens.
It’s because initiatives with greater 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 as a result of greater ranges of liquidity, they are typically much less unstable than low market cap tokens.
These low-market tokens can be held for speculative causes primarily because of their upside potential, particularly in trending markets. Which means that low-market tokens, whatever the issuing platform, enchantment to profit-seeking speculators, not because 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 finally exiting for USD.
On this case, Ponzi tokens, as claimed, are low-market cash that may be meme cash or different well-marketed initiatives. These tokens have greater upsides, are liquid sufficient, and could be offered for ETH in layer-2 decentralized exchanges or widespread ramps like Binance or Coinbase.
The Ethereum Technical Debt: Scaling Stays A Huge Challenge
Nonetheless, R89Capital didn’t point out which layer-2 initiatives are “Ponzis” however mentioned the first motive ETH is capped is because of Ethereum’s technical debt.
Through the years, 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 isn’t uncommon for gasoline 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.
Characteristic picture from Canva, chart from TradingView
