Ethereum enterprise capitalists (VCs) are “not silly” and know that investing on the planet’s largest sensible contract platform gained’t consequence within the “multiples” they want, in line with a crypto consumer. Going by the deal with R89Capital, claims that VCs are actually Ethereum layer-2 belongings 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 larger market caps are tougher to govern and often have discovered extra institutional adoption than rising tokens.
It is because initiatives 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 as a result of larger ranges of liquidity, they are typically much less risky than low market cap tokens.
These low-market tokens can 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, enchantment 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 initiatives. These tokens have larger upsides, are liquid sufficient, and might be offered for ETH in layer-2 decentralized exchanges or well-liked ramps like Binance or Coinbase.
The Ethereum Technical Debt: Scaling Stays A Huge Situation
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