Ethereum enterprise capitalists (VCs) are “not silly” and know that investing on the earth’s largest sensible contract platform received’t end result within the “multiples” they need, in response to a crypto person. Going by the deal with R89Capital, claims that VCs are actually Ethereum layer-2 property as automobiles to exit the market, dumping “Ponzi tokens.”
Ethereum VCs Exiting ETH For “Ponzi” Tokens?
The person opines that the first cause why ETH costs could not surge in multiples like rising tokens, together with meme cash like PEPE, as an example, 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). 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 identify 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 usually much less unstable than low market cap tokens.
These low-market tokens will also be held for speculative causes primarily because of their upside potential, particularly in trending markets. Which means 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, seeking 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 will be offered for ETH in layer-2 decentralized exchanges or standard ramps like Binance or Coinbase.
The Ethereum Technical Debt: Scaling Stays A Huge Difficulty
Nonetheless, R89Capital didn’t point out which layer-2 initiatives are “Ponzis” however mentioned the first cause 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 person expertise, particularly when token costs start rallying.
It isn’t 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.
Characteristic picture from Canva, chart from TradingView