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Ethereum enterprise capitalists (VCs) are “not silly” and know that investing on the planet’s largest good contract platform gained’t end result within the “multiples” they need, in keeping with a crypto person. Going by the deal with R89Capital, claims that VCs at the moment are taking a look at Ethereum layer-2 belongings 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 might not surge in multiples like rising tokens, together with meme cash like PEPE, for 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). Usually, cash with increased market caps are tougher to govern and normally have discovered extra institutional adoption than rising tokens.
It’s because initiatives with increased 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 increased ranges of liquidity, they are typically much less risky than low market cap tokens.
These low-market tokens may also be held for speculative causes primarily resulting from their upside potential, particularly in trending markets. Which means that low-market tokens, whatever the issuing platform, attraction to profit-seeking speculators, not resulting from 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 increased upsides, are liquid sufficient, and may be offered for ETH in layer-2 decentralized exchanges or standard ramps like Binance or Coinbase.
The Ethereum Technical Debt: Scaling Stays A Large Difficulty
Nonetheless, R89Capital didn’t point out which layer-2 initiatives are “Ponzis” however stated 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
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