VanEck has significantly downgraded its long-term Ethereum (ETH) price target.

The revision comes amid changing network dynamics.

ETH’s ability to change the tide will likely depend on whether power can shift back to Layer 1.

Several analysts and experts had high hopes for Ethereum (ETH) coming into 2024. These hopes were only heightened by the SEC’s shock approval of spot ETH ETFs in May 2024. 

Fast-forward to less than two months until the end of the year, however, and these hopes have yet to materialize. Instead, the asset has significantly underperformed fellow market leaders Bitcoin (BTC) and Solana (SOL). Amid ETH’s lackluster performance, VanEck has revised its long-term price target for the asset.

From $22K To $7.3K

VanEck has significantly downgraded its long-term Ethereum (ETH) price target. In an X post on Thursday, October 17, VanEck’s head of digital asset research, Matthew Siegel, disclosed that the asset manager had revised its 2030 ETH target from $22,000 to just above $7,300, representing a staggering 67% reduction. Sponsored

The revision comes amid Ethereum’s changing network dynamics. Specifically, Siegel disclosed that VanEck’s previous model had assumed that Ethereum would get 90% of the revenue from Layer 2 chains in the form of blob fees, proving fees, and call data fees. As the researcher highlighted, however, reality has been the opposite of the asset manager’s assumptions, as the firm estimates that only 10% of this revenue has accrued to Ethereum over the past four months.

"This is a major change and shows L2s are taking more value from Ethereum. All else equal, if the split were to stay at 10:90, our price target for ETH would fall by 2/3," Siegel wrote.

The recent VanEck report feeds into the narrative that most Layer 2 chains are not as economically aligned with Ethereum as they should be and are instead excessively extracting value from Layer 1 following the Dencun upgrade, which effectively made it free for these chains to settle transactions on the mainnet.

Beyond extracting value, these Layer 2 chains have driven a large amount of activity from the Layer 1 chain, leading to a decrease in ETH burns and making the asset inflationary. As a result, many investors have questioned the asset’s investment thesis.

Can Ethereum (ETH) Turn the Tide?

ETH’s ability to change the tide will likely depend on whether power can shift back to Layer 1. In an October 4 report, VanEck analysts argued that the network had to incentivize greater alignment for the rollup-centric roadmap to not be purely extractive on ETH.

Some suggestions made by the analysts included forcing Layer 2 chains to use based sequencers, which require validators to hold ETH, offering perks like faster finality to Layer 2 chains that return more value to the Layer 1 chain, or requiring Layer 2 ETH collateralization to use blobs.

On October 6, VanEck’s Matthew Siegel noted that proposals like EIP-7781 could help spark this alignment shift. The proposal promises to offer faster finality for the Ethereum mainnet and rollups using based sequencers.

On the Flipside 

VanEck’s prediction can change as market dynamics shift.

Why This Matters

VanEck’s revised prediction underscores the fundamental changes the Ethereum network and ETH’s tokenomics have undergone in recent months and how they are affecting how investors view the asset.

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