Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is once again at the center of a heated debate. Quinn Thompson, a director at Lekker Capital, sparked a wave of controversy after declaring in a post on X that ETH is “dead” as an investment.
Criticism of core network metrics
Thompson points to declines in key metrics such as transaction activity, user growth, and fee revenue, claiming that while the network is operational, it no longer justifies its market valuation of over $225 billion. He emphasizes that Ethereum increasingly offers less attractive returns for investors.
Industry responses
Thompson’s statement drew sharp reactions. Nic Carter of Castle Island Ventures argued that weak performance on the base layer does not devalue ETH as an investment; on the contrary, second-layer solutions prove the protocol’s scalability. According to him, the oversupply of second-layer tokens has created inflationary pressure.
Thompson partially agreed but blamed the Ethereum community itself for encouraging excessive token issuance, which has “diluted” ETH’s investment potential.
The role of Layer 2 – help or hindrance?
Omid Malekan of Columbia Business School defended the role of Layer 2 solutions, arguing that they are key to the blockchain’s future scalability. He stressed that if such a useful network fails to generate returns, the problem lies not in the model but in its monetization.
Tokenomics and oil comparisons
Thompson drew a parallel with the oil market – a highly used asset that does not always directly translate to value for the underlying resource. Scott Johnson of VB Capital rejected the analogy, explaining that ETH has a built-in deflationary mechanism – when demand increases, supply contracts, making it unique compared to commodities like oil.
Thompson responded that he sees no evidence of such a sustainable feedback loop between usage and reduced ETH supply.
Investment asset or technological infrastructure?
As the debate continues, it’s becoming clear that Ethereum’s future as an investment hinges on two core factors – effective tokenomics and the success of scalability through Layer 2. ETH remains foundational to many innovations in DeFi and Web3, but whether it stays attractive to investors depends on how these internal challenges are addressed.
Frequently Asked Questions
Find answers to the most common questions below.
Experts are divided. Some argue ETH's network metrics and returns are declining, while others believe its role in DeFi and Web3 still makes it a valuable long-term asset.
Critics highlight decreasing transaction activity, user growth, and fee revenues. They argue Ethereum's tokenomics may no longer justify its market cap.
Layer 2s improve scalability and reduce fees, but some argue they dilute ETH’s investment appeal. Supporters, however, say they prove Ethereum’s adaptability and long-term utility.
This article is for general informational purposes only and is not intended to be, nor should it be considered, legal or investment advice.
