Are Ethereum Venture Capitalists Losing Hope In ETH? Trending Crypto News

Ethereum price on October 31| Source: ETHUSDT on Binance, TradingView
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Ethereum venture capitalists (VCs) are “not stupid” and know that investing in the world’s largest smart contract platform won’t result in the “multiples” they desire, according to a crypto user. Going by the handle R89Capital, claims that VCs are now looking at Ethereum layer-2 assets as vehicles to exit the market, dumping “Ponzi tokens.”

Ethereum VCs Exiting ETH For “Ponzi” Tokens?

The user opines that the primary reason why ETH prices may not surge in multiples like emerging tokens, including meme coins like PEPE, for instance, is because of the relatively large market cap. 

According to trackers on October 31, ETH has a market cap of over $215.8 billion and is the second largest after Bitcoin (BTC). Typically, coins with higher market caps are harder to manipulate and usually have found more institutional adoption than emerging tokens. 

Ethereum price trends to the upside on the daily chart | Source: ETHUSDT on Binance, TradingView

This is because projects with higher market cap are more liquid, have more name recognition, and have seen more adoption. Even so, while they are easier to buy in the second market due to the higher levels of liquidity, they tend to be less volatile than low market cap tokens. 

These low-market tokens can also be held for speculative reasons primarily due to their upside potential, especially in trending markets. This means that low-market tokens, regardless of the issuing platform, appeal to profit-seeking speculators, not due to underlying fundamentals.

R89Capital aligns with this preview to allege that VCs, looking to recoup their investment, are launching Ponzi tokens on general-purpose layer-2 platforms before dumping them for ETH and eventually exiting for USD. 

In this case, Ponzi tokens, as claimed, are low-market coins that can be meme coins or other well-marketed projects. These tokens have higher upsides, are liquid enough, and can be sold for ETH in layer-2 decentralized exchanges or popular ramps like Binance or Coinbase. 

The Ethereum Technical Debt: Scaling Remains A Big Issue

Still, R89Capital didn’t mention which layer-2 projects are “Ponzis” but said the primary reason ETH is capped is due to Ethereum’s technical debt.

Over the years, Ethereum developers have been launching new products and scaling solutions, of which the transition from a proof-of-work to a proof-of-stake system and adoption of layer-2 solutions stand out. Even so, scaling remains a challenge impacting user experience, especially when token prices begin rallying. 

It is not unusual for gas fees on Ethereum to spike to double-digits in a bull market, discouraging deployment while catalyzing migration of some transactions to competing platforms like Solana or layer-2 scaling solutions like Base or Optimism.

Feature image from Canva, chart from TradingView

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