Crypto

Ethereum L2s Eye $1T Valuation by 2030, Arbitrum Leads with $18B

VanEck predicts Ethereum L2 networks could hit $1T valuation by 2030, despite bearish outlook on token values.

By Bill Bullington

4/4, 05:17 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • VanEck predicts Ethereum Layer 2 networks could reach a $1 trillion valuation by 2030, with Arbitrum leading at $18 billion in locked tokens.
  • Despite bullish projections, VanEck remains bearish on the long-term value of most L2 tokens, citing oversupply concerns.
  • Ethereum is expected to capture 60% market share across all public blockchains, underpinning the growth of its L2 ecosystems.

Ethereum L2 Networks: A Trillion-Dollar Potential

Investment firm VanEck has released a report predicting that Ethereum layer 2 (L2) networks could reach a valuation of over $1 trillion by 2023 in a base case scenario. This optimistic forecast is based on the evaluation of 46 L2 networks across five key areas, with a particular focus on the scalability and speed enhancements these networks offer to the Ethereum blockchain. Currently, Arbitrum leads as the largest ecosystem, boasting over $18 billion in locked tokens and capturing the majority of the $36 billion locked across all 46 networks.

Market Share and Long-Term Outlook

Analysts Patrick Bush and Matthew Sigel from VanEck estimate that Ethereum will eventually secure 60% of the market share across all public blockchains, attributing this dominance to the volume of assets within the Ethereum ecosystem. However, despite the promising valuation and market share predictions, VanEck maintains a "generally bearish" stance on the long-term value prospects for the majority of L2 tokens. They highlight the intense competition expected among L2 networks and point out that the top 7 tokens for L2 already have a fully diluted valuation (FDV) of $40 billion, with an anticipated $100 billion more in FDV from L2 tokens expected to enter the market within the next 12-18 months.

Competition and Valuation Concerns

The report underscores the challenges facing the L2 sector, particularly in terms of market saturation and valuation. With thousands of rollups predicted to emerge, and many strong projects intending to launch in the medium term, the analysts express concerns over the crypto market's ability to absorb the incoming supply of L2 tokens without significant price discounts. This skepticism is further supported by current CoinGecko data, which values tokens of the Ethereum L2 category at just over $20 billion.

Street Views

  • Patrick Bush and Matthew Sigel, VanEck (Bearish on Ethereum L2 networks):

    "We are generally bearish on the long-term value prospects for the majority of L2 tokens... It seems a bridge too far for the crypto market to absorb even limited amounts of that supply without massive discounts."