Ethereum (ETH) in Danger Due to Three Trends: Ex-Arcane Research Team

While crypto enthusiasts are typically optimistic about Ethereum (ETH) in long run, these analysts shared three aspects of its ‘bear case’

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“Bear case for Ether”: Why are cross-chain and bridges dangerous for Ethereum (ETH)?
L2s might destroy their own L1 soon

Anders Helseth, vice president and head of research in crypto analytics firm K33 (formerly known as Arcane Research), shares a surprising bearish prediction for Ethereum (ETH) as a technology and Ether as an asset.

“Bear case for Ether”: Why are cross-chain and bridges dangerous for Ethereum (ETH)?

According to his thread shared on March 16, 2023, Ethereum’s (ETH) dominance in the smart contract segment might be on borrowed time. Its users avoid switching to competitors due to problems with moving liquidity out of Ethereum (ETH).

The bear case for Ether

— Anders Helseth (@andershelseth) March 16, 2023

The modern bridge ecosystem is too expensive to use, too “empirically insecure” and too difficult to use as far as the majority of Ethereum (ETH) users are concerned.

As such, in general, people are still using Ethereum (ETH) because they cannot stop doing so. Moving liquidity through bridges is still too risky and too costly.

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This, in turn, is bearish for Ethereum (ETH) in the long term: once the Web3 segment becomes truly chain-agnostic (cross-blockchain value transfer becomes frictionless and inexpensive), money will leave Ethereum (ETH).

L2s might destroy their own L1 soon

Even if this scenario is not valid, Ethereum (ETH) might lose its audience due to the irrelevance of the modern use cases that are associated with the necessity of storing ETH (“lock-ups”).

Last but not least, the evolution of Ethereum (ETH) L2s might make its main network obsolete: the problem of block space will be solved for good:

Scaling solutions make blockspace virtually infinite. Scaling solutions reduce the ability to capture the willingness to pay for transactions. So, even if everything is scaled on Ethereum, transaction fees would be so cheap that Ether captures little value

As covered by U.Today previously, bridge security is among the most serious roadblocks for blockchain scaling.

In 2022-2023, the majority of funds stolen in hacks were lost due to bridge design flaws.