Bloomberg Intelligence’s crypto market analyst Jamie Coutts is warning that Ethereum (ETH) competitors may soon fizzle out.
Coutts tells his 5,938 X followers that ETH competitors put up abysmal second-quarter financials this year, which he says indicates these projects are likely doomed.
According to Coutts, there are similarities between “zombie” companies traded on the stock market and layer-1 blockchain projects that are seeing their demand plummet.
“The alternative L1 (layer-1) blockchain landscape reminds me of zombie companies (EBIT [earnings before interest and taxes] > Interest Expense) in the fiat world. I don’t see how crypto avoids a massive die-off in the not-too-distant future.
Insufficient demand (fees) + high inflation = negative profitability.”
According to his chart, Ethereum’s network pulled in more than $500 million in profits in the second quarter of 2023, while other layer-1 projects saw a decline of more than $1.5 billion.
Coutts says that “zombie” companies and layer-1 projects can attract investor interest for their potential. But he says with the Federal Reserve’s high interest rates, such speculative investments are less appealing, likely dooming many layer-1 blockchains.
“For clarification, 23% of Russell 3000 are by definition ‘zombie’ companies. People will pay for potential growth and for some that will eventually result in profitability. The problem is the new rates regime – there will inevitably be attrition. Same for Alt-L1s, some will survive and thrive but a lot will need to change course.”Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Follow us on Twitter, Facebook and Telegram
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated Image: Midjourney