By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel generally agreed that Ethereum (ETH) and Solana (SOL) are facing significant challenges, with near-term risks dominated by macroeconomic factors, regulatory clarity, and competition from layer-2 solutions and other chains. While some panelists saw potential in long-term adoption and institutional investment, the consensus was that the current prices may not reflect fair value, and further declines are possible.
Risk: Layer-2 cannibalization and competition from other chains could compress on-chain fees and staking economics, muting the rebound thesis for ETH and SOL.
Opportunity: Institutional adoption of real-world asset (RWA) tokenization could serve as a catalyst for a rebound in ETH and SOL prices.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
This year's crypto market sell-off has been violent and widespread, sparing few cryptocurrencies. With only a few exceptions, almost every top cryptocurrency with a market cap over $1 billion is down big for the year.
If you're willing to dig through the crypto bargain basement bin, though, that could present a unique buying opportunity. Some of the most popular altcoins of the past five years are selling at truly discounted prices. But are any of them actually worth buying?
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The obvious place to search for value is amid the wreckage of the Layer-1 blockchain networks, all of which skyrocketed to eye-popping gains in the previous crypto bull market rally.
Due to their smart contract functionality, these Layer-1 blockchains have historically been the building blocks for everything that gets built in the crypto and blockchain world. In turn, that has justified their lofty valuations in the past.
But just look at how far the mighty have fallen. Ethereum (CRYPTO: ETH) is down 45% for the year, as is Solana (CRYPTO: SOL). Avalanche (CRYPTO: AVAX) is down 50%, and Cardano (CRYPTO: ADA) is down a heartbreaking 55%.
All of these Layer-1 blockchains basically do the same thing, so it's really a matter of picking one best-in-class winner and moving on. Right now, the market is saying Ethereum and Solana are the most likely winners, and I tend to agree. Even after a decade, Ethereum reigns supreme as the top Layer-1, while Solana has effectively been crowned the heir apparent.
For now, then, you can forget about Avalanche, which is down 97% from its all-time high. And the same goes for Cardano, which is down 95% from its all-time high.
They are in free fall right now, and there is little chance that they can regain their former mojo. Earlier this year, for example, Cardano's founder warned of a "wave of failures" coming to the Cardano blockchain ecosystem.
The safe bet is to back established Layer-1 blockchain networks, such as Ethereum, that have proven their mettle over the past decade. They are big, diversified, and increasingly trusted by large institutional investors.
A riskier move is to investigate the growing number of purpose-built Layer-1 blockchain networks that specialize in a narrow niche of the crypto world. They are not trying to be all things to all people and have largely avoided the worst of the crypto market carnage.
Take Bittensor (CRYPTO: TAO), for example. It's a purpose-built Layer-1 blockchain for AI. For the year, it's down 1%. But in a year like this one, that counts as wild outperformance. By way of comparison, Bitcoin (CRYPTO: BTC) is down nearly 30% this year.
Or, if you think the AI bubble is about to pop, what about a Layer-1 blockchain for stablecoins? You could invest in Stable (CRYPTO: STABLE), up 147% this year. It might not have Ethereum's long track record, but it's generating a positive return this year.
The biggest Layer-1 blockchain networks appear to be wildly undervalued right now and could be ready to soar higher as soon as the crypto market bottoms out.
Take Ethereum. It's currently trading at $1,650, but some analysts' price targets for the world's second-largest cryptocurrency are as high as $10,000.
Or what about Solana? It's currently selling for just $70, but some analysts think its true value could be closer to $3,200.
In order to minimize risk, I'm sticking to the largest-market-cap names when digging through the bargain basement bin. Investors will need to be patient, but there's a legitimate case for investing in best-in-class Layer-1 blockchains that are currently trading at fire-sale prices.
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Dominic Basulto has positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Bittensor, Ethereum, and Solana. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Near-term upside in ETH and SOL hinges on macro normalization and regulatory clarity; without that, the 'fire-sale' narrative risks becoming a trap."
The article paints ETH and SOL as undervalued blue chips, but near-term risk is dominated by macro flows and regulatory clarity, not just fundamentals. Targets like ETH at $10,000 and SOL at $3,200 assume multi-year adoption with no policy shocks, which feels optimistic in a risk-off environment. It glosses over SEC staking scrutiny, DeFi regulation, and fierce competition from L2s and AI-focused chains that could siphon demand or fragment liquidity. Price declines may reflect liquidity stress and risk appetite, not simply a discount to fair value. Even with durable tech, timing, staking dynamics, and clear regulatory rules will largely determine if large upside ever materializes.
Counter: If macro risk eases and regulators provide clear crypto rules, ETH's staking demand and SOL's throughput could unlock substantial inflows. That would re-rate these assets much faster than the article imagines.
"Market cap size is a poor proxy for value when Layer-2 scaling solutions are fundamentally shifting the revenue capture model away from the Layer-1 base layer."
The article’s premise that Ethereum and Solana are 'undervalued' based on price-drop-alone is a classic value trap. While ETH and SOL maintain dominant network effects, the narrative ignores the ongoing 'fee cannibalization' from Layer-2 scaling solutions, which threatens the long-term revenue models of Layer-1 chains. Betting on a rebound requires a catalyst—like institutional adoption of real-world asset (RWA) tokenization—not just a return to mean. The author’s dismissal of Cardano and Avalanche as 'also-rans' is premature; in crypto, developer activity and protocol upgrades often precede price by months. Investors should focus on protocols with sustainable tokenomics rather than just market cap.
The 'strongest case' against my caution is that crypto markets are reflexive; if liquidity returns to the ecosystem, the largest cap assets will inevitably capture the lion's share of inflows regardless of their fundamental efficiency.
"The article assumes Layer-1 winner-take-most dynamics without evidence that Ethereum's or Solana's competitive moats have strengthened, not weakened, during the 45% drawdown."
The article conflates two separate theses without justifying why. Yes, ETH and SOL are down 45% — but the piece offers zero on *why* they fell or what fundamental changes warrant re-rating them 6-10x higher. It cherry-picks Bittensor's 1% YTD performance (survivorship bias in a down market) and promotes a stablecoin Layer-1 up 147% without explaining why that's not a bubble itself. Most critically: the article assumes Layer-1 consolidation to 'best-in-class' winners is inevitable, but provides no evidence that Ethereum's dominance persists if execution falters or competing ecosystems (Solana's throughput, Arbitrum's adoption) outpace it. The price targets ($10k ETH, $3.2k SOL) are attributed to unnamed 'analysts' — a red flag.
If Layer-1 consolidation is real and inevitable, then ETH and SOL at current prices are genuinely mispriced — but the article never proves consolidation *is* happening, only assumes it. Alternatively: these tokens fell 45% for structural reasons (regulatory risk, declining dApp activity, or genuine technological obsolescence) that a market bounce won't fix.
"Ethereum faces material risk of permanent market-share loss to specialized competitors that the article downplays."
The article frames Ethereum and Solana's 45%+ 2026 declines as entry points for best-in-class Layer-1s while dismissing Avalanche and Cardano. This overlooks how quickly developer mindshare and TVL can migrate to specialized chains, as seen with Bittensor's relative resilience. ETH at $1,650 and SOL at $70 may embed overly bullish assumptions on institutional inflows and staking demand that could stall if macro tightening persists or if new L1s fragment activity further. The piece also ignores that prior cycle leadership has repeatedly failed to protect against deeper drawdowns once narratives shift.
ETH's decade-long network effects and growing institutional custody could still consolidate value even amid fragmentation, making the current discount more attractive than the article's niche-chain alternatives suggest.
"Layer-2 cannibalization could cap ETH/SOL upside, undermining the article's value tilt unless a clear monetization catalyst materializes."
Gemini overlooks the revenue dynamics behind L1s; even with strong network effects, Layer-2 cannibalization and gas fragmentation can compress on-chain fees and staking economics, which might mute the rebound thesis for ETH and SOL absent a clear monetization catalyst. If Arbitrum/Optimism and other rollups steal demand, 6- to 12-month re-rating could stall despite macro improvement. That creates downside skew if risk appetite remains fragile. I would dock the narrative until we see evidence of L1/L2 monetization balance.
"The critical risk for ETH is not fee cannibalization, but the potential decoupling of the L1 token from L2 gas utility."
Gemini and ChatGPT focus on L2 cannibalization, but both miss the 'fat protocol' thesis: value accrual is shifting from dApps to the base settlement layer. If ETH effectively captures security spend from L2s via EIP-4844 and future blobs, fee compression is a feature, not a bug. The real risk isn't revenue loss, but the 'Solana-fication' of Ethereum—where L2s become so efficient they render the L1 token redundant as a gas asset. That is the structural threat.
"EIP-4844 reduces ETH's per-transaction revenue; institutional RWA adoption must outpace that decay to justify re-rating."
Gemini's 'fat protocol' framing is sharper than the L2 cannibalization debate, but it dodges the timing problem. EIP-4844 *reduces* ETH's gas revenue per transaction—the opposite of value accrual to the base layer. If L2s inherit that efficiency without sending fees back to L1, ETH's staking yield compresses regardless of security spend. The 'Solana-fication' risk is real, but it's already priced in at $1,650. The question is whether institutional adoption of RWAs (Gemini's own catalyst) happens fast enough to offset that structural headwind.
"Unexamined Solana RWA migration risk amid L2 fragmentation heightens downside for both ETH and SOL beyond timing concerns."
Claude correctly notes EIP-4844 compresses per-transaction revenue, yet overlooks the cross-chain risk that Solana could capture RWA flows if Ethereum's L2 fragmentation persists. Gemini's fat protocol relies on L1 value accrual, but without rapid institutional adoption, both ETH and SOL face prolonged yield compression. This unexamined migration threat between ecosystems amplifies downside beyond the timing issue Claude raises.
The panel generally agreed that Ethereum (ETH) and Solana (SOL) are facing significant challenges, with near-term risks dominated by macroeconomic factors, regulatory clarity, and competition from layer-2 solutions and other chains. While some panelists saw potential in long-term adoption and institutional investment, the consensus was that the current prices may not reflect fair value, and further declines are possible.
Institutional adoption of real-world asset (RWA) tokenization could serve as a catalyst for a rebound in ETH and SOL prices.
Layer-2 cannibalization and competition from other chains could compress on-chain fees and staking economics, muting the rebound thesis for ETH and SOL.