Coinbase's Geoffrey Kendrick Warns That Base Network Activity Is Influencing Ethereum ETH/USD Price Dynamics

Kendrick explained that while higher activity on Base boosts ETH demand initially—due to transaction fees being paid in ETH—the profits generated by Base are ultimately converted to U.S. dollars, weighing on ETH's price.

Standard Chartered's Geoffrey Kendrick has warned that activity on Coinbase's (NASDAQ:COIN) Base network is impacting Ethereum (CRYPTO:ETH) price dynamics through indirect selling pressure.

What Happened: Kendrick explained that while higher activity on Base boosts ETH demand initially—as transaction fees are paid in ETH—the profits generated by Base are ultimately converted to U.S. dollars, putting downward pressure on ETH's price.

According to Kendrick, Base, which has become the dominant Layer-2 on Ethereum, funnels about 80% of its revenue back to Coinbase. The exchange, in turn, does not hold onto Base's ETH profits for long.

"Coinbase is not in the business of HODLing Base's ETH profits," Kendrick stated, highlighting data that shows the company actively selling ETH in the past three quarters, especially during periods when ETH prices were higher.

Coinbase's quarterly filings disclose how much ETH it holds, divided between operational needs and investment purposes. Since Ethereum's Dencun upgrade in 2024, Base's profits—paid in ETH—have likely been regularly sold off as Coinbase manages risk in response to market conditions.

Kendrick deduced that Coinbase sold 12,652 ETH in the final quarter of 2024, with net proactive selling of 1,558 ETH over the three previous quarters.

Why It Matters: This analysis builds on an earlier Standard Chartered report, where Kendrick argued that Base's emergence has removed as much as $50 billion from Ethereum's market capitalization.

"Base now extracts super-profits from the Ethereum ecosystem," Kendrick wrote in the prior note, where he also highlighted Ethereum's broader structural challenges.

He stated that Ethereum's transition to proof-of-stake and its Layer-2 scaling model—designed to reduce fees—have unintentionally shifted economic value away from Ethereum to its Layer-2s, primarily Base.

The report also lowered Standard Chartered's ETH-USD price target to $4,000 by the end of 2025, compared to a previous projection of $10,000.

While Kendrick acknowledged that Ethereum still leads in areas like stablecoins, DeFi, and tokenization, he said the Ethereum Foundation may need to consider new economic models, such as taxing Layer-2 networks, to reverse the trend.

Absent such measures, Kendrick expects ETH to continue underperforming relative to Bitcoin (CRYPTO:BTC). He projects ETH-BTC could fall to 0.015 by the end of 2027, marking its weakest level since early 2017.