We Can Soon Expect A Mass Die-Off Zombie ETH Competitors

A warning has been issued by Bloomberg Intelligence’s crypto market analyst, Jamie Coutts, regarding Ethereum’s (ETH) competitors. Coutts has informed his 5,938 followers that these competitors had poor financial results in Q2 of this year, suggesting that these projects may soon fail.

Coutts has compared these layer-1 blockchain projects to “zombie” companies in the stock market, as their demand is decreasing.

He predicts that a significant number of crypto projects may soon die off due to insufficient demand, high inflation, and 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.

According to Coutts, companies that are commonly referred to as “zombies” and layer-1 projects may seem attractive to investors due to their potential.

However, with the Federal Reserve’s high-interest rates, these types of speculative investments are becoming less appealing and many layer-1 blockchains may suffer as a result.

To clarify, 23% of companies in the Russell 3000 index are considered “zombies” due to their lack of profitability. While people are willing to invest in potential growth, the new interest rate regime will likely lead to some attrition.

The same can be said for Alt-L1s – some may thrive, but many will need to change course to survive.

The latest Digital Asset Fund Flows Weekly Report from CoinShares reveals that digital assets experienced outflows of more than $100 million for the third consecutive week.

The report states, “Digital asset investment products saw outflows this week, totaling US$107m with profit taking gathering pace in recent weeks.”

CoinShares notes that BTC saw the majority of outflows, totaling US$111m, which is the largest weekly outflow since March when US regulatory scrutiny began to intensify. Additionally, for the first time in 14 weeks, the outflows into short bitcoin have stopped.