Ethereum has a fundamental problem: Cyberphunk Nick Szabo

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In two X posts, legendary internet aficionado Nick Szabo and Synracy Capital co-founder Ryan Watkins laid out opposing frameworks for understanding the Ethereum rally and its valuation mechanics, which read like opposing frameworks for what is actually driving Layer-1 price.

Ethereum price has nothing to do with utility

Szabo’s core claim is clear: “A fundamental problem with ETH’s valuation is that Ethereum’s primary use cases are largely outside of ETH’s market value.” In his view, Ethereum “could be very useful” and its applications “could generate huge revenue,” but “the price of Ethereum remains low—and vice versa—there is little connection between them.”

He contrasted this with Bitcoin, whose “primary use case is as a store of value, closely tied to its price,” adding that “Bitcoin’s fundamental design is better suited to that use case, so ETH can’t just imitate it, it has to rely on other use cases that are not closely tied to its price.” For Szabo, the key is structural: utility on Ethereum doesn’t reliably translate into value capture for ETH, whereas Bitcoin’s purpose and price are intertwined by design.

Sabo, who returned to the X in late September 2025 after a five-year absence, made his statement in response to one made by Watkins. Researchers look at markets from the opposite perspective, arguing that investors often over-engineer first-tier valuation models, with price and narrative playing a pivotal role. “Time and time again I see people overthinking L1 valuations,” he wrote, viewing ETH’s last leg of strength as a narrative pivot rather than a spreadsheet breakout.

Why has ETH price tripled since April?

“The only difference between $1,400 ETH and $5,000 ETH is Bitmine,” he said in April. “Ethereum is a dying platform.” Today, “it’s the stablecoin chain and the next ‘Bitcoin-like’ opportunity for institutions.” The lesson he learned was straightforward: “As they say, price drives the narrative.”

Crucially, Watkins does not insist that these narratives are legitimate—he emphasizes the vacuum they fill. “The point here is not whether these are reasonable. The point is that the lack of an agreed valuation methodology creates a void that only a narrative and associated framework can fill.”

He presents the competing bull cases not as beliefs but as open hypotheses: “Will the bull case for ETH become an indicator of global GDP? Will it become an essentially unvaluable ‘programmable Bitcoin’? What about both? The truth is that no one knows.”

This uncertainty, he said, prompts markets to anchor on simple comparisons and flows: “So, what happens when markets anchor on relative values ​​and narratives? BTC is $2 trillion. So who says ETH shouldn’t be 50% of that? It provides a superset of what Bitcoin does, right? ETH is $500B. Why shouldn’t SOL be 100% or more of that? It’s a premium product that has greater traction in almost every economy.”

He considers these exercises “silly” but useful for navigation: “We can theorize everything we want, or navigate the environment in front of us.” Until the fundamentals are reestablished, “don’t overthink it.” In his closing remarks, he clearly defines the advantage: “There is a huge competitive advantage for assets that have penetrated mainstream consciousness and persisted over time. It’s a game of flow and narrative until the party stops.”

Both views may be true simultaneously. The market will likely continue to price ETH primarily through narrative and relative value, while the question Szabo raised—whether Ethereum is designed to create a lasting link between network utility and token value—remains unanswered. For now, the debate itself is a sign that ETH is going through a cycle in which a perception of purpose, rather than just measurable analogues of cash flow, sets the tone.

As of press time, ETH is trading at $4,701.92.

Featured image created using DALL.E, chart from TradingView.com

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