In Part One, I focused on Messar's structural arguments surrounding L1 valuation traps, chain abstraction, AI agents, derivatives, and DePIN. Part Two shifts the discussion from the growth narrative to internal tensions within the cryptocurrency system—particularly Ethereum's positioning, the evolution of stablecoins, and the importance of maintaining skepticism when reading institutional research reports.
These chapters are less about where capital goes and more about where capital goes. They aim to further explore where value is quietly lost and why some long-held assumptions may no longer hold true.
Ethereum's identity crisis
One of the most compelling parts of the report is Messari's in-depth exploration of Ethereum's strategic dilemma. The report raises a thought-provoking question: Is Ethereum gradually becoming a "settlement dump" for its own Layer 2 ecosystem?
To understand this concern, context is important.
The Ethereum Cancun upgrade and EIP-4844 introduced Blobs, significantly reducing the data availability costs at Layer 2. From both a user and scalability perspective, this upgrade has been very successful. Transaction fees have decreased, and the operating costs of Rollups have also been significantly reduced.
However, these negative economic impacts are far from beneficial to Ethereum itself.
Before Blob, applications like Uniswap required users to transact directly on the Ethereum mainnet, consuming ETH and participating in fee burn. After the upgrade, most of this transaction activity migrated to the L2 layer, where fees are collected at the aggregation layer. Ethereum still receives settlement fees, but only a fraction of what it used to be.
Therefore, Ethereum's gas consumption is decreasing, the rate of ETH burning is slowing, and by 2025, the asset will transform from a deflationary asset to an inflationary asset. This is not merely a technical footnote—it directly impacts Ethereum's monetary narrative.
Messari argues that unless Ethereum can restore its economic traction through mechanisms such as shared sequencers, mainnet upgrades, or some form of native sharding, its valuation will increasingly rely on the "digital gold" narrative.
In this competition, Ethereum faces a structural disadvantage. As a monetary asset, it cannot win in the competition. The success or failure of Bitcoin and Ethereum depends on their simplicity, immutability, and brand clarity. If execution layer relevance cannot be restored, Ethereum will face the risk of being squeezed out by Bitcoin's monetary dominance and L2 service application dominance.
The shift from yield-generating stablecoins to shadow banking
Another major theme of the report is the shift of stablecoins from passive settlement tools to active yield tools.
Messari predicts that interest-bearing stablecoins will increasingly erode the market share of cryptocurrencies. The reason is simple: institutions are no longer willing to forgo a 5% risk-free rate of return for holding unyielding dollars.
The report introduces the concept of "risk-free yield withdrawal." Historically, USDT holders have essentially handed over their returns to Tether, which then reinvests its reserves, reaping billions of dollars in profits annually. In a high-interest-rate environment, this inefficiency becomes glaringly obvious and cannot be ignored.
The protocol Ethena directly challenges this model. Ethena combines liquidity-staking tokens with a delta-neutral hedging strategy, distributing underlying yields to stablecoin holders. Importantly, USDe's listing on major centralized exchanges in 2025 gives it true settlement capabilities, not just DeFi composability.
However, Mesari did not ignore these risks.
Because USDe is a synthetic stablecoin backed by derivatives hedging, it is subject to structural de-pegging risk under extreme market conditions. Its returns primarily come from two sources: LST staking rewards and funding fees paid by perpetual futures traders.
In a bull market, long traders subsidize the entire system, allowing USDE holders to "collect rent." In a prolonged bear market, fund flows reverse, and the system must pay to maintain hedging. Therefore, returns are cyclical, not fixed.
Messari's optimism implicitly assumes that leverage demand will persist and the Bitcoin market environment will remain favorable. The LST premium is an indicator worth watching; persistent distortions often indicate rising underlying pressure.
Backtesting and health skepticism
While Mesari's research is insightful and historically accurate, it should not be taken as absolute truth.
As a research platform with institutional interests, Messari inevitably reflects portfolio risk exposure and strategy preferences. The report maintains a consistently optimistic tone. For example, Solana's holdings are highly consistent with its disclosed holdings. This doesn't negate the argument, but a critical distance is certainly warranted.
To verify this, I used AI-assisted analysis to backtest Messari’s major predictions in recent years.
The results were mixed, but quite insightful. In late 2023, Messari predicted that Solana was the only L1 token capable of truly challenging Ethereum, a prediction that proved remarkably accurate, with SOL's price soaring from around $20 to over $200 in 2024. Their relatively bearish stance on Ethereum was also validated, with the ETH/BTC price continuing to weaken in 2025.
The predictions regarding DePIN were partially correct. Large projects like Render and Helium performed well, but many smaller projects ultimately failed. The predictions for stablecoins were more accurate, with yield-bearing stablecoins poised to be one of the most stable growth sectors in 2025.
Overall, the hit rate was high—but not perfect.
This further underscores a broader point: the best way to interpret the Messar Report is... as a directional compass , not a trading manual. They excel at identifying structural shifts early on, but they don't account for liquidity timing, narrative decay, or retail-driven reflexivity.
Ethereum's identity crisis
One of the most compelling parts of the report is Messari's in-depth exploration of Ethereum's strategic dilemma. The report raises a thought-provoking question: Is Ethereum gradually becoming a "settlement dump" for its own Layer 2 ecosystem?
To understand this concern, context is important.
The Ethereum Cancun upgrade and EIP-4844 introduced Blobs, significantly reducing the data availability costs at Layer 2. From both a user and scalability perspective, this upgrade has been very successful. Transaction fees have decreased, and the operating costs of Rollups have also been significantly reduced.
However, these negative economic impacts are far from beneficial to Ethereum itself.
Before Blob, applications like Uniswap required users to transact directly on the Ethereum mainnet, consuming ETH and participating in fee burn. After the upgrade, most of this transaction activity migrated to the L2 layer, where fees are collected at the aggregation layer. Ethereum still receives settlement fees, but only a fraction of what it used to be.
Therefore, Ethereum's gas consumption is decreasing, the rate of ETH burning is slowing, and by 2025, the asset will transform from a deflationary asset to an inflationary asset. This is not merely a technical footnote—it directly impacts Ethereum's monetary narrative.
Messari argues that unless Ethereum can restore its economic traction through mechanisms such as shared sequencers, mainnet upgrades, or some form of native sharding, its valuation will increasingly rely on the "digital gold" narrative.
In this competition, Ethereum faces a structural disadvantage. As a monetary asset, it cannot win in the competition. The success or failure of Bitcoin and Ethereum depends on their simplicity, immutability, and brand clarity. If execution layer relevance cannot be restored, Ethereum will face the risk of being squeezed out by Bitcoin's monetary dominance and L2 service application dominance.
The shift from yield-generating stablecoins to shadow banking
Another major theme of the report is the shift of stablecoins from passive settlement tools to active yield tools.
Messari predicts that interest-bearing stablecoins will increasingly erode the market share of cryptocurrencies. The reason is simple: institutions are no longer willing to forgo a 5% risk-free rate of return for holding unyielding dollars.
The report introduces the concept of "risk-free yield withdrawal." Historically, USDT holders have essentially handed over their returns to Tether, which then reinvests its reserves, reaping billions of dollars in profits annually. In a high-interest-rate environment, this inefficiency becomes glaringly obvious and cannot be ignored.
The protocol Ethena directly challenges this model. Ethena combines liquidity-staking tokens with a delta-neutral hedging strategy, distributing underlying yields to stablecoin holders. Importantly, USDe's listing on major centralized exchanges in 2025 gives it true settlement capabilities, not just DeFi composability.
However, Mesari did not ignore these risks.
Because USDe is a synthetic stablecoin backed by derivatives hedging, it is subject to structural de-pegging risk under extreme market conditions. Its returns primarily come from two sources: LST staking rewards and funding fees paid by perpetual futures traders.
In a bull market, long traders subsidize the entire system, allowing USDE holders to "collect rent." In a prolonged bear market, fund flows reverse, and the system must pay to maintain hedging. Therefore, returns are cyclical, not fixed.
Messari's optimism implicitly assumes that leverage demand will persist and the Bitcoin market environment will remain favorable. The LST premium is an indicator worth watching; persistent distortions often indicate rising underlying pressure.
Backtesting and skepticism about health
While Mesari's research is insightful and historically accurate, it should not be taken as absolute truth.
As a research platform with institutional interests, Messari inevitably reflects portfolio risk exposure and strategy preferences. The report maintains a consistently optimistic tone. For example, Solana's holdings are highly consistent with its disclosed holdings. This doesn't negate the argument, but a critical distance is certainly warranted.
To verify this, I used AI-assisted analysis to backtest Messari’s major predictions in recent years.
The results were mixed, but quite insightful. In late 2023, Messari predicted that Solana was the only L1 token capable of truly challenging Ethereum, a prediction that proved remarkably accurate, with SOL's price soaring from around $20 to over $200 in 2024. Their relatively bearish stance on Ethereum was also validated, with the ETH/BTC price continuing to weaken in 2025.
The predictions regarding DePIN were partially correct. Large projects like Render and Helium performed well, but many smaller projects ultimately failed. The predictions for stablecoins were more accurate, with yield-bearing stablecoins poised to be one of the most stable growth sectors in 2025.
Overall, the hit rate was high—but not perfect.
This further underscores a broader point: the best way to interpret the Messar Report is... as a directional compass , not a trading manual. They excel at identifying structural shifts early on, but they don't account for liquidity timing, narrative decay, or retail-driven reflexivity.
