Can Ethereum reach $40,000? Geoffrey Kendrick's institutional thesis and the global settlement layer

Standard Chartered says ETH will reach $40,000. This isn't a Crypto Twitter shitpost — it's Geoffrey Kendrick, Global Head of Digital Assets Research, with a thesis that flips the dominant 2024 narrative: L2s don't cannibalize Ethereum, they validate it.

Can Ethereum reach $40,000? The Standard Chartered Thesis

In 2024, Kendrick was one of the most critical voices regarding Ethereum's future. The proliferation of Layer 2 networks like Base, Arbitrum, and Optimism — driven by the Dencun upgrade and the introduction of data blobs — drastically reduced transaction costs but also drained revenue from the mainnet. Kendrick himself estimated that Base alone had removed billions of dollars in potential value from ETH's market cap by diverting gas fees.

By January 2026, his vision took a 180-degree turn. This wasn't the result of a technical correction, but rather a deep observation of the behavior of Digital Asset Treasuries (DATs) and major asset managers. Standard Chartered's current thesis maintains that the retail migration to L2s was a necessary step for scalability, but it has left the L1 free to host high-value transactions that require maximum security and decentralization.

Kendrick argues that 2026 will be the "year of Ethereum," much like 2021 was, because the asset's structural fundamentals are now superior to Bitcoin's in terms of productive capital retention capacity.

Standard Chartered's confidence is reflected in a series of price targets that, while adjusted in the short term due to general market weakness, show an unprecedented long-term bullish conviction in commercial banking:

A critical component of this projection is the ETH/BTC ratio. Kendrick anticipates it will gradually return to the 0.08 levels seen in 2021. The logic: while Bitcoin acts as a reserve asset ("digital gold"), Ethereum functions as a smart contract platform with diversified revenue streams — stablecoins, DeFi, and Real World Asset (RWA) tokenization.

Why are L2s no longer a threat to ETH's value?

The dominant narrative of 2024 was clear: Layer 2s were vampirizing Ethereum's value. Gas fees on L1 plummeted, the mainnet seemed to be emptying, and revenue was migrating to Arbitrum, Base, and Optimism. Kendrick was one of the analysts who most amplified that concern.

So, what changed? The short answer: the user profile. L2s absorbed retail traffic — $50 swaps, NFT mints, gaming microtransactions — that congested the mainnet without providing significant economic value per transaction. What remained on L1 was exactly what institutions need: a clear environment for high-value transactions with maximum finality.

But there is a nuance that the bearish narrative completely ignored: L2s pay a toll in ETH. Every rollup — whether Optimism, Arbitrum, Base, or zkSync — must publish its state data to L1 and pay fees in ETH to do so. The more successful L2s are, the more ETH they burn on the base layer. Kendrick describes this as a high-quality "B2B" structural demand source — L2s become corporate clients of Ethereum, not competitors.

The model is analogous to an operating system: iOS doesn't lose value because millions of apps exist; every app installed reinforces the ecosystem. L2s are Ethereum's "apps," and every transaction they process validates the relevance of the base layer.

What does "global settlement layer" mean for Ethereum?

Kendrick uses the term "global settlement layer" with a specific intent: to position Ethereum not as a general-purpose blockchain, but as the final settlement infrastructure for the traditional financial system. The most accurate analogy is Fedwire — the Federal Reserve's real-time gross settlement network — but open, programmable, and operational 24/7.

What characteristics make Ethereum a candidate for that role?

• Economic Security: Over $92 billion in staked ETH protects the network. An attacker would need to control more than $60 billion in capital to compromise consensus — a cost that makes attacks economically irrational.
• Credible Neutrality: Unlike networks with controlling foundations or centralized sequencers, Ethereum operates with thousands of globally distributed validators. No single entity can censor transactions or modify the state.
• Operational Track Record: Nearly a decade of uninterrupted uptime, processing trillions of dollars without a single failure on the mainnet.
• ERC-20 Standard: Universal interoperability with institutional-grade wallets, exchanges, and custody protocols eliminates technical friction for new participants.

For a fund manager moving $100 million, paying a $50 fee on L1 is an insignificant friction cost compared to the certainty that the transaction is protected by that globally distributed economic security. As BlackRock's Robert Mitchnick notes: "There was no doubt that the chain we would start our tokenization on was Ethereum."

Why are institutions returning to L1?

The fork is already happening. Data from 2025 and early 2026 show a clear pattern: while simple transfers have almost entirely migrated to networks like Arbitrum or Base, RWA minting operations, high-volume stablecoin transfers, and institutional arbitrage remain on L1.

Why? Kendrick emphasizes that for traditional financial institutions, speed and marginal savings are secondary to trust and immutability:

Many Layer 2 networks still rely on centralized sequencers, introducing single points of failure and censorship risks that are unacceptable for a systemic bank's compliance departments. Although L2s offer massive scalability, their security guarantees are often conditional and depend on "escape hatches" that have yet to be tested under extreme market stress.

The institutional strategy Kendrick describes is sequential: launch first on the mainnet to ensure asset integrity, and then expand to secondary layers to improve distribution and operational efficiency. This is the same model BlackRock applied with BUIDL: minting on L1, subsequent distribution across 6 networks.

How do staking and deflation affect the price thesis?

A fundamental pillar of the Kendrick thesis is that institutional volume will more than compensate for the loss of retail transactions to L2s. This phenomenon directly impacts the scarcity mechanism introduced by EIP-1559.

The model is simple but powerful: the net supply of ETH changes based on the difference between issuance (validator rewards) and burn (base fees). When demand for block space increases — due to "heavy" institutional transactions like large fund settlements or massive asset minting — the burn rate exceeds issuance, creating permanent deflationary pressure.

Kendrick also identifies a "B2B" revenue stream that reinforces this dynamic: Layer 2 networks pay fees in ETH to settle their states on the mainnet. This is high-quality structural demand that does not depend on retail sentiment.

In parallel, the accumulation of ETH by Digital Asset Treasuries (DATs) is creating a supply shock:

• Corporate Holdings: By December 2025, corporate balance sheets exceeded 6.5-7 million ETH — more than 5.5% of the circulating supply.
• Bitmine Immersion Technologies (BMNR): The largest Ethereum-focused DAT, controlling ~3.4% of the supply with plans to reach 5%.
• Ethereum ETFs: Over $11 billion in net inflows, removing ETH from the open market.

The combination of burn-driven deflation, corporate accumulation, and ETF inflows creates a liquidity deficit that magnifies the bullish impact of any new institutional demand. It is a model that the restaking ecosystem with EigenLayer and Symbiotic further amplifies by locking up additional ETH as economic security for external services.

What role do BUIDL and RWAs play in ETH's valuation?

The core of Kendrick's bullish vision lies in the tokenization of Real World Assets (RWA) and the explosive growth of stablecoins. According to Standard Chartered, by 2028 these sectors will inject massive liquidity that will transform Ethereum's revenue dynamics.

The projections are aggressive but not without foundation:

The case of BlackRock's BUIDL is paradigmatic: a tokenized money market fund managing billions in US Treasury bills across 6 blockchains, with Ethereum as the primary issuance layer. When the world's largest asset manager chooses Ethereum as the foundation for its institutional yield product, the signal is unmistakable.

Kendrick's logic is that once an institution decides to move its treasuries to digital formats to take advantage of 24/7 settlement and programmability, Ethereum becomes the default choice thanks to its deep liquidity and ERC-20 standard. And RWA tokenization data confirms this trend: over $26 billion already tokenized, with Ethereum capturing the dominant share.

The regulatory catalyst is the CLARITY Act, which seeks to establish a clear line between SEC and CFTC jurisdiction. Kendrick maintains that this legislation, along with the GENIUS Act for stablecoins, will allow major managers to integrate Ethereum into their corporate treasury strategies safely and transparently.

What are the risks to the Kendrick thesis?

Every bullish thesis has fracture points. Kendrick's, despite its sophistication, is not immune to structural risks that could derail the $40,000 projection:

Regulatory Risk. The CLARITY Act has yet to be passed. The "regulation by enforcement" model remains in effect in the US. A prolonged delay or hostile legislation could stall institutional investment for years. Without a clear framework, bank compliance departments cannot authorize direct exposure to L1.

Competition from Solana. Solana processes thousands of transactions per second with fees costing fractions of a cent. If Solana manages to attract significant institutional products — and projects like Franklin Templeton's tokenized fund on Solana suggest it's possible — the narrative of Ethereum's monopoly as a settlement layer weakens.

Technical Roadmap Execution. The Glamsterdam (ePBS, parallel execution, 10,000 TPS) and Hegotá (post-quantum cryptography, native account abstraction) upgrades are scheduled for 2026. A delay in their implementation would erode confidence in Ethereum's ability to scale without sacrificing decentralization.

Dependence on Bitcoin. Kendrick's short-term projections were already adjusted downward (from $12,000 to $7,500 for 2026) due to BTC weakness. If Bitcoin's four-year cycle theory does not confirm a new high, ETH will drag that weakness regardless of its own fundamentals.

Private Chains. There is a risk that institutions will build private permissioned blockchains instead of using the public L1. JPMorgan with Onyx or Goldman with its digital asset platform might prefer controlled environments that eliminate the regulatory risk of operating on a public network.

How does ETH position itself against Solana and Bitcoin in 2026?

Kendrick establishes a clear taxonomy: Bitcoin is a store of value, Ethereum is productive infrastructure, Solana is execution speed. Three distinct roles that are not necessarily mutually exclusive but compete for institutional capital allocation.

Compared to Bitcoin, Ethereum's advantage is capital productivity. Bitcoin generates returns only through price appreciation. ETH generates returns through staking (~3.2% annually), DeFi participation, liquidity provision, and fee capture. For a corporate treasurer who must justify digital asset allocation to the board, an asset that produces yield is easier to defend than one that simply "goes up in price." Kendrick expects the ETH/BTC ratio to return to 0.08 — 2021 levels — as this productive capital narrative gains institutional traction.

Compared to Solana, Ethereum's advantage is security and the network effect. Solana offers superior speed (up to 65,000 theoretical TPS), but with a more concentrated validation model and a history of outages that institutions cannot ignore. With the Glamsterdam and Hegotá upgrades, Ethereum plans to reach 10,000 TPS on L1 — sufficient for most institutional use cases — without compromising decentralization.

The allocation of ETH in a diversified portfolio depends on the risk profile, but the Kendrick thesis suggests that for long-term institutional investors, ETH offers the most attractive combination of yield + appreciation + infrastructure utility.

Conclusion: The financial infrastructure of the future is built on Ethereum

Geoffrey Kendrick's thesis for 2026 and beyond positions Ethereum not just as an investment asset, but as the centerpiece of a new global financial infrastructure. The evolution of his vision — from skepticism over revenue leakage to optimism over institutional entry — reflects a deep understanding of the needs of major financial players: security, reliability, and a clear regulatory framework.

The projected recovery in fee revenue, driven by high-value institutional transactions, and the resulting deflationary pressure from ETH burning, provide solid fundamental support for Standard Chartered's predictions. If Ethereum successfully executes its upcoming technical upgrades and the regulatory framework consolidates, the $40,000 target for 2030 stops being a speculative figure and becomes a projection based on capturing value from a trillion-dollar tokenized asset market.

For banks, paying L1 fees is not an expense — it is the necessary insurance to operate on the most secure and liquid network in the digital world.

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