L2s appear to have beaten Ethereum: So why is ETH still a Billion-dollar bet?

Ethereum [ETH] is still the base layer that keeps Web3 running, but the activity it once hosted is now happening somewhere else.New data shows Layer-2 networks are handling most of the ecosystem’s transactions, even as Ethereum continues to power the system underneath. It keeps the “digital oil” idea alive, just with the combustion moving off-chain.At the same time, Ethereum’s own numbers are cooling.L2s now control most of Ethereum’s transaction flowSource: Dune AnalyticsThe pie chart shows how Polygon, Arbitrum, and Optimism dominate total transactions, leaving only a small share for smaller rollups like Linea, Scroll, and zkSync.This isn’t a one-off. Daily transaction data shows Polygon and Arbitrum consistently processing between 2-4 million transactions a day, while Optimism adds more activity.Together, these L2s handle far more traffic than Ethereum’s mainnet, so users have clearly moved to cheaper, faster layers.What does that mean for Ethereum’s “digital oil” narrative?The metaphor still resonates, especially with EIP-1559’s fee burn and the long-held idea that Ethereum’s utility should support its value. And yet, ETH supply has turned inflationary again, even as L2 usage grows.Source: ArkhamCritics argue this is the result of revenue moving off-chain, with sequencer fees and MEV captured by rollups instead of returning to Ethereum itself.Supporters counter that Ethereum’s role is evolving into core infrastructure, making it less a commodity and more the digital land everything is built on.A slower L1 doesn’t mean a weaker ETHDeFiLlama data shows TVL easing to around $66 billion, continuing the downtrend through late 2025. Activity is clearly migrating to L2s. Yet derivatives traders aren’t treating ETH like a fading asset.Source: DeFiLlamaAMBCrypto previously reported that CryptoQuant CEO Ki Young Ju flagged Ethereum as significantly undervalued, noting that 10 out of 12 valuation models show ETH trading far below its fair worth.At the time, the Composite Fair Value estimated ETH near $4.8k, implying the asset was still around 59% undervalued despite macro weakness.Aggregated Open Interest remains elevated above $15 billion, and Funding Rates stay consistently positive. The market still prices ETH as core infrastructure rather than a trade people are exiting.Source: CoinalyzeEven as usage thins on the base layer, the believers haven’t gone anywhere.Final ThoughtsEthereum’s value case stays intact as L2 adoption surges and models still price ETH far above current levels.Despite weaker L1 metrics, there is confidence.