As the crypto industry has grown, so has the number of companies researching the price of Ethereum (ETH) and the situation on the Ethereum blockchain. So one might assume that the market has a good idea of the price. However, according to a new study, this is not the case as ETH should be worth more.
ether Rate too low many functions
RxR Research takes a slightly different approach than most analytics firms. It is a new partnership between the two crypto investment funds Republic Crypto and Re7 Capital. Whether this makes the research twice as good remains to be seen, but in any case the latest research results are already very remarkable. RxR believes the Ethereum price, which is currently around $1,650, is too low.
More specifically, the price is 27% below “fair value”. The situation on the chain looks excellent. You can use different “lenses” to determine what the price should be. The researchers mention six; the stability of the network, the number of active addresses, ETH as “fuel” for transactions and smart contracts (Gas fees), ETH stake and finally ETH as a kind of stake in the Ethereum network.
Can ETH Rise Despite Ethereum Supply Inflation?
Most models only consider how many active users a network has. You can then easily calculate the value using Metcalfe’s law, but this can result in a distorted picture.
For example, at the current rate, approximately $1.6 billion worth of ETH is destroyed every year to settle transactions. This reduces the number of outstanding tokens, which has a positive effect on the price.
Finally, the researchers come to the conclusion that Ethereum functions like a company and that investors in ETH are, so to speak, shareholders. The ratio between the amount that investors destroy and the amount they receive in a strike is important because this determines whether there is inflation or deflation in Ethereum.
Last week there was news that the amount of ETH outstanding was increasing again, leaving the company struggling with inflation again. In fact, since the merge upgrade a year ago, the asset base has been largely deflationary. The researchers don’t say anything about this, maybe it didn’t have that big of an impact.
If you add all these factors together, the price is 27% too low. The researchers assume that the network will not grow any further. Normally, once this valuation is reached, the price also shoots up to a price that is too high. Therefore, it is possible that the price will exceed RxR’s expectations.