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Are we about to see the impossible? Could Ethereum hit 35k? While a lot of people would say that it is very unlikely the linked research report (link) suggests that this dream could come true. In this article we will highlight some of the main arguments and talk about ETHs price prediction. Keep in mind that this is not financial advice and only for entertainment purposes only.
Standard Charted Report
This Report came out on the 7th of September and many of us probably oversaw it due to the amount of news about crypto regulations by the SEC and the Fed as well as the storm that was caused by Evergrande. Now that the bad news have surpassed this article could indicate a bright future for the crypto space, especially for Ethereum. The report was made after the London hard fork and gives a insightful view on how the future could look like.
In general, the report makes the case for ETH between 26k and 35k USD. Not only that but it also makes the proposition that ETH could be a better investment than BTC over the medium turn and it sees 1ETH = 0.161 BTC. This would mean that ETH has 2.2 times more upside potential than Bitcoin. Furthermore, it suggest “the flippening” which is appearing to be more and more trendy. In the following we will take a look at the different sections of this report.
Structural Considerations
In the first section the authors are talking about the structural considerations of Ethereum. More specifically they point out that the value doesn’t come from the coin itself but from the network. Many people compare ETH to digital Silver whereas it should be compared to digital oil as the authors suggest. ETH is the foundation for the network, on which an amazing amount of decentralized applications are build on. This mean, the more applications are being build on this network the more valuable ETH will become since it is necessary to run all of these applications. Sort of a fuel if you ask me.
Some of the use cases are mentioned in the report. Among them are smart contracts, DAOs (decentralized autonomous organizations), DeFi and the most recent trend: NFTs. Like I said before, To run these applications there is a demand for ETH and therefore a value behind it.
The Future of ETH
The above-mentioned things are surely very important information. But the main reason why people are bullish on ETH is the upcoming update: ETH 2.0. This is what the authors are covering in the next section of their report. Everybody who is familiar with crypto knows what I am talking about. The move from Proof of Work to a Proof of Stake ecosystem. The main advantage is the scalability which would make the ecosystem faster and more efficient.
This upgrade comes at the perfect time since mining is getting more criticism because it is environmental unfriendly and the need of high-tech hardware like GPUs to run a mining pool. In recent times this can get very expensive due to the chip shortage that the world is going through. Furthermore, The Chinese government is banning crypto which is also bad news for the Chinese crypto miners. This means they can not run their mining pools anymore which leads to less ETH supply.
So with this upgrade major drawbacks will get eliminated and the average transactions per second will rise up to 100k transactions per second which would mean that the ETH blockchain would be one of the fastest that is currently available.
Supply & Demand
The next part of the research outlines how the predicted price is evaluated. Like everything in an economic space it has to do with supply and demand. Currently there are over 7.8 million ETH staked. This means that this ETH is not in circulations until the 2.0 upgrade comes. But this is not the only factor. Since the London hard fork the base fees have been burned. Since the activations in the beginning of August over 400 thousand ETH was burned. Since this day the burning increased rapidly. On some days the burning even exceeded the issuance which made ETH a deflationary asset. This also can be seen in the following graph where the inflation rate dropped down to -2%. Those are some reasons why the supply of ETH is going down at the moment and why this asset is becoming scarcer every day.
Now let’s take a look at the demand. In general, the more demand to use the network the more demand there is for ETH. With the recent NFT hype gas prizes have risen into astronomical places. This just indicates that people are willing to use the network for their projects. Additionally, to that institutional and retail investors are starting to discover the crypto space for themselves. This interest can be seen in the following two graphics:
Valuation
The next section section of this report looks at the value of ETH. The authors compare Ethereum to the global banking system. They using metrics which involves BTC as well as different Paying providers like MasterCard and VISA and they come to the conclusion that ETH should be valued at about 35k.
Another metric they are using is the Flow argument. Here, they compare the optimal allocations of crypto in a global portfolio. The conclusion is that roughly 2% should be invested in crypto. Given that the total amount of money is 400 trillion dollars that would imply the crypto share at 9 trillion. Comparing this to the total amount of crypro market cap this would mean a 4.5 times increase for the whole crypto sector. Extending this analysis: ETH has a market cap of 390 billion dollars which is about 20% of the entire crypto market. The authors assume that ETH has the potential to increase its share to one third of the total crypto market which would lead to 26k per ETH. So how do they come to the prize of 35k? Here the assumption is that ETH can be catching up to the BTC value. They assume that the flippening will happen which would imply a 0.161 BTC per ETH.
Conclusion
To wrap this article up, I think that there is still a considerable amount of upside for ETH. I would also take into consideration that other blockchains are making progress and are called the next ETH killers. But this does not mean that they can not exist next to each other. Furthermore, with bridges being build between all of the different blockchains this can only mean one thing: A bright future for the crypto space.
If you are interested to watch a more detailed video about this topic I can recommend you the following:
Published by ga38jem on PUBLISH0X on the 9th October 2021
Published by ga38jem on LeoFinance on the 9th October 2021
