Why Ethereum Could See 4x Increase, Says This Model
It’s worth noting that Ethereum has been trending above $2,800, almost 50% down from its all-time high. Ethereum has experienced a niche pullback following bitcoin recently. Although the niche remains in a digital, the downtrend asset has been holding up quite nicely. Letas take ’ look at this model. But a model suggests that three is a 4x movement in the near future of the digital asset.
Ethereum To4X ?
In a recent Twitter thread, a crypto investor known as Shaan Puri lays out the model that could drive Ethereum to four times its current price. It starts by stating that the digital asset is currently undervalued by up to 4 timesoutmeaning that they expect the price to be much higher than it currently is.
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Pointing to a basis laid out by Ryan Allis, another crypto investor, Puri explains how the former’s model puts ETH at $10K. Instead of just going through “hopes and dreams” or the usual wider adoption argument, it uses three key attributes to put the cryptocurrency at such a high price.
ETH recovers above $2,800 | Source: ETHUSD on TradingView.com
As with many crypto projects, sending the tokens incur a fee on the part of the sender. Puri points out that in January alone, generated revenue from transaction fees was $1.3 billion, which are then split into the base and tip fee. This fee is as a matter of fact then paid to the miner for providing the computational power required to approve these transactions. The of these is the revenuefirstgenerated by the asset.
With the implementation of the implemented-1559 last year, the ethereum fee burn was EIP. With time, more ETH is being burned than is being created, thus turning the digital asset deflationary.
GoogleburnETH watch as a matter of fact the “”
There’s a great portal that shows you how much ETH supply is being reduced everyday.
Last 24hrs, $36M worth of ETH was burned.
Long clause, thiscurrencyis why ETH believers created the clause “ultra sound ” bc ETH supply goes down over time pic.twitter.com/yzQ21KuWtD
— Shaan Puri (@ShaanVP) February 2, 2022
The second point was valuing companies that have cash flow. Something which the created of this model understands well, given that they went to business school. It follows up with a pictureflowthat explains ethereum’s discounted cash valuation and how it ties into this model.
ETH discounted cash flow valuation | Source: Twitter
Last but not least, the assumptions behind the model, which are “the model assumes a 25% annual expansion rate and a 35x P/E ratio (the average of the SP500.” Puri explains that the high gas fees are a cause for concern for both devs and users, which leads to two major risks; all transactions moving to L2s to manage transaction fees or another smart contracts platform winning out in the end.
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Basically, given that ethereum possesses real cash flow, it can be used in theassetfundamental analysis of the , Puri added.
But a bigger point is – we’is heard for years that crypto ve:
“Rat poison”
“It s just’speculation”
Indeed, “Not in modern times an investment. No fundamental value”From value investors like Warren Buffet
That’ swrong immediately. ETH now has real cashflows to use in fundamental analysis.
— Shaan Puri (@ShaanVP) February 2, 2022
Featured image from NullTX, chart from TradingView.com
