- Managing director of BMO Financial Group at the Colorado market, Brian Russ makes a comprehensive presentation on Ethereum to show whether it is overvalued or not.
- According to him, ETH could surge from the current price by 17 times, implying that $1000 worth of ETH today would be valued at $17,000 in 2033.
Ethereum’s (ETH) journey to becoming the second-largest crypto by market cap has been marked by consistency, resilience, and gritty adventure. Since its inception in 2015, the digital asset has moved by 804,027% from the $0.43 recorded on October 20, 2015. ETH reached its peak of $4,891 on November 16, 2021, and has since struggled to breach that level. In the first quarter of this year, the asset started strongly, targeting $3,500 as analyzed by the Crypto News Flash.
Interestingly, the managing director of BMO Financial Group at the Colorado market, Brian Russ believes that the asset still has the potential to make more upward moves. Speaking at the ETHDenver on March 1, Russ explained how Ethereum appears undervalued using the discounted cash flow (DCF) model. According to him, his methodology factors “discounted cash flow, precedent transaction, market comparables, and Metcalfe’s Law models.”
Russ’ remarkable presentation took a quick look at what cash flows are and how they are growing on the Ethereum network. In this case, the Ethereum wallet growth rate was referred to, and it was established that its annual surge has been 36% in the last 5 years. Explaining this further, Russ assumed that a 33% annual wallet growth for 10 years would mean that 50% of the global population (4.5 billion users) could be using the asset by 2033.
Is Ethereum Undervalued or Overvalued?
Russ used the amount of Ethereum issued and burned to estimate the type of profit it generates. $1.8 billion of profit was generated by the Ethereum network according to Russ. Growing this by 33% annually for 10 years means that there would be a $458 billion future value of the Ethereum blockchain. A more intense calculation results in a $400 billion valuation, representing a 15% premium. As disclosed by Russ, Ethereum is currently undervalued by this amount. However, the result is quite different when compared to other early-stage tech companies.
Using different tools in this model shows that Ethereum is 20% overvalued according to Russ. Using Metcalfe’s law, Ethereum is said to be 44% below its current market cap of $400 billion. With each of the models giving a different answer to whether the asset is undervalued or not, Russ added the weighted average of 25% from each model. This resulted in an implied value of $345 billion ($2,875 per coin). As claimed by him, his model is very accurate and provides a conservative estimate of a project’s true value.
Through this rigorous, quantitative approach, we’re able to determine that the valuation of the Ethereum blockchain is actually fair. We think it is fairly valued, and the reason that’s important, especially as investors, is because it gives us the conviction that we are investing in something at fair value, and with that conviction, we can hold on to it for the long haul. For 3 years, 5 years, 10 years. Imagine if you had done this exercise and determined that Ethereum had this upside potential back in 2016, or 2017.
In conclusion, Russ predicted that Ethereum could value 17 times more than the current value by 2033. As of press time, the asset was trading at $3,670.98 after surging by 5% in the last 24 hours. In a publication by Crypto News Flash, ETH recently hit a 22-month high of $3,125.
