Ethereum Valuation Models Suggest Undervaluation Amid Market Decline

The native token of the Ethereum network, Ether (ETH), is reportedly undervalued in nine out of 12 commonly used valuation models, according to Ki Young Ju, CEO of the crypto market analysis platform CryptoQuant.

The composite fair value using all 12 models indicates ETH should be priced at approximately $4,836, suggesting a potential gain of over 58% compared to its current market price, which is just north of $3,000.

Ju highlights that eight out of the 12 models have a reliability rating of at least two on a three-tier scale, indicating a solid foundation for these valuations. The Capital valuation model, which evaluates total on-chain assets including stablecoins, ERC-20 tokens, NFTs, real-world tokenized assets, and bridged assets, estimates a fair value for ETH at $4,918.

Metcalfe's Law, which assesses the value of a network based on the square of its active users or nodes, projects an even higher price of $9,484 for ETH, implying that it is over 211% undervalued. Additionally, using the Layer-2 framework, which considers total value locked in Ethereum's scaling network, projects a price of $4,633 per ETH, indicating a 52% undervaluation.

However, the Ethereum community is divided on the efficacy of traditional valuation models in accurately pricing digital assets. Some analysts argue that these models fall short in capturing the nuances of decentralized blockchain networks.

Notably, the Revenue Yield valuation model, which calculates ETH's value based on annual network revenue divided by the staking yield, suggests ETH is actually overvalued at its current price. This model estimates a fair price of approximately $1,296, indicating ETH is overvalued by over 57%, largely due to dwindling revenue generation and increased competition from other networks.

The contrasting views on Ethereum's valuation during this market decline provide critical insights into potential future trends and investment opportunities. Sources indicate that traditional financial frameworks may struggle to fully represent the evolving cryptocurrency landscape, leading to ongoing debates within the Ethereum community regarding its true valuation.