- VanEck, a global investment manager, predicts that Ethereum’s price will reach $11,800 by 2030, positioning it as a competitor to U.S. Treasury bonds.
- The valuation analysis conducted by VanEck takes into consideration various factors such as transaction fees, miner-extractable value (MEV), and Ethereum’s market share in key sectors.
VanEck’s Ethereum Valuation Analysis
Global investment manager VanEck has released a report forecasting that the price of Ethereum (ETH) will surge to $11,800 by the year 2030, positioning the cryptocurrency as a formidable rival to U.S. Treasury bonds. The report, authored by Matthew Sigel, the head of digital assets at VanEck, and Patrick Bush, a research senior investment analyst, provides an in-depth analysis of Ethereum’s potential and outlines the valuation methodology employed by the firm.
Ethereum’s Revenue Projection and Cash Flows
According to VanEck’s projections, the yearly average revenue generated by the Ethereum network is expected to soar from $2.6 billion to a staggering $51 billion by 2030, assuming Ethereum maintains a 70% market share among smart contract protocols. This surge in revenue would result in an estimated $42.90 billion in cash flows to Ethereum after accounting for validator fees and global tax rates.
Target Price and Discounting
As a result of this comprehensive analysis, VanEck establishes a base-case price target of $11,848 per Ethereum token by 2030. However, to account for the time value of money, the target price is discounted to a current price of $5,300, taking into consideration a 12% cost of capital derived from Ethereum’s recent beta.
Ethereum’s Scalability Upgrades and Cost Reductions
VanEck’s report comes at a time when Ethereum is undergoing significant upgrades to enhance its scalability. One such upgrade, EIP-4844, commonly referred to as “proto-danksharding,” aims to address scalability concerns and is scheduled for implementation during the Deneb-Cancun upgrade in the latter part of Q3 or the first quarter of Q4 in 2023.
The introduction of EIP-4844 is expected to substantially reduce the costs associated with utilizing Ethereum Layer 2 solutions. These cost reductions could reach levels up to 100 times lower than the current fees. While this may temporarily decrease the amount of Ethereum burned due to reduced fees, it is anticipated that the overall growth in Ethereum’s economic activity will drive increased value accumulation in the medium term.
VanEck’s comprehensive report and valuation methodology provide valuable insights into Ethereum’s potential as a lucrative investment and a store of value. With projections indicating a substantial increase in Ethereum’s revenue and market share, investors and enthusiasts alike will be closely monitoring the cryptocurrency’s progress in the coming years.
