Ethereum is “undervalued” – when will ETH rise?

Since its inception, the Ethereum network has attracted the interest of investors and developers thanks to its security and superior features, as well as its growth potential. ETH is the second largest coin by market capitalization, just behind BTC. It is valued at $ 1,971 at the time of writing, less than half its ATH from $ 4,356 in May.

However, analysts do not consider the current price level to be appropriate. In one Video Recently, analyst Lark Davis highlighted certain aspects of this blockchain and compared it to the leading online payment system Paypal to highlight just how undervalued the asset is.

PayPal’s market cap at press time is $ 340.2 billion, up $ 100 billion from ETH’s market cap of $ 217.41 billion.

Payment of transactions

In view of the transaction volume and the value of both payment platforms, however, this evaluation criterion appears unfair. In the first quarter of 2021 alone, the network processed $ 1.5 trillion in transactions, while PayPal only had $ 936 billion for all of 2020. At the current rate, ETH processes more transactions in one month than PayPal in a whole year.

The graph below shows the quarterly growth in daily trading volume on the network and illustrates the enormous potential for future growth.

Quarterly ETH trading volume | Source: Messari

Even the Bitcoin blockchain is way behind the daily payment volume on Ethereum. According to Money Movers, Bitcoin processes around $ 9.93 billion a day, while Ethereum processes three times that figure.

user

When it comes to the total number of users on each platform, PayPal clearly dominates. In the first quarter of 2021, it had 392 million active user accounts. While the total number of unique addresses on Ethereum is 160 million, most users have multiple accounts so the actual number of users could only be a third of that.

However, the daily increase in Paypal users is 225,969. It should also be noted that the payment company has amassed the above number of users since it was founded in 1998, compared to the only 6 year old Ethereum network.

The following graph shows the network’s user growth.

Unique address on Ethereum | Source: Etherscan.io

Transaction fee

In terms of transaction fees, PayPal charges a number of different fees for different users, which can range from 2.9% to more than 4% of the transaction value. The Ethereum gas fees are at the time of writing 25.65 Gwei. Even at the 2021 high, it only climbs to $ 0.0069.

While many speculated that gas tariffs could rise with network demand, the analyst pointed to key developments such as the transition to the PoS consensus mechanism, Layer 2 solutions like Polygon that enable transactions at very low prices, and the network is planned start sharding in 2022, which will help lower gas charges.

Average gas fees on Ethereum | Source: Etherscan.io

Additionally, PayPal as an asset class offers a dividend of 0% and this will come in the form of dollars rather than PayPal stocks in the future. However, with the introduction of staking on Ethereum last December, investors were able to achieve an average annual return of 8% in ETH.

According to the suspect, profit will rise to 25% when Ethereum and Ethereum 2.0 are merged. Plus, it has a higher value proposition as ETH rewards can be reused to increase profits for years to come. Even DeFi applications running on the Ethereum network offer 5-10% more lucrative staking rewards for USDC or other assets. The analyst added:

“The Ethereum blockchain is not just a simple means of payment. It’s the entire ecosystem of financial products. “

adoption

The adoption of Ethereum by major financial institutions is seen as an additional indicator of its future potential. For example, in April the European Investment Bank issued $ 121 million worth of digital bills through Ethereum, and the Bank of Israel recently selected the ETH network to issue tokens representing digital shekels.

ETH price

To be fair, ETH didn’t do well in the last month of the second quarter of 2021. The trend looks weak from the bulls point of view and ETH has tested the bottom of the recent range of $ 1,700-1,750. However, we are nearing the end of another terrible 7-day period and there are signs that the situation ahead is relatively positive for the largest altcoin.

ETH / USD and demand zone | Source: Tradingview

As mentioned above, ETH completed a 3-week bearish action yesterday. This period is particularly important as ETH was last exposed to a 4-week correction for the last time in March 2020 during the Black Swan crash. There is currently a good chance that ETH will achieve a Green Candle Week.

Another important thing is that ETH is currently back in the demand zone and the asset is likely to close both the weekly and daily candles above the key support level of $ 1,880. ETH posted a daily close below $ 1,880 for the past 2 days, despite the fact that the asset previously tested $ 1,720 and $ 1,700 on the chart.

The increased selling pressure was one of the main factors that caused the ETH price to collapse as short-term traders left the market. But there have been massive inflows of funds since May 24th and outflows have gradually improved. On June 25, 117,000 ETH left the centralized and decentralized exchanges, which shows that the selling pressure is finally easing. Yesterday the inflow was 13.8k ETH, but now it is relatively smaller.

Source: Santiment

While it is difficult to assume that historical price movements will repeat themselves, unrealized gains can be based on how traders react to the downward movement. At the time of going to press, the relative unrealized gains of ETH are very similar to the price development from June to July 2017. Specifically, the downward trend before the price begins to rise in the second half of 2017.

Relative unrealized profit | Source: Glassnode

The unrealized profit depends heavily on the Hodler and since this still maintains a higher range, the strength of the long-term owners is very good. The market has recovered from such cases in the past, so a strong recovery can be expected next week.

You can see the ETH price here.

Disclaimer of liability: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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