This model states that ETH can grow 4x
Looking at the long-term price charts, it is easy to see that ETH has been catching up with Bitcoin lately. Although the market is still in a downtrend, the largest altcoin is holding up pretty well. As Cointelegraph reported, the price just recovered above $3,000 today, up almost 6% over the past 24 hours, although it is still almost 40% below its all-time high. The near term is even more optimistic as a pattern points to a quadrupling.
ETH 4 hour chart | Source: Trade View
In a recent Twitter thread, investor Shaan Puri proposed a model that could boost ETH to four times its current price.
He stressed that the asset is currently undervalued by up to four times, which means they expect a much higher price than it is now.
Citing the basis given by investor Ryan Allis, Puri explains how the model pushed the ETH price to $10,000. Instead of just looking at “hopes and dreams” or the commonly accepted argument, three main attributes are used to infer such a high price.
The first is the income generated by the property. As with many crypto projects, there is a fee for token transmitters. This fee is then paid to the miner to provide the necessary computing power to confirm the transactions. Puri points out that transaction fee revenue was $1.3 billion in January alone, including base fees and “tips.”
With the implementation of EIP-1559 last year, the toll mechanism was also implemented. Over time, more ETH is burned than created, making it a deflationary digital asset.
Google “ETH is watching the burn”
There is a great website that shows you how much ETH supply is being reduced every day.
In the last 24 hours, $36 million worth of ETH has been burned.
In the long term, this is why ETH believers created the term “ultra sound money” as the supply of ETH decreases over time pic.twitter.com/yzQ21KuWtD
— Shaan Puri (@ShaanVP) February 2, 2022
“search on Google phrase “ETH is watching the burning”you’ll see a great page stating that the amount of ETH is decreasing every day. In the last 24 hours, $36 million in ETH has been burned. In the long term, ETH believers therefore have the term “ultrasonic money” (to refer to the decreasing supply property of Ethereum 2.0). ETH supply decreases over time”.
The second feature is the valuation of cash flow companies. Following this pattern, a picture emerges that explains discounted ETH cash flow valuation and how it feeds into the model.
Discounted ETH Cash Flow Rating | The source: Shaan Puri
Finally, there are model assumptions, “the model assumes an annual growth rate of 25% and a 35x P/E (SP500 average)”. Puri explained that high gas fees are a concern for both developers and users, leading to two major risks: All transactions are moved to Layer 2 to reduce transaction fees or a single platform. Other smart contracts will eventually take their place take in.
Basically, since ETH has real cash flow, it can be used for fundamental analysis of the Puri asset say more.
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