$4.5 Trillion Asset Manager Claims Ethereum (ETH) is Undervalued: Reasons Explained

Fidelity Investments' crypto arm believes Ethereum (ETH) is trading below its true value.

In their latest 'Ethereum Investment Thesis' report, Fidelity Digital Assets suggests that Ethereum (ETH) is undervalued. Based on Ethereum's current supply of approximately 120 million and annualized network fees surpassing $6.8 billion, the calculated price of ETH, using a discounted cash flow model, is estimated at $2,090. This indicates a potential undervaluation of about 28% from its present rate.

Fidelity Digital Assets believes Ethereum's valuation is intrinsically tied to its network activity and, subsequently, the associated fees. They forecast these fees to experience double-digit growth over the coming seven years, reaching an impressive $20 billion by 2030.

Post Ethereum's transition to a proof-of-stake mechanism, valuing ether has become more predictable. This value can be gauged by assessing the demand for block space through transaction fees. These fees are either burned or directed to validators, thus amplifying the value for ether holders.

Essentially, the long-term connection between ether's value and fees is undeniable. The expansion of Ethereum's applications propels the demand for block space. This, in turn, results in escalated fees, enhancing both the utility and value by providing increased yields to validators.

Fidelity Digital Assets highlights potential risks that could affect the fees produced by the Ethereum network. They note:

"If scaling technology diminishes fee revenue, the connection between ether's value and its utility to network users might deteriorate, unless this decline is counterbalanced by a surge in transaction volumes."

Currently, Ethereum is priced at $1,630.

Sep 08, 2023