Valuation
As noted earlier, analysts' price targets for Ethereum range from $5,700** to **$150,000+. Following methodologies by Ryan and Vivek, this section outlines a Discounted Cash Flow (DCF) valuation for Ethereum.
Key Components
Core Business (Zero Growth):
- Assumes 1.77 billion ETH in circulation.
- Discount rates: 15% (conservative), 10%, or 5%, yielding values of $300**, **$383, and $500 per ETH, respectively.
Growth Potential:
- Estimates Ethereum disrupting multiple industries (e.g., finance, identity, IoT).
- Assumes 5% market capture per sector, with overlaps excluded.
- Conservative valuation: $1,945/ETH** (total: **$2,245/ETH).
Optionality (Real-World Applications):
- Uses the Black-Scholes model to price Ethereum’s embedded optionality (e.g., DeFi, NFTs).
- Estimated value: $2,297/ETH**, bringing total intrinsic value to **$5,448/ETH (including 2% deflationary supply reduction).
Key Insight: At ~$2,234/ETH, investors pay for Ethereum’s core business while gaining optionality for free—a 15% chance to capture 5% of disrupted markets.
Final Thoughts
Quotes from Industry Leaders
👉 "Ethereum is like betting on a startup’s management team—its value hinges on developers scaling the base layer while maintaining network effects."
— Lyn Alden (2021)
"Blockchains are generalized mechanisms for running programs, storing data, and executing transactions verifiably. They’re hyper-sets of computation."
— Tim Sweeney (2017)
👉 "The shift to crypto-enabled work could be a civilization-level change in how people earn—akin to the open-source revolution but monetized."
— Marc Andreessen (2021)
FAQ
Q: Why is Ethereum’s valuation range so wide?
A: It reflects divergent assumptions about adoption speed, regulatory hurdles, and technological scalability.
Q: How does optionality impact Ethereum’s price?
A: Optionality accounts for unforeseen use cases (e.g., Web3, DAOs), adding speculative upside.
Q: What’s the biggest risk to Ethereum’s growth?
A: Failure to scale efficiently or losing developer momentum to competitors like Solana.
Q: Is Ethereum’s deflationary supply a guaranteed value driver?
A: Not guaranteed—demand must outpace reduced supply to sustain price increases.