Why CryptoQuant’s CEO Believes Ethereum is Undervalued

Ethereum's price has stabilized near $3,000 during the last week of November. While this represents a 15% increase from a recent low of $2,600, it still remains approximately 40% lower than its peak of $4,900 reached in August.

Key Takeaways

Ethereum's price is currently around $3,000, which is 40% lower than its August peak.
CryptoQuant's CEO claims Ethereum is undervalued based on 10 out of 12 evaluation models.
The Composite Fair Value suggests ETH could reach $4,800, indicating a 59% undervaluation.
The realized price of ETH may signal a potential recovery if historical patterns repeat.
Recent ETF inflows have decreased, impacting Ethereum's price.
The Fusaka upgrade has the potential to positively influence Ethereum's value.

Why CryptoQuant's CEO thinks Ethereum is currently undervalued

Ki Young Ju, the CEO of CryptoQuant, argues that Ethereum is significantly undervalued based on various metrics. He stated, "10 out of 12 Ethereum valuation models indicate that ETH is undervalued." Currently, the median value, also known as the Composite Fair Value derived from these 12 models, has an average price target of $4,800. This implies that ETH is 59% undervalued at its existing price near $3,000.

Ethereum

Source: ETHVal

However, two additional metrics—the price-to-sales (P/S) ratio and revenue yield—suggest that Ethereum might be overvalued, with appropriate trading values of $820 and $1,200, respectively.

Evaluating Ethereum's Recovery Path

Another indicator aligning with the Composite Fair Value's ‘undervalued’ status is Ethereum's realized price, which reflects the cost basis for most accumulating addresses. Since 2019, ETH prices have bounced back from the realized price, recently contacting this level again. Thus, if historical trends hold, the local bottom for Ethereum may have been reached, potentially paving the way for a prolonged recovery, as noted by CryptoQuant.

Ethereum

Source: CryptoQuant

The Influence of ETF Flows on Ethereum

Between April and October, Ethereum experienced substantial ETF inflows of approximately $12 billion, resulting in a tripling of its price to nearly $5,000. However, these flows have since decreased, leading to a $3 billion withdrawal from the products and causing the ETH price to dip below $3,000 over the past two months.

Ethereum

Source: Farside

At present, there are signs of a slight recovery in institutional inflows, which could potentially support Ethereum's rebound if this trend continues into December.

Potential Catalysts for Ethereum’s Growth

Analysts suggest that the upcoming Fusaka upgrade, set for activation on December 3rd, could serve as another positive catalyst. The Fusaka upgrade aims to increase gas limits, enabling more transactions per block, which will result in a higher rate of ETH being burned. This could ultimately make ETH deflationary and enhance its value, according to analyst Joseph Young.

However, it's crucial to note that a whale from the ICO era recently sold off $120 million worth of ETH. Should profit-taking continue among major players, it might restrict Ethereum’s recovery.