Ether (ETH) Costs are Buying and selling at 27% Low cost to Truthful Worth, New Analysis Reveals

Ether, the native cryptocurrency of the Ethereum ETH -0.85% blockchain, is at present buying and selling at a major 27% low cost to its perceived honest worth. This revelation comes from a complete evaluation carried out by the analysis agency RxR. This agency is a collaborative enterprise between Republic Crypto and Re7 Capital.

The valuation mannequin utilized by RxR for this evaluation is a blended model of the Metcalfe legislation. This legislation posits that the worth of a community is instantly proportional to the sq. of its consumer rely. Within the context of Ethereum, this implies contemplating not simply the energetic customers on the Ethereum mainnet but additionally these on the quickly increasing Ethereum scaling networks. Conventional fashions, in distinction, are inclined to focus solely on the mainnet’s energetic consumer base.

Ether’s major operate permits customers to execute transactions on the Ethereum blockchain. Moreover, customers can earn curiosity, take part within the community’s safety via staking, retailer non-fungible tokens, and interact in numerous different actions. As such, the worth proposition of Ether has all the time been intrinsically linked to the utilization of the Ethereum community.

Lewis Harland, an analyst at RxR, identified in a latest analysis notice that Ethereum’s community valuation aligns extra carefully with the up to date Metcalfe legislation index when the energetic consumer base of Ethereum’s scaling networks is taken into account. With out factoring in these networks, the valuation of ETH stands at $275 billion, which suggests the present market capitalization is buying and selling at a 27% low cost.

Moreover, Harland emphasised that Ether’s market capitalization aligns higher with the blended Metcalfe legislation mannequin than with the standard mannequin. That is evident when contemplating the growing exercise on layer 2 networks or off-chain options developed atop the mainnet to alleviate scaling and information bottlenecks.

Layer 2 options have emerged as a major space of curiosity available in the market. Protocols inside this area have discovered their distinctive promoting factors. In distinction, Arbitrum leads in transaction quantity, and Optimism is carving a distinct segment with its superchain imaginative and prescient.

Over the previous two years, the overall worth locked in layer 2 protocols has surged, tripling to exceed $9 billion, as per information from L2Beat. Harland highlighted a pivotal shift in April 2021 when scaling networks started considerably contributing to Ethereum’s blockspace.

This was evident when platforms like Curve, Sushiswap, Decentraland, and Aave launched on Polygon MATIC 1.05% (PoS) between April and Could 2021, driving the overall worth bridged to Polygon to a staggering $10 billion.

Over 250 functions on Ethereum have a complete worth locked of greater than $1 million. Practically 30 layer 2 networks have an mixture whole worth locked of $10 billion, primarily because of the rise of rollup-centric options. Harland underscored the significance of incorporating layer 2 exercise when figuring out the honest worth of Ethereum utilizing the Metcalfe legislation fashions.