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Is Ethereum Price Fair?

Ether (ETH), the token of Ethereum, reached a new historical maximum exceeding $4,000 last Monday, May 10, 2021. This new peak happened just one week after having surpassed $3,000.

Ethereum cryptocurrency
Is Ethereum overvalued? (Photo by Peter Patel, elifxlite on PixBay)

With the price rise, its market capitalization has grown to the point that it currently exceeds the total capitalization of JP Morgan. It has also outpaced large companies, including Walt Disney, Walmart, Bank of America (BofA), and PayPal.

The index prepared by Companiesmarketcap.com shows in their statistics, Ethereum's market capitalization on May 12 reached above $500,000, reaching a new high. The value has fallen in the last hours and is at more than $480,000 million at writing. The price rounds $4,200 for each ETH.


Considering the data from the ranking of the most valuable companies by market capitalization, Ethereum momentarily surpassed the digital payments company Visa, and the Seoul-based conglomerate Samsung, whose capitalizations are above $480,000 million.


Three places down are Johnson & Johnson and the multinational corporation of Walmart stores. At the bottom of this list are recognized international firms such as Mastercard, Home Depot, Nestlé, and Procter & Gamble.

Why is the price of ETH on the rise?

In recent months, the upward trend of this digital asset has attracted many investors, with some observing that the growth of ETH has even surpassed Bitcoin.


So far, there are two possible reasons why the price of Ether is going up. The first one refers to the growing interest in non-fungible tokens. NFTs may be one of the main reasons why the value of Ether has reached a new all-time high, as indicated by sources such as CNN. Ethereum blockchain currently has the largest market for non-fungible tokens.


Second, the arrival of the so-called altcoin season could be another reason for the increase. For analysts, it has become clear that the popularity of altcoins, among which Ether is the most important, has increased over the last year, being seen as stopovers to reach Bitcoin.

If this performance continues, ETH could perhaps reach other all-time highs. Consequently, if the behavior continues in this way, it would not be surprising if Ethereum's capitalization reaches or surpasses Apple, Microsoft, or Amazon.


Is Ethereum overvalued?

Activity on the Ethereum (ETH) network suggests that the price of Ether should be 75% below its current value, analysts at JPMorgan Chase bank say. Given that its current price is $4,026, JPMorgan's estimate suggests that the price of this cryptocurrency should be more close to $1,000.


JPMorgan sent a note to its clients on Friday, May 7, in which it acknowledges that institutional interest in Ether and recent improvements to the Ethereum network are driving its price. However, according to JPMorgan analysts, there are divergences between the measures of network activity and Ether's valuation.


In 2021, ETH has appreciated about 450%. After setting a new all-time high of $ 4,200 on Monday, ETH is trading at $ 4,110 at writing.

JPMorgan's team of analysts, led by Nikolaos Panigirtzoglou, maintains in their client's report that the network's processing power estimation, as well as the rate of creation of new addresses, together with other parameters, can help to establish an effective price of the native cryptocurrency of said network.

"Essentially, a bigger network participant strengthens the underlying Blockchain and implies greater acceptance of the native cryptocurrency of that network," the analysts note. They contend, however, that an assessment of Ethereum's number of unique addresses and mining activity suggests that Ether should be trading around a fair price of $1,000, 75% below its current price.

Ethereum attracts institutional investors.

Analysts believe that the European Investment Bank's decision to use the Ethereum network to issue bonds for €100 million, equivalent to $122 million, "is certainly very significant, as it represents the endorsement of the Ethereum blockchain by an official institution."


Also, analysts estimate that the upcoming network changes, which imply a reduction in the supply of Ether, could contribute to increased interest from investors. However, they suggest that investment in Ether could be growing very rapidly.

A sample of institutional interest in Ethereum was evident in the issuance of three Ethereum ETFs in Canada. These investment instruments come to compete with funds traded around bitcoin, already launched in that country.

Botton Line

  • With the current market capitalization, Ethereum is also close to Samsung.

  • ETH hit all-time highs topping $4,000 on May 10.

  • So far this year, Ether has appreciated 446%.

  • ETH could be overvalued according to some network metrics.

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