The comprehensive evaluation on Ethereum (ETH) by VanEck Research, led by Matthew Sigel, the Head of Digital Assets Research, and Patrick Bush, Senior Investment Analyst, Digital Assets, has revised the price target for Ethereum to $11.8k by 2030, following Ethereum’s hard fork. This revision is due to a more precise valuation model that took into account a variety of revenue streams and market dynamics associated with Ethereum’s ecosystem. The analysis was originally disclosed in a detailed blog post on May 9, 2023, and reposted on X (formerly Twitter) recently. It utilizes a combination of cash flow projections and fully diluted valuation (FDV) calculations.
Ethereum’s revenue model was likened to a digital mall that houses various internet commerce activities. The valuation considered the revenues from transaction fees, MEV (Miner Extractable Value), and an emerging revenue stream termed “Security as a Service” (SaaS). The revenue projections see Ethereum’s network revenues soaring from an annual rate of $2.6 billion to $51 billion in 2030, assuming a dominant market share of 70% among smart contract protocols.
The transaction revenue estimation is centered on the “market capture” of smart contract platforms in various business sectors like Finance, Banking, Payments (FBP), Metaverse, Social and Gaming (MSG), and Infrastructure (I). The analysis suggests a shift in the relationship between platform and business revenues over time as off-chain businesses deploy on-chain to reduce costs and seek new revenues.
MEV, profits derived from transaction ordering within each produced block, was acknowledged as an integral part of blockchain’s security mechanism. The analysis assumes a direct relationship between MEV and the value of all assets hosted on Ethereum, approximating a “management fee” for keeping value on Ethereum. The L2 (Layer 2) settlement dynamics are seen as the long-term scaling solution for executing transactions on Ethereum, with most revenue from L2s eventually accruing to Ethereum.
A novel revenue item, “Security as a Service” (SaaS), was introduced, conceptualizing Ethereum’s security exportability to back outside ecosystems, applications, and protocols. This burgeoning use case for ETH is anticipated to grow, although it remains uncertain to predict.
The base case scenario projects an ETH price of $11,848 by 2030, discounted to $5,359.71 as of April 30, 2023, at a 12% cost of capital. This base case assumes Ethereum becoming the dominant open-source global settlement network hosting significant portions of commercial activity across various business sectors. The bear and bull case scenarios provide a wider range of price targets, acknowledging the uncertainties surrounding Ethereum’s future performance.
The extensive analysis by VanEck Research provides a clear valuation methodology for Ethereum and explores its potential as a store-of-value asset in the evolving crypto landscape, in addition to its transactional and protocol utility.
Recently, VanEck announced the launch of its Ethereum Strategy ETF (EFUT), an actively managed fund aimed at capital appreciation through investments in Ethereum futures contracts, rather than direct investments in digital assets. The fund will primarily engage with ETH futures traded on the Chicago Mercantile Exchange, under the stewardship of Greg Krenzer, the Head of Active Trading at VanEck. This initiative mirrors VanEck’s existing Bitcoin Strategy ETF (XBTF), with both funds focusing on digital asset futures contracts. By adhering to a C-Corp structure, EFUT and XBTF may provide a tax-efficient advantage for long-term investors.
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