For developers who wish to write smart contracts and DeFi applications, ETH is the main asset in the cryptocurrency field. It is the basic currency collateral of the DeFi financial system. In the Ethereum network, the locked-in value of DeFi has increased from USD 1 billion in January 2020 to USD 16 billion in January 2021, and the fees charged exceed the Bitcoin network, which is approximately 79 times the implied P/E ratio.
The current market price is down 37% from the previous historical high. We believe that the valuation of ETH is underestimated relative to Bitcoin BTC. In particular, the share of BTC in the overall cryptocurrency market exceeds 70%, which is close to the upper end of this share range in recent years.
When ETH was launched in 2015, it was easy to be labeled as an inflationary cryptocurrency whose economic model was inferior to BTC, thinking that its value might be zero, but this is a wrong perception. The launch of the Ethereum network and ETH is a watershed in finance, for the first time a financial contract that does not require a trusted third party to participate in financial transactions. The market value of Bitcoin comes from its status as a digital gold/wealth store, but the value of Ethereum comes from financial value.
This new parallel system is easier to use globally and at a lower cost in the long run, and can lead to rapid trials of the level of Internet information consumption, but this time it is the financial market. With Ethereum, anyone can participate and even create a new financial market with just a few clicks. If you want, you can get the loan at 3 o'clock in the morning on Saturday night and pay it off on the following Sunday.
No need for exchanges or over-the-counter trading platforms, just use sites such as 1inch and Matcha to exchange from one asset to another, and usually get better prices. You can send someone a digital dollar within 30 to 60 seconds, 24x7, 365 days a year, and they can receive it at any time within this time frame.
Like most revolutionary new technologies, it is usually difficult to use, looks complicated, and many use cases feel like toy use cases. Will the future of finance really have the Sushi Agreement as its core component? Maybe it is, maybe not, but does it sound crazier than the NASDAQ (National Association of Securities Dealers Automatic Quotation Association)? not at all. Ethereum initially (2015-16) was almost only meaningful to its investors, and then (2017-18) became an interesting toy for members of the crypto community. Now, in fact, Ethereum has entered a very useful era and found a product market. . what does this mean? (2019-21) Suitable for people in the encryption field. I believe this growth trend will continue this year. Ethereum, as a platform for decentralized exchanges (DEX), loan agreements, synthetic asset trading agreements, etc., will provide more value to crypto users.
The fit of this product with the market is very real. Last year, the transaction volume within the Ethereum network increased by more than 100 times, as did loans. The daily transaction fees charged by Ethereum itself now exceed the Bitcoin network. As an asset, ETH is fully involved in all these developments, because when Ethereum completes the migration to Ethereum 2.0, it will share transaction fee income when using ETH pledge. Most importantly, ETH is used as collateral in many DeFi applications (for example, collateral is required to be invested in the issuance of the USD-pegged stablecoin Dai).
ETH is also used by users to pay for transaction fees (there will be plans to burn part of the transaction fees at certain points in time). In the long run, ETH may even become a deflationary asset that can earn fee income, use it as collateral, and pay fees. Any of these features is enough to make ETH a fascinating asset, but from an investment perspective, the combination of the above advantages makes ETH different from any other asset in the market. The implied P/E multiple based on current transaction costs is about 79. For this asset whose underlying usage has increased by 25 times (the total locked value in DeFi) or 100 times (DEX transaction volume), this asset is comparable to the stock market’s Compared with assets, the above P/E ratio feels too low.
ETH is currently down 37% from its historical high. We believe that ETH is undervalued compared to BTC (not that the two should be closely compared, because digital gold and DeFi are two different things in the final analysis), but we are still very optimistic about ETH. The market share of the total market value of BTC in the crypto market has been above 70% recently. In recent years, it has tended to be at the upper end of this range. As the bull market continues, we believe that people will make a certain degree of profit from their BTC investment. And put funds into ETH. In addition, once CME CME’s ETH futures are launched, ETH will be legalized and become an asset that institutional investors can hold. It can actually be used as a fairly easy asset allocation container (suitable for the disruptive technical asset characteristics of these institutions) .
As more and more ETH holders pledge their ETH in Ethereum 2.0, it means that a large amount of ETH is locked, and the selling pressure on its market price will decrease. These two things, combined with ETH's fundamentals and historical low valuation relative to Bitcoin, should provide a strong boost to the price trend of ETH in 2021, so we are very optimistic about ETH.
Your points are eye-opening to the potential of ETH and the structure which differs from bitcoin hence the growth of ETH. You got me with "loan at 3 o'clock in the morning" and the guidance such as sites "1inch and Matcha" I was hoping for a way to earn ETH online now that I'm interested in it, how do I accumulate more ETH. Overall good article very informative.