Disputedly, Ethereum is the second most popular cryptocurrency in the market. The platform opened the crypto markets to a plethora of opportunities with smart contracts and tokens. Deservedly so, it the largest cryptocurrency with respect to market capitalization.
As mentioned earlier on CoinGape, Coinmetrics recently noted that the NVTV (Network Value to Market Value Ratio) of Ethereum is near its all-time low. This signifies network growth in proportion to the market value. The growth of ERC-20 and ERC-721 tokens has primarily fuelled the rise.
However, the value of the Ethereum transfers is less than the amount during Q4 2018, when the price bottomed at around $80. The graph points to a considerable decrease since October.
While the increases in the number of transactions can be attributed to non-value tokens, the value of transfers is still less. Nevertheless, it has also witnessed a drop since October 2019.
Moreover, ERC-20 token currently comprises of all major stablecoins (Tether, USDC, TUSD), exchange tokens (BNB, Huobi Token, Okex Coin, LEO) including utility tokens like BAT.
Recently, Samson Mow calculated the daily liquidity required to balance the supply of Bitcoin [BTC]. According to the estimates, Bitcoin’s supply needs a daily input of around $13-16 million to maintain a stable price.
Similarly, at the current rate, Ether [ETH] requires about $1.5-1.7 million to maintain the price around current levels. As we note, the value of transactions is actually less; it is unlikely that the amount is being put.
However, there has been consistent growth in the number of ETH addresses. While there is a possibility that this data can be misleading. However, it certainly adds to the network effect of Ethereum.
The other major factor affecting the price is the project risk that the team faces for Ethereum 2.0. There is a lot of uncertainty around network performance, staking rewards, and the outlook of regulators after the shift. Currently, Ethereum is a commodity, as viewed by the SEC. However, it might change to securities with the change to the PoS network.
Last but not least, Bitcoin’s bullish or bearish trend is largely responsible for the movements in the price of altcoins. This year witnessed a substantial correlation between the movement of Bitcoin and altcoins. However, the altcoins took a stronger blow in the bear market than Bitcoin.
How would you rate the current price of Ethereum, undervalue, or overvalued? Please share your views with us.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com