Leading altcoin Ethereum has recently experienced a price drop after Bitcoin. Although the market is in a bearish trend, the digital asset is doing pretty well at the moment. Ethereum is trending above $2,800, down almost 50% from the ATH level. But one model suggests 4x movement in the near future of the digital asset. As Kriptokoin.com, we took a look at this model for our readers.
An ambitious 4x prediction for the leading altcoin
In a recent Twitter post, a crypto investor known as Shaan Puri says it’s the model that could push Ethereum 4x its current price. He states that the leading altcoin is currently under 4x, which he claims means the price should be much higher than it is currently.
Shaan Puri explains how the legacy model drove ETH to $10,000, pointing to a foundation set by another crypto investor, Ryan Allis. Rather than simply arguing for “hopes and dreams” or wider adoption, he cites three key attributes for the altcoin to reach such a high price.
The first of these is the income generated by the asset. As with many crypto projects, sending tokens incurs a fee from the sender. This fee is then paid to the miner to provide the computational power needed to confirm these transactions. Shaan Puri points out that in January alone, revenue from transaction fees was $1.3 billion, which was then split into base and tip fees. With the implementation of EIP-1559 last year, Ethereum fee burning was implemented. Over time, more ETH is burned than is created, which translates into digital asset deflation.
The second point is to value companies with cash flow. Given that they went to business school, something this model creates is well understood. It continues with a picture explaining Ethereum’s discounted cash flow assessment and how it ties into this model.
Finally, the assumptions behind the model, the model assumes an annual growth rate of 25% and a 35x P/E ratio (average of SP500). Shaan Puri explains that high gas fees are a concern for both developers and users, posing two major risks. Shaan Puri adds that basically, given that Ethereum has real cash flow, it can be used in fundamental analysis of the asset.
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