Blofin, a cryptocurrency analysis company, has released a report on the future price of Ethereum (ETH).
The report considers three scenarios based on the profitability of the Ethereum network, the impact of the upcoming Cancun update, and investor expectations reflected in ETH's price-to-earnings (P/E) ratio.
The report states that the price of Ethereum is mainly influenced by new trends and its adoption as a platform for decentralized applications (DApps). These factors affect the net income of the Ethereum network, which is the difference between the fees paid by users and the rewards paid to validators.
According to Blofin, the Cancun update, which is expected to launch in 2024, will significantly increase Ethereum's scalability and efficiency, reducing transaction costs and accelerating the growth of the Layer2 ecosystem.
The report presents three possible scenarios for Ethereum's price action, based on different assumptions about net revenue growth and ETH's P/E ratio. The P/E ratio is a measure of how much investors are willing to pay for each dollar of earnings. A higher P/E ratio indicates higher investor confidence and expectations.
Optimistic Scenario:
In the most optimistic scenario, Blofin assumes that the Cancun update will cause the Ethereum network's net income to double every quarter after launch, starting at $423 million in the second quarter of 2023.
It also assumes that ETH's P/E ratio will remain high around 300, similar to some leading tech companies like Amazon. In this case, Blofin predicts that the average price of ETH could exceed $5,300 in early 2024 and reach $9,700 in the first quarter of 2024.
Neutral Scenario:
In a more neutral scenario, Blofin assumes net revenue growth will be more stable at 25% per quarter before the Cancun update and 50% in the first quarter of 2024.
It also assumes that ETH's P/E ratio will decline to around 150, which is still higher than the average P/E ratio of the S&P 500 index. In this case, Blofin predicts that the average price of ETH could exceed $2,150 in early 2024 and reach $3,200 in the first quarter of 2024.
Pessimistic Scenario:
In a more pessimistic scenario, Blofin assumes that net revenue growth will decline marginally to 20% in Q3 2023 and 15% in Q4 2023.
It also assumes that ETH's P/E ratio will remain unchanged at around 300. In this case, Blofin predicts that the average price of ETH could exceed $2,050 in early 2024 and reach $2,700 in the first quarter of 2024.
*Not investment advice.