Leading Asset Manager Forecasts an Ethereum Surge to $11,800

Ethereum (ETH) might be heading for an $11,800 price by 2030, according to leading investment management firm VanEck Research.

In a recent report, investment management firm VanEck Research revisited its estimates for Ethereum’s (ETH) future revenue and valuation following the hard fork. Utilizing a rigorous valuation model, the firm predicts an ETH price increase to $11,800 by 2030, translating to an annual revenue rate of $51 billion from the current $2.6 billion.

In a tweet today, Chinese blockchain reporter Colin Wu drew public attention to this ambitious projection.

VanEck, which manages a $69 billion ETF, predicts that the price of ETH will reach $11,800 in 2030, and ETH will become a competitor of U.S. Treasury bonds. The specific valuation methods are cash flow forecast and FDV calculation. https://t.co/bxTUJ3T4t3

— Wu Blockchain (@WuBlockchain) June 5, 2023

VanEck’s analysis offers a transparent valuation methodology for Ethereum, considering various factors such as transaction fees, Miner Extractable Value (MEV), and “Security as a Service.” The $11,800 price forecast depends on Ethereum’s capture of up to 70% of the market share of all smart contract protocols in 2030. 

However, this projected $11,800 price is discounted to $5.3k at present, considering a 12% cost of capital derived from ETH’s recent beta. According to VanEck, the recent Ethereum Shanghai hard fork, which gave users an opportunity to withdraw staked ETH, allows ETH to potentially compete with US Treasury Bills.

It is essential to grasp the nature of Ethereum as a digital mall where secure internet commerce takes place. Ethereum is a platform for businesses built on smart contract code, allowing users to engage in commerce without relying on trust. Validators maintain the network’s security and ledger of economic events. At the same time, Ethereum charges users for conducting business and exchanging value within the platform.

Ethereum Revenue Recognition And Value Accrual

VanEck recognizes transaction fees, including the base and tip fees, as revenue lines for Ethereum. Additionally, Miner Extractable Value (MEV) is considered a revenue item for ETH, as a portion of MEV accrues to ETH stakers through validators. 

The firm also introduces a novel revenue item called “Security as a Service” (SaaS), highlighting Ethereum’s potential as a store-of-value asset for state actors seeking to maximize human capital.

VanEck’s projections are based on the market capture of Ethereum as a smart contract platform. The firm identifies three main business categories – Finance, Banking, and Payments (FBP), Metaverse, Social and Gaming (MSG), and Infrastructure (I). 

By assuming a certain percentage of economic activity in each category will move on-chain, VanEck estimates Ethereum’s take rate of the business economic activity derived from blockchain deployment. This take rate varies depending on the end market, with Ethereum’s share falling between 3% and 10% across different business categories.

Notably, at its current price of $1,866, ETH would need to increase by 532% in 7 years to hit a goal of $11,800 by 2030. This goal is also 141% higher than ETH’s all-time high of $4,891 which it attained in November 2021.