Fidelity Investments’ Cryptocurrency Arm Claims Ethereum (ETH) Is Undervalued
Fidelity Digital Assets, the cryptocurrency-focused subsidiary of investment heavyweight Fidelity Investments, has asserted that Ethereum (ETH) is presently being undervalued. In a recently released report titled ‘Ethereum Investment Thesis,’ the firm points out that with Ethereum’s current supply of approximately 120 million and annualized network fees exceeding $6.8 billion, the estimated price of ETH using a discounted cash flow model stands at approximately $2,090, which is approximately 28% higher than its current market price.
The asset manager underscores that Ethereum’s valuation closely aligns with network activity, particularly the fees it generates. Fidelity anticipates robust double-digit growth in these fees over the next seven years, projecting them to surpass $20 billion by 2030.
They explain, “Assigning value to ether becomes more straightforward following the network’s transition to proof-of-stake. The demand for block space can be gauged through transaction fees, which are either burned or distributed to validators, ultimately increasing the value for ether holders.”
Consequently, the relationship between fees and the value of ether should remain intrinsically linked over the long term. A proliferation of Ethereum use cases will drive greater demand for block space, resulting in elevated fees and enhanced value, ultimately providing utility and yield to validators.
Regarding potential risks that may impact the fees generated on the Ethereum network, Fidelity Digital Assets states:
“The connection between ether and the value it delivers to network users might weaken in the event that scaling technology reduces fee revenue unless there is a substantial uptick in transaction volumes to counterbalance this margin compression.”
As of the time of writing, Ethereum is trading at $1,630.