Prominent investment giant Fidelity Investments, whose cryptocurrency-focused unit manages more than $4.5 trillion in assets, recently said that Ethereum ($ETH), the second-largest digital asset by market capitalization, is trading at a discount.
According to a new report titled “The Ethereum Investment Thesis,” Fidelity Digital Assets noted that Ethereum’s current circulation is around 120 million ETH, with annualized network fees exceeding $6.8 billion, and calculated that ETH’s price should be around $2,090, applying a discounted cash flow model.
Further analysis by the asset manager also shows that Ethereum’s valuation appears to move in lockstep with its network activity, especially the fees it accumulates. Fidelity Digital Assets expects this already impressive figure to grow by double digits over the next seven years, potentially crossing the $20 billion threshold by 2030.
The report elaborates on the underlying dynamics, explaining that the value of ether “is easier to model after the network switches to proof-of-stake,” adding that demand for block space “can be measured through transaction fees,” which are either burned or passed on to validators.
According to the company, this means that “fees and Ethereum value accruals should be intrinsically related in the long run,” with the growing number of Ethereum use cases creating greater demand for block space, which in turn This in turn leads to higher fees and greater value and utility.
Fidelity Digital Assets noted that potential obstacles affecting the Ethereum network include a weakening of “the relationship between ether and the value it provides to network users” if “scaling technology erodes fee revenue unless transaction volumes increase and offset this margin compression.”
The report comes as Ethereum whales bought over $400 million worth of the second-largest digital asset by market capitalization in just 24 hours, as their accumulation of ETH appears to be accelerating.
Amid a broader cryptocurrency market correction, the sector’s market capitalization fell close to the $1 trillion mark, with cryptocurrencies losing around 4.7% of their value over seven days.
