An “undervalued” Ethereum ETH/USD could close the valuation gap as the Merge approaches, Bloomberg analysts have said.
What Happened: In a recent Crypto Outlook report from Bloomberg Intelligence, analysts applied a discounted cash flow (DCF) model to the world’s second-largest cryptocurrency.
“The upcoming Merge, shifting Ethereum from a proof-of-work model to proof-of-stake, will convert Ether into an equity-like instrument with elegant supply/demand dynamics that could drive significant interest in the asset,” they said, noting that the DCF analysis showed the cryptocurrency to be currently undervalued.
Modeling cash flows after transaction fees, analysts estimate that Ethereum is on track to generate $12.7 billion in 2022.
In the most optimistic scenario, the analysts arrived at a valuation of $9,328 for Ethereum, which represents an approximate 213% upside from current prices.
They applied a price/earnings exit methodology when valuing the digital asset, with the assumption that Proof-of-Stake blockchains only have indirect costs in the form of new issuance, turning cash flows into profits.
They used an exit multiple of 25x –—similar to Apple Inc AAPL – but noted that Ethereum “has a much higher growth profile” than the technology company.
Price Action: According to data from Benzinga Pro, Ethereum was trading at $3,191, down 4.31% in the last 24 hours.