Michael Nadeau from The DeFi Report discusses Ethereum's position in the current crypto cycle, analyzing its diminishing returns across past cycles and the impact of its L2 roadmap on its recent performance. He explores various valuation metrics, noting the market's confusion, and concludes that ETH is currently in a "fair value zone," with potential for deeper value around $1500.
Summarized by Podsumo
ETH's growth multiplier significantly dropped from 175x (Cycle 1) to 61x (Cycle 2) and only 5.6x (Cycle 3), raising questions about whether it was a "skipped cycle" or a "new normal."
Michael Nadeau attributes ETH's underperformance in the last cycle to its L2 roadmap, which "disrupted itself" by improving the product for L2 customers but diminishing value capture at the L1 level.
The market struggles to value ETH, with metrics suggesting prices ranging from $2 (price-to-sales) to $24,000 (ecosystem settlement/store of value), highlighting significant uncertainty.
Current cycle metrics place ETH in a "fair value zone" (MVRV at 0.84, 39.4% supply in profit, trading below 200-week MA), with deep value potentially around $1500 and below.
Despite low fees due to L2s and blobs, ETH maintains a low inflation rate (0.83%), effectively compensating validators without significant dilution, supporting its store-of-value narrative.
"ETH has to prove itself to me and like we can kind of get into what I'm looking for in this episode."
"Ethereum disrupted itself so that it could grow and so that we could scale V&E's L2s and in doing so they made the product better for the L2 customer but sort of hurt themselves in the near term."
"To me, it's a combination of the sort of cash flow story. There is cash flow here that is different from Bitcoin, the token economic story and then the fundamental story."