Ethereum’s upcoming Merger means analysts can now use discounted cash flow valuation methods. This is why one analyst is seeing up to 220% increase for Ethereum and says 3 altcoins will benefit from it.
Ethereum valuation scenarios and altcoins that will seize the opportunity
According to Bloomberg Intelligence strategist Mike McGlone, who is known for his success predictions, Etherum is a Proof of Stake (PoS) model from a Proof of Work (PoW) model. The upcoming merger, which translates to . You can read Strategist’s accurate predictions from this article of Kriptokoin.com.
In the latest report from Bloomberg Intelligence, the strategist states that about 70% of the fees will be burned similarly to buybacks, with the rest going to shareholders as rewards or dividends. The Strategist explains:
Blockchains have no direct costs. Therefore, revenue represents profit and allows the use of traditional financial ratios such as P/E multiples.
The change to the consensus mechanism now allows P/E-like methods to be applied to Ethereum valuation. In the Bloomberg report, strategists use three different methods of discounted cash flow analysis to find a valuation range for Ethereum.
Baseline scenario, sustained growth method that assumes the growth rate of free cash flows in the last year of the initial forecast period will continue indefinitely. Using this method, ETH has a value of $6,128 compared to its current level of $3,300. The second, and more cautious, estimate comes from using the ‘H-pattern’, which found ETH to be $5,539, 90% higher than at the time the report was published.
The final approach is to use a price-to-earnings method that estimates cash flows using a series of multiples. Similar to Apple’s, based on 25x solid output, ETH should be worth $9,328, which is about 220% higher than where it currently stands. And considering that Ethereum has a higher growth profile than Apple, according to Mike McGlone, that’s pretty conservative. The strategist notes that the aggregation of the three DCF methods yields an average value of $6,998, which is 140% higher than current levels.
An encouraging sign is the strong rally in altcoins last month. According to the report, many, including Solana (SOL), Terra (LUNA), and Avalanche (AVAX), posted returns 1.5 to 2 times higher than Bitcoin in March. “This improvement in technical breadth is a healthy sign that risk appetite is returning,” Mike McGlone comments.
19108
