Valuing ETH in the bull market cycle: Hashed analyzes 10 methods from TVL to cash flow

With the current price at $1.95K, to understand whether Ethereum is undervalued or overvalued, we need to explore the 10 different valuation methods recently published by Hashed. These models not only help investors assess ETH’s intrinsic value but also highlight the importance of applying multiple perspectives when analyzing a cryptocurrency asset. Based on a weighted average calculation considering reliability, the fair value of ETH is approximately $4.766K, which is 144% higher than the current price.

Unlike Bitcoin, which is viewed as a commodity, Ethereum as a smart contract platform could potentially develop a widely accepted valuation system. However, so far, the Web3 industry has yet to reach consensus. The 10 models listed by Hashed are categorized by reliability from low to high, providing the market with a more comprehensive view of Ethereum’s true value.

Three valuation tiers with varying reliability

Valuation methods are divided into three levels: low, medium, and high. Low-reliability models often rely on a single factor such as TVL or staking, leading to less convincing conclusions. Medium-reliability models combine factors like historical data and network laws. Finally, the high-reliability approach is the yield bond method, favored by traditional finance analysts.

An important point is that all 8 models indicate Ethereum is undervalued, reflecting not only the current state but also hinting at potential opportunities in the upcoming bull cycle.

From TVL models to Metcalfe’s Law: Traditional valuation methods

Simple TVL multiplier is the most basic method, multiplying Ethereum’s TVL by 7 (the historical average from 2020-2023) and dividing by the total supply. The result is $4.129K, 36.5% above the current price. However, this method only considers DeFi TVL and cannot account for the complex effects of overlapping protocols.

Staking scarcity premium considers ETH being locked up, increasing scarcity. The formula: Price × √(Total Supply ÷ Circulating Supply). The result is $3.528K, 16.6% above, but this model faces issues as it ignores additional liquidity from Liquid Staking Tokens (LST).

TVL combined with L2 calculation (TVL + L2_TVL×2) × 6 ÷ Total Supply = $4.733K, 56.6% higher. Although it includes L2, it still relies solely on TVL data, limiting its effectiveness.

Metcalfe’s Law uses the formula 2 × (TVL/1B)^1.5 × 1B ÷ Total Supply, yielding $9.958K (231% above). This is an academically validated model with strong historical correlation, but it remains limited by using only TVL as the sole indicator.

Asset and cash flow-based valuation: Bull market perspective

Discounted cash flow (DCF) approach treats Ethereum like a company, using staking rewards (APR around 2.6%) as income. The resulting valuation is about 37% of the current price, lower than expected. This suggests traditional valuation methods may not suit Ethereum’s nature.

Transaction value ratio valuation compares market cap to annual fee revenue, using a multiple of 25 (the standard for L1 protocols). The result is $1.286K, 57.5% below the current price. However, viewing Ethereum as an application rather than a currency seems logically flawed.

On-chain asset valuation considers the total value of assets (stablecoins, tokens, NFTs) divided by total ETH supply. The result is $4.924K, 62.9% above. This simple model assumes Ethereum’s market cap should align with the value of assets paid on its network to ensure security.

Yield bond model—the only model rated as high reliability—calculates Annual Revenue ÷ APR ÷ Total Supply = $1.942K. This is 36.7% below the current price, providing strong evidence that Ethereum is not a security.

Reasonable valuation and opportunities in the next cycle

By taking a weighted average of all 10 methods, the estimated fair value is around $4.766K. However, the choice of valuation method is more critical than the final number. If only medium- and high-reliability models are considered, the fair value could differ significantly.

From a deep analytical perspective, Ethereum’s intrinsic value should be based on supply and demand factors, including gas payment activity, NFT purchases, or liquidity pool creation. Combining network activity levels, actual transaction costs, and historical parameters can help derive a more accurate valuation.

Recently, Ethereum’s activity has sometimes exceeded levels seen during the 2021 bull run, but due to reduced costs, demand for ETH has not increased proportionally. This explains the current oversupply. However, in the next bull cycle, as DeFi booms again, the “dream ratio” will become an essential factor in valuation methods.

Investors can use a combination of different valuation approaches, paying attention to the reliability of each model, to gain a more comprehensive understanding of ETH’s value—especially in a bull market that will bring significant opportunities and risks.