Crypto Market

What would be the fair value for bitcoin and Ethereum?

  • BTC and ETH would reach their fair value (or more) at the end of 2024 or beginning of 2025.

  • The fair market capitalization for the two assets would be $2.9 trillion.

According to bitcoin (BTC) and ether (ETH) bulls, their prices are currently undervalued, that is, they are lower than they believe they should be. But, really what would be the fair values ​​of these currencies, which have the highest capitalization in the market?

This is something that Hashdex, a Brazilian investment company that is optimistic about the potential of these digital currencies. “BTC and ETH differ from their ‘fair value’,” he maintains in a report based on historical behavior.

The investment company clarifies that “the current undervaluation is not atypical,” since it has occurred in multiple periods in the past. Therefore, An analysis of the capitalization of currencies throughout their history allows us to identify what their value should be.

“If we analyze the previous halving years (2016 and 2020), the combination of BTC and ETH was 57% and 40% below their fair value, respectively, at the end of the third quarter of those years,” he specifies. This is something that is similar to what is currently seen.

“In the third quarter of 2024, this difference is 44%, in line with previous cycles, suggesting that the current lateral price movement is not out of the ordinary,” notes the investment firm.

The capitalization of bitcoin and ether together ended the third quarter of 2024 at 1.6 trillion dollars (USD), a figure that continues to be maintained. Thus, represents almost half of its optimal value of USD 2.9 trillionaccording to the long-term trend line displayed in yellow on the chart below.

Long-term logarithmic growth of BTC and ETH market capitalization. Source: Hashdex.

This chart measures the long-term growth of the combined market capitalization of bitcoin and ether via a log regression channel. In this way, it models exponential performance including diminishing returns under three value lines: inferior (green), superior (red), and fair/reasonable (yellow).

“If this seasonal trend continues, a return to fair value and an acceleration towards overvaluation could occur later this year (similar to 2020) or early 2025 (similar to 2017), coinciding with the end of the recovery phase of bitcoin,” Hashdex delves into.

According to this analysis, the capitalization of BTC and ETH will exceed USD 2.9 trillion between the end of 2024 and the beginning of 2025. Therefore, the prices of these currencies would rise sharply in such a scenario, but what levels would they reach?

Although Hashdex does not predict a reasonable capitalization value for each of the currencies, but as a whole, its analysis allows us to identify what prices they could reach. To do this, just take a look at the capitalization levels and prices with which they closed the third quarter.

BTC and ETH would reach new price records

Of the combined capitalization of bitcoin and ether of USD 1.6 trillion in the third quarter, the first currency dominates 80% (USD 1.3 trillion) and the second the rest (USD 300 trillion). Meanwhile, they closed the period trading at USD 63,000 and USD 2,500, respectively, according to data from CoinMarketCap.

If this capitalization ratio continues (80% vs 20%), bitcoin would reach a capitalization of USD 2.3 billion and ether of USD 600 billion. This to reach its fair value of USD 2.9 trillion, predicted by Hashdex for the fourth quarter of 2024 and the first of the following year.

By simple rule of three, with such capitalizations, bitcoin would be listed at just over USD 110,000 and ether at USD 5,000. In other words, they would set new all-time high prices.

Until now, the all-time high price of bitcoin was USD 73,700 seven months ago and that of ether USD 4,900 three years ago.

In any case, there are risks to take into account in this analysis. The capitalization ratio between bitcoin and ether is not fixed, but varies according to the supply-demand of each currency. Therefore, in the event that one dominates a greater dominance of the aforementioned fair value, its price would be higher, while that of the other would be lower.

In addition to this, it is worth taking into account the current macroeconomic and geopolitical context which, if it worsens, could affect risk demand. Consequently, This could prevent the rise of bitcoin and etherso, as CriptoNoticias indicated, it is crucial not to have a bias when analyzing it to operate.

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