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Investment research firm Fundstrat bullish on ‘undervalued’ Ethereum, foresees 650% jump to $10,500

Updated: Aug 31, 2024
Published: Jan 20, 2021
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Ethereum broke its previous all-time high of $1,420 on Jan. 19 to set a new record. The rally was followed by a correction that has left the digital trading more than 8% lower than it did in the past 24 hours.

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Despite the pullback, investment research boutique Fundstrat Global Advisors is bullish on Ethereum, predicting that it will soar more than 650% (from its recent peak price) to reach a valuation of $10,500 per unit, according to a research report published by the company.

“Based on our analysis, we are issuing a price target for Ethereum, which represents 650% upside from the current price $1,400,” says the report. “We further see Ethereum as undervalued relative to Bitcoin based on a price to book multiple basis and believe capital flows from Bitcoin could act as a catalyst for higher ETH prices.”

Why is Fundstrat bullish on Ethereum?

The firm gave a number of reasons to support its price prediction of $10,500 for Ether. Fundstrat believes that the face of cloud computing will be changed by smart contract platforms like Ethereum. Computing is shifting from centralized to decentralized, and the transition to blockchain cloud works in favor of Ethereum.

Ethereum has the most active ecosystem in crypto for decentralized applications (Dapps). The DeFi ecosystem, built on top of Ethereum, has grown over the years and the total value locked in DeFi has soared to $24.99 billion.

The DeFi activity on the Ethereum network generated $600 million in transaction fees during 2020. In the first 18 days of 2021, the protocol generated $180 million in transaction fees, putting it on course to rack in $3.9 billion this year. 

The increase in transaction fees last year, due to network congestion as a result of increasing DeFi activities, worried protocol users who felt that the high fees were not in line with Ethereum initial goal of facilitating cheaper transactions.

Most cloud companies have only managed returns of less than 50% year-over-year revenue growth for investors, but Ethereum, still in its early days, has the potential to generate 10 - 30x that rate.

Ethereum, per the report, is undervalued compared to bitcoin. Using a method called the Grider to Book multiple, Ether is found to be twice cheaper than bitcoin. Bitcoin is currently trading at $34,278, more than 7% down in the past 24 hours.

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