Situational Finance: Ethereum Tops $3,000

By Life 101 Contributing Editor - Chad Copeland

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Disclaimer: Do your own research. These notes are just the opinion of the contributing editor and should be treated as such. Please consult with a financial advisor before investing any of your personal money.

Almost four years ago, I wrote a valuation for a mentor with the goal of convincing them that Ethereum was a worthwhile long term investment alongside their position in Bitcoin. Fortunately, they obliged, and in celebration of Ethereum eclipsing $3000, I thought it would be appropriate to share those findings.


Rather than updating the valuation, I thought it would be more genuine to leave it how it was originally written. It is a little entertaining to see what I was right about and what I was wrong about. While I do not want to mislead anyone, I still believe the core reasons that I thought it was worth buying back then ring true today. Later this month, I will follow up with an updated valuation now that the price and crypto landscape has grown in such a short time. Without further ado, my 9.4.2017 Ethereum Valuation:

Coin: ETH

Pricing Date: 9/4/20117

Coins Offered: 94,432,040

Price Range: $295-400

Exchange(s): Bithumb, Coinbase/GDAX, Bitfinex, Bittrex, Kraken, etc.

Investment Opinion (include reasons): 

  • Cryptocurrencies are decentralized digital assets that are volatile and extremely new. Like the Internet boom, 90% of coins are scams or poor investment options. I believe Ethereum falls in that other 10% category. As of this writing, Ether is trading around $300, although we’ve seen an ATH of $415. I am bullish that Ether will trade well over $800. 

  • Ether derives its value from the thousands of developers who are building their applications on the Ethereum blockchain network. Those apps inherently fuel the demand for the ether token. Those rent-seeking tokens or decentralized apps (DAPPS) that use the Ethereum blockchain are similar to the 80s & 90s where developers lined up to develop programs to run on Microsoft’s operating system.

  • Ethereum is gaining speed and momentum faster compared to market leader Bitcoin.  It has almost five times as many nodes in its network compared to bitcoin, meaning more people are using their computers to support it. It also confirms new blocks every 12 seconds (compared to 10 minutes for bitcoin) and has a larger number of transactions per day than bitcoin. There is a realistic chance that over years that Ethereum will eclipse Bitcoin in market capitalization.

  • The Enterprise Ethereum Alliance (EEA), otherwise known as 150+ members including Fortune 500, startups, etc., backing and creating protocols/frameworks that will be integrated with the Ethereum blockchain.

I believe this is a BUY sub $400 price mark.

At the very least Ethereum can be a simple “platform play” even if you don’t believe in its uses as a coin comparable to Bitcoin. The biggest wealth today comes from platform companies (Apple, Google, Amazon, Facebook, etc), and Ethereum has the biggest potential as a platform for other DAPPS to be built on. 

Brief Company Description:

Ethereum is a decentralized platform that runs smart contracts or applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference. It currently is second in market capitalization only to its predecessor bitcoin.  

Additional Company Information/Future Outlook:

Metropolis Ethereum 3.0 bringing new features to Ethereum.

  • Raiden

    • Comparable to the lightning network for Bitcoin which will enable infinite transactions/s, Raiden uses “payment channels” to increase transaction speed which is needed for scalability.

      • Currently Ethereum processes 15 transactions/s & Bitcoin 7/s.

        • For Perspective - Visa does 40K transactions per second.

  • Plasma

    • Scalability project teamed with Buterin and lightning network creator, Poon.

      • Plasma will get rid of unnecessary data by using fraud proofs in the root chain. It will only broadcast completed transactions to the public Ethereum chain.

        • Saves processing power and memory making it more inexpensive to interact with the system’s other participants.

        • It will also increase speed so DAPPS will run without worrying about a backlog

Post Metropolis

  • Casper - I lied, I will mention that the POS has been announced today by Coinbase, a mere 3.5 years later. Patience is a virtue I guess. Read more about it here.

    • POW—>POS (proof of work —> proof of stake phase)

      • People will put their Ethereum up for stake into smart contracts (not available to everyone) that will lock up their ETH.

      • In return, those who stake will earn interest on their ETH (predicted 6%-12%).

Primary Strengths/Opportunities:

  • Backed by 150+ partners composing the largest open-source blockchain initiative the Enterprise Ethereum Alliance (EEA) which connects Fortune 500 enterprises, startups, academics, and technology vendors with Ethereum subject matter experts.

    • Microsoft, Intel, J.P. Morgan, UBS, Accenture to name a few.

      • Microsoft already created the COCO platform —>a framework making it easier for enterprises to adopt blockchain technology.

    • Coco Framework and protocol aims to reduce the complexity required to allow blockchain networks to meet the operational and security needs of enterprises. This is achieved by addressing critical needs for commercial adoption like high-transaction speed, distributed governance, and confidentiality.

      • Providing these capabilities should open up more opportunities for Blockchain adoption across industries such as financial and legal services, supply chain, healthcare among other sectors.

    • Ethereum is already part of the initial COCO framework —> this will drive price higher b/c the rate of adoption will increase as Ethereum becomes more accessible and compatible with existing structures.

    • Traditionally it takes a long time for large corporations and financial institutions to move from one platform to another.

      • COCO protocol is a progressive approach that is a tailored product that encourages usability while cutting cost and time.

      • A tech giant (Microsoft) is developing an open-source environment and commercializing a product designed to integrate Blockchain tech and Ethereum specifically. 

      • An announcement likely to impact positively the perception users and investors have towards Ethereum and blockchain in general.

  • “Platform Play”: over 50% of all cryptocurrencies or DAPPS are built to function on the Ethereum blockchain

    • In other words, over 50% of the market has made the Ethereum technology the foundation on which they have built their coins/DAPPs.

      • Intuitively it is hard to justify putting your money behind one of those cryptocurrencies without putting money behind Ethereum.

  • Russian Adoption

    • Ethereum Russia —> entity partnered with Bank for Development and Foreign Economic Affairs aka Vnesheconombank (VEB).

      • Founded by Ethereum founder Vitalik Buterin and Vladislik Martynov, CEO of a mobile communications and connectivity devices company, Yota Devices.

      • Created to enhance the country’s ability to implement blockchain technology.

    • President Vladimir Putin described the digital economy as a “foundation for creating brand new business models” following a meeting with Vitalik Buterin.

Primary Risks:

  • A new and already volatile industry could attract new customers that haven’t put in adequate hours to know what they truly are investing in. This will most likely increase the volatility of the sector. 

  • Scalability will be the biggest hurdle of any cryptocurrency. Making transactions fast enough that it can truly be a global digital asset are issues the Ethereum team has set out to solve. Although they have timetables, expect that some of these deadlines may change, which will impact the price of the coin. 

Bottom Line: A lot of the new money is flooding to the cryptocurrency market that are seeking a get rich quick play. This will further contribute to an already extremely volatile market. However, investors in Ethereum should be looking at this a long play, being prepared to stay steadfast through peaks and valleys. The positive for ethereum investors is their confidence should be in the potential growth of the technology, the EEA backing, and the fact that ethereum is a platform and not simply the store of value in the case of bitcoin. 

Capital Structure:

  • Coins in Circulation = 94,432,040

  • Market Cap = $28,033,020,221 based on a $296 per coin.

  • Currently up 3500%+ from January 1, 2017 ($8.46)

THE END


If you enjoyed this entry, join the Life 101 Community and introduce yourself. We really want this to be a strong, supportive community. Later in May, an updated perspective on Ethereum