ETH is probably undervalued right now
post by mukashi (adrian-arellano-davin) · 2022-06-19T02:20:15.752Z · LW · GW · 22 commentsContents
22 comments
ETH is trading right now under 1k USD, which gives it a market cap as large as the 100th largest company in the world. There is definitely a real possibility that a sizeable part of our financial system runs on the ETH network at some point during the next 10 years. If this prediction becomes true, ETH is probably very undervalued right now, due in part to the wave of panic affecting the markets right now.
Things move quickly in the cryptomarkets and the short term is impossible to predict. Next week it could go to 200 USD or it could go move up to never go down again. In any case, ETH is at the moment the most promising platform for DeFI, with many more investors, programmers and contributors than any other alternative.
On top of all that, we are very likely only a few months away from the long awaited Merge, when ETH abandons PoW for good, which is arguably the worst part of cryptos like Bitcoin. It is likely that there is a big rebound in ETH price, so I am putting my money where my mouth is.
22 comments
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comment by Vaniver · 2022-06-19T02:56:50.927Z · LW(p) · GW(p)
we are very likely only a few months away from the long awaited Merge
Not only was the Merge supposed to happen this month (before being delayed to "a few months from now"), I think I've been hearing "ETH is about to switch to proof-of-stake" since the original white paper, which means the base rate on such predictions is, uh, low.
Replies from: Radamantis, adrian-arellano-davin, adrian-arellano-davin↑ comment by NunoSempere (Radamantis) · 2022-06-19T03:23:57.125Z · LW(p) · GW(p)
https://metaforecast.org/?query=ETH+merge -> https://polymarket.com/market-group/ethereum-merge-pos -> 59% by October, 87% by November.
Replies from: gilch↑ comment by gilch · 2022-06-19T15:14:05.293Z · LW(p) · GW(p)
Thank you for putting a number on it. Here's another one: https://www.metaculus.com/questions/9552/maximum-price-for-ethereum-by-2023/. Current prediction is $5,180.
As Ether is trading around $1,000 now, I'd say that's undervalued, even in the relatively short term of 2023. But how much can we trust these predictions?
Replies from: gbear605, niplav↑ comment by gbear605 · 2022-06-19T17:57:29.267Z · LW(p) · GW(p)
Unfortunately, that question was set up poorly so that it is impossible to guess lower than a median of $5010. Of course, that's because the actual price of ETH was around $4800 back in November 2021, so the predictors are basically saying that it won't recover to that price by the end of 2022.
↑ comment by mukashi (adrian-arellano-davin) · 2022-09-12T08:11:01.881Z · LW(p) · GW(p)
Ethereum Merge happening is less than 3 days now
Replies from: Vaniver↑ comment by Vaniver · 2022-09-16T20:29:39.301Z · LW(p) · GW(p)
It looks like it happened.
↑ comment by mukashi (adrian-arellano-davin) · 2022-06-20T04:27:00.890Z · LW(p) · GW(p)
That's true, but the fact that the Merge has been delayed many times in the past does not mean that it will be delayed many times in the future. For the record, I have an 80% of the merge happening by the end of this year, and 95% happening by the end of the year after.
comment by gilch · 2022-06-19T15:23:34.953Z · LW(p) · GW(p)
SquishChaos made a thorough case for Ether settling well above $30k and possibly briefly hitting $150k by 2023. If that's true, the current price of ~$1k is a good deal.
However, this report was published in late April '21. Have recent events invalidated this thesis at all? Ether has lost over 90% before and still recovered.
Replies from: gbear605↑ comment by gbear605 · 2022-06-19T17:53:03.667Z · LW(p) · GW(p)
I'm not super familiar, but I just read the one page summary of the report. One of the supposed catalysts for $150k was EIP1559, which went into effect last August and didn't seem to affect the price. The other catalyst was supposed to be PoS coming shortly after, which has been continually delayed (though probably coming soon) and will have had a much longer gap after EIP1559. ETH HODLing seems to not be significant as expected, so that's another driver that has failed. The narrative also isn't there, and the recent crypto crashes are working against it. The spike to $150k seems to be impossible since the different drivers didn't line up.
Moreover, I suspect that SquishChaos' prediction for ETH now would be at least somewhere in the middle of the price at the time of the report (~$2000) and $30k, so perhaps $15k? Instead ETH peaked under $5k in November and is back down to $1k, so I would say that the report seems pretty much falsified. That doesn't mean it won't hit prices that high, but I certainly would not expect them any time this year, or even in the next few years.
Replies from: gilch↑ comment by gilch · 2022-06-20T04:16:22.768Z · LW(p) · GW(p)
Looks like Squish himself now considers his thesis falsified.
Replies from: adrian-arellano-davin↑ comment by mukashi (adrian-arellano-davin) · 2022-06-20T04:35:58.925Z · LW(p) · GW(p)
I would not believe at all ETH at 30k-150k by next year, which is the original thesis. However, I think that the original dynamics he discusses will have a noticeable impact on the price. Specifically, switching from PoW to PoS does one very important thing, which is that all the selling pressure from the miners (that need to sell continuously to pay for the electricity) disappears.
comment by Richard_Kennaway · 2022-06-19T18:20:38.896Z · LW(p) · GW(p)
Both ETH and BTC have lost about two-thirds of their value over the last year (as it seems have most crypto coins, based on randomly looking at a few on Coinbase). I know nothing about whatever the reasons are. Is there a reason to think that at last, now is the end of the fall? Rather than, say, there not being any end to the fall?
Replies from: adrian-arellano-davin↑ comment by mukashi (adrian-arellano-davin) · 2022-06-20T04:39:41.979Z · LW(p) · GW(p)
I do not have any reasons to think that this is the bottom. I just have reasons to believe that this is not the highest price that it will ever have, in the next few years. Barring a catastrophic failure in the Merge (which is a possibility, but not likely), I am pretty confident predicting at least a price of 2k ETH at some point in the next 3 years, and I think I am being super conservative.
comment by @chrisrice (chrisrice) · 2023-05-29T04:32:53.932Z · LW(p) · GW(p)
I understand ETH’s large market cap and it’s popularity due to it’s first move advantage… but what is everyone’s thoughts about DERO… a fungible alternative to ETH?
I tend to think the technology of ETH is out of date, and wonder about whether it is truly decentralized or not.
comment by ponkaloupe · 2022-06-19T07:03:41.108Z · LW(p) · GW(p)
Eth lending rates on Aave/Compound have remained < 1% for literally years. most returns in DeFi are dollar-denominated. the sustainable ones don’t seem to move much outside the 2-6% APY range (except during bull markets where people will pay a premium to leverage their Eth/BTC — but we’re no longer in a bull market). the 20% APY dollar-denominated yields have shown themselves to largely be unsustainable (e.g. UST). in an environment where the sustainable DeFi yields no longer vastly outcompete bonds/treasuries, why would you be bullish on DeFi?
follow-up: if you’re using DeFi today, which platforms are you using which i’m likely to be overlooking when i make these claims?
Replies from: adrian-arellano-davin↑ comment by mukashi (adrian-arellano-davin) · 2022-06-20T04:42:56.656Z · LW(p) · GW(p)
I don't think that looking at the lending rates is the way to judge the value of ETH. What I consider valuable are all the things that could potentially be built on top of the ETH network. This is a very good post talking about it:
https://www.lesswrong.com/posts/nMNi86hgNjaNnh8iu/a-whirlwind-tour-of-ethereum-finance
comment by Jalex Stark (jalex-stark-1) · 2022-06-19T04:02:11.662Z · LW(p) · GW(p)
Which trade are you advocating for? "long crypto"? Reversion? (akak "buying the dip") Long ETH vs. short BTC?
All of these are plausible opinions, and it's not crazy to allocate some of your portfolio based on them -- but a trade consists of a price and a size. Do you think you should have 0.1% of your net worth in ETH or 30%? Does that change if ETH goes to 100 or 3000 next week? Do your arguments apply equally well elsewhere? (solana?)
↑ comment by mukashi (adrian-arellano-davin) · 2022-06-19T05:02:46.159Z · LW(p) · GW(p)
I am just saying long ETH. I am not giving any financial advice because everyone has a different risk profile. In my personal case, I am comfortable having around 30 or 40% of my net worth in cryptos (specifically ETH). I do not think the same arguments can be applied to other cryptos (I do have some SOL and I am not buying anymore for now)
comment by benjaminikuta · 2022-06-19T03:11:11.810Z · LW(p) · GW(p)
Is there a good way to buy calls without paying too much spread?
Replies from: deathspiral↑ comment by deathspiral · 2022-06-19T04:29:47.292Z · LW(p) · GW(p)
Define "too much"? The spread is whatever another entity is willing to accept to trade with you and, almost by definition, it is exactly the correct amount.
Replies from: benjaminikuta↑ comment by benjaminikuta · 2022-06-19T06:07:16.683Z · LW(p) · GW(p)
It's not about being "correct". It's just that if it's really wide, it might not even be worth it.