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Ethereum (ETH) will reach a price of $22,000 within six years thanks to ETF approvals, scaling improvements, and healthy on-chain progress, according to VanEck.
In a Wednesday report, the $89.5 billion asset manager said the network’s TradFi market share growth and dominance among smart contract platforms creates “a credible path to $66B in free cash flow to token holders.”
The Investment Case For Ethereum VS Big Tech
VanEck described Ethereum’s investment case as a “high-growth, internet-native commercial system.” that could disrupt existing financial systems and big tech businesses like Apple and Google.
“As Ethereum is a platform for applications, we begin our valuation by estimating the market size of business sectors that blockchain applications will disrupt,” wrote VanEck.
Looking at industry verticals like finance, marketing, infrastructure, and artificial intelligence, the firm said Ethereum’s total addressable market is collectively worth $15 trillion.
As an investment asset, VanEck said ETH is “revolutionary” because of the many functions it can provide. It may be classified as “digital oil,” “programmable money,” a “yield-bearing commodity,” or “internet reserve currency.”
As VanEck theorizes, ETH will accrue more value as the Ethereum network grows – especially as more of the ETH supply is burned with each transaction, benefitting long-term holders.
“The most appealing aspect of using Ethereum is its potential cost savings to businesses and users,” VanEck argued.
While Apple and Google extract 30% of its users’ hosted application revenue, Ethereum only takes 24% through DeFi apps, which may drop to between 5% and 10% as activity migrates to layer 2 networks.
Ethereum VS Bitcoin Within A Portfolio
VanEck also studied the optimal weighting for Bitcoin and Ethereum within a traditional 60/40 portfolio. It determined that a maximum 6% crypto allocation would “substantially improve the portfolio’s Sharpe ratio with a relatively minor impact on drawdown,” with that allocation being split 3% each between Bitcoin and Ethereum.
In terms of how to weigh the two assets within a crypto-only portfolio, VanEck said that 71.4 % Bitcoin and 28.6% Ethereum provided the best risk-reward.
“The findings highlight the potential of cryptocurrencies to improve portfolio performance in a controlled and measurable way,” VanEck wrote.
Ethereum ETFs are expected to launch next month. In a report on Monday, K33 Research predicted that the funds will absorb 28% of the flows of the Bitcoin spot ETFs, totaling $4 billion within five months after launch.