VanEck, a global investment firm, has projected that the price of Ethereum (ETH) could potentially reach $11,800 by 2030. This prediction is contingent upon Ethereum achieving an annual revenue of $51 billion in that year.
The report, authored by VanEck’s Head of Digital Assets Research, Matthew Sigel, and Senior Investment Analyst for Digital Assets, Patrick Bush, takes into account various factors, including Ethereum’s transaction fees, Miner Extractable Value (MEV), and the concept of “Security as a Service” to arrive at this conclusion.
Sigel and Bush’s price forecast is based on the assumption that Ethereum will secure a 70% market share within the smart contract protocol sector. They explained:
“Our projections are primarily rooted in the concept of ‘market capture’ within the smart contract platform space. This refers to the portion of economic activity in various business categories that we anticipate will either utilize, stem from, or be hosted on public smart contract platforms like Ethereum.”
In their analysis, the authors identified finance, banking and payments, metaverse, social and gaming, and infrastructure as the primary categories of economic activity. They anticipate that approximately 5% of financial sector activity, 20% of metaverse and media-related activity, and 10% of technology infrastructure activity will transition onto blockchain platforms.
To streamline the user experience, the authors factored in a take rate on the economic activity that arises from blockchain implementation within businesses.
They employed gas costs, which users pay for interactions with smart contracts on blockchain platforms, to determine the distribution of revenues between Ethereum and the businesses operating on its network.
Ethereum’s Transaction Fees and MEV to Drive ETH Price Up
The analysts from VanEck also acknowledged the significance of Ethereum’s system transaction fees and Maximum Extractable Value (MEV) as potential sources of revenue.
Furthermore, Sigel and Bush delved into Ethereum’s role as a store of value in the cryptocurrency landscape. They suggested that with its new proof-of-stake status, Ethereum could become a competitor to US Treasury bills.
In addition to these revenue streams, the analysts introduced a novel concept, referred to as “Security as a Service” (SaaS). They explained that Ethereum’s value could be utilized both within its own ecosystem and beyond to secure various applications, protocols, and ecosystems.
For example, Ethereum can be locked as collateral behind the guarantees of a business or protocol to ensure honest behavior. In cases of violations, this locked value could be seized to penalize malicious or irresponsible parties or to compensate those who have been affected.
ETH holders who engage in Security as a Service (SaaS) are anticipated to receive rewards, which would be a multiple of the aggregated value from priority fees, tips, block-building fees, and ETH inflationary issuance. These rewards would be determined based on the average security and investment risks associated with utilizing Ethereum as a security provision asset.
In their base case scenario, the analysts anticipate that Ethereum will generate annual revenue of $51 billion by the end of April 30th, 2030. They then subtracted a 1% validator fee and applied a 15% global tax rate to calculate a cash flow of $42.90 billion for the same period.
Consequently, they arrived at a 2030 Price Target of $11,848 per token based on a Free Cash Flow (FCF) multiple of 33x and a total of 120.7 million tokens in circulation.
To determine the present-day valuation, they discounted Ethereum at a rate of 12%, although they acknowledged an 8.74% rate calculated through the Capital Asset Pricing Model (CAPM). This elevated discount rate was used to account for increased uncertainty about Ethereum’s future. As a result, their analysis yielded a present-day discounted price of $5,359.71 in their base case scenario.