VanEck Research’s comprehensive review of Ethereum (ETH), led by Matthew Sigel, Head of Digital Assets Research, and Patrick Bush, Senior Investment Analyst, Digital Assets, has revised the price target for Ethereum to $11.8k by 2030, following of Ethereum’s hard fork. This revision is due to a more accurate valuation model that took into account a variety of revenue streams and market dynamics associated with the Ethereum ecosystem. The analysis was originally disclosed in a detailed blog after on May 9, 2023 and recently reposted to X (formerly Twitter). It uses a combination of cash flow projections and fully diluted valuation (FDV) calculations.
Ethereum’s revenue model was compared to a digital shopping center housing various internet trading activities. The valuation takes into account the income from transaction costs, MEV (Miner Extractable Value), and an emerging revenue stream called “Security as a Service” (SaaS). According to revenue projections, Ethereum’s network revenue will increase from an annual rate of $2.6 billion to $51 billion by 2030, assuming a dominant 70% market share among smart contract protocols.
The transaction revenue estimate focuses on the ‘market capture’ of smart contract platforms across business sectors such as finance, banking, payments (FBP), Metaverse, social and gaming (MSG), and infrastructure (I). The analysis suggests a shift in the relationship between platform and business revenues over time, as off-chain companies leverage on-chain to reduce costs and seek new revenue.
MEV, the profit derived from ordering transactions within each block produced, was recognized as an integral part of blockchain’s security mechanism. The analysis assumes a direct relationship between MEV and the value of all assets hosted on Ethereum, which amounts to a “management fee” for maintaining value on Ethereum. The L2 (Layer 2) settlement dynamic is seen as the long-term scaling solution for transacting on Ethereum, with most revenue from L2s ultimately flowing to Ethereum.
A new revenue item was introduced, “Security as a Service” (SaaS), conceptualizing the exportability of Ethereum’s security to outside ecosystems, applications and protocols. This growing use case for ETH is expected to grow, although predicting this remains uncertain.
The base case forecasts an ETH price of $11,848 in 2030, discounted to $5,359.71 on April 30, 2023, at a 12% cost of capital. This base case assumes that Ethereum becomes the dominant open-source global settlement network hosting a significant portion of commercial activity across business sectors. The bear and bull scenarios provide a broader range of price targets, recognizing the uncertainties surrounding Ethereum’s future performance.
The comprehensive analysis by VanEck Research provides a clear valuation methodology for Ethereum and explores its potential as a store of value in the evolving crypto landscape, in addition to its transactional and protocol utility.
Recently, VanEck announced the launch of its Ethereum Strategy ETF (EFUT), an actively managed fund focused on capital growth through investments in Ethereum futures contracts, rather than direct investments in digital assets. The fund will primarily focus on ETH futures traded on the Chicago Mercantile Exchange, led by Greg Krenzer, Head of Active Trading at VanEck. This initiative mirrors VanEck’s existing Bitcoin Strategy ETF (XBTF), with both funds focusing on digital asset futures contracts. By adhering to a C-Corp structure, EFUT and XBTF can provide a tax-efficient benefit for long-term investors.
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