On April 14, the price of Ether (ETH) just hit an all-time high at $2,400 and although the price has increased more than three-fold since the beginning of this year, the current speculative premium suggests, there is a lot of room for upside.
Ether’s speculative premium is far from overheated
While the current price of Ether is at around $2,375, the Realized Price, meaning the average price paid by all investors who are currently holding Ether is at $802. This means that current buyers of Ether are willing to pay 2.99x the price of what all current holders have paid on average for their Ether. While this might sound high, this multiple went as high as 6 in the last bull market.
Ethereum: Market Value to Realized Value (MVRV). Source: Glassnode
In order to derive at this multiple, the Market Value of Ether (current Ether price) is divided by the Realized Value (what all current holders paid on average for their Ether). In short, this multiple is called the MVRV ratio and was invented by David Puell and Murad Mahmudov. It could also be described as the multiple of the market’s cost basis for an asset.
In the past, the MVRV ratio served as a good signal for when the mania got out of hand, meaning when the multiple reached a value above 4, and where a value below 1 proved to be a good buying opportunity.
The MVRV ratio could rise to 5 by end of May
The following chart shows the multiple over the course of Ether’s existence. It becomes visible that it has followed an upwards trend channel since December 2019.
Ether Market Value to Realized Value (MVRV). Source: Glassnode
If this trend were to continue, and a similar MVRV ratio run-up like in the past is ahead of us and eventually a multiple of 5 could be reached by end of May. Based on the current Realized Price of $802, this would suggest a market price of Ether of $4,010 and would be a price increase of 71%.
Even better, as more buyers are coming into the market, the Realized Price is expected to rise over time. Over the past month alone, it increased by 15.1%. Projecting this to the end of May, the Realized Price could rise by 26.43% to around $1,014 per Ether. Based on a multiple of 5, this would result in a market price of $5,070 per Ether, which is an increase of 116%.
Ethereum: Realized Price. Source: Glassnode
Fasten your seatbelt
This projection is a real possibility, especially with Ether and Bitcoin breaking to new all-time highs on a regular basis. There are no guarantees when it comes to price and time targets. However, there are probabilities, and according to this on-chain indicator, the upside scenario has a much better chance to play out.
$5,000 for one Ether by end of May might sound crazy now, but $2.4k also sounded crazy a year ago when Ether closed the day at $159.
Title: $5,000 Ethereum by the end of May? On-chain data suggests so
Sourced From: cointelegraph.com/news/5-000-ethereum-by-the-end-of-may-on-chain-data-suggests-so
Published Date: Wed, 14 Apr 2021 18:23:34 +0100
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