Many people mistakenly believe that cryptocurrency is purely a speculative digital game with no real underlying business support. However, this is not the case. Bitcoin can serve as an alternative store of value, while other public blockchains like Ethereum provide infrastructure services for the network. You can actually analyze its value using fundamental factors, much like evaluating a company or its stock.
Understanding Ethereum as a Network
First, it's essential to recognize that Ethereum is essentially a large-scale network. Developers use this network to build blockchain applications, including decentralized finance (DeFi), non-fungible tokens (NFTs), and even games.
Both developers and users need to pay a relatively small fee for these services, commonly known as the gas fee.
As user activity increases and the network becomes busier, the amount spent on gas fees rises. The network divides these fees into two parts: half goes to the operators (validators) who maintain the network as a reward, and the other half is burned.
Therefore, the burned portion can be viewed as the network's revenue.
Revenue vs. Expenditure Dynamics
New Ether is created with each new block generated on the Ethereum network, roughly every few seconds. This newly minted Ether can be considered the network's expenditure. In other words, Ethereum's expenses are relatively stable.
However, if the number of applications using Ethereum is high enough that the amount of Ether burned exceeds the new supply, Ether becomes a deflationary currency.
Using a corporate analogy, this means revenue exceeds expenses, which should theoretically lead to a price increase.
Conversely, if network usage is low, and revenue falls below expenses, the "company" would operate at a loss, putting downward pressure on the price. Based on this logic, you can calculate Ethereum's price-to-earnings (P/E) ratio.
Current Market Metrics and Trends
According to data from ultrasound.money, Ethereum's current P/E ratio is approximately 92x, up from 48x earlier this year. This indicates a decline in revenue. Why is this happening?
The primary reason is that, over the past two years, Ethereum's main revenue source has been NFTs. Designing, minting, selling, or transferring NFTs requires gas fees, and more complex NFT smart contracts result in higher fees.
During the launch of major NFT projects, user activity surged, driving up minting and purchasing volumes and, consequently, gas fees. There have been extreme cases where minting an NFT worth几十美元 required数百美元 in gas fees.
After several years of development, the market now understands that NFTs are not just digital art collections. Many of these "artworks" lack market demand, and numerous celebrity-backed NFTs failed to sustain ongoing activity.
As a result, aside from a few blue-chip NFT projects, over 90% have fallen below their minting prices. With investors feeling discouraged, overall market activity has significantly decreased, severely impacting Ethereum's profitability.
Even if you view Ethereum as a startup tech company, a nearly 100x P/E ratio is undoubtedly expensive.
Future Outlook and Market Dynamics
Of course, markets are not always rational. Tech companies often sell dreams and potential. If spot exchange-traded funds (ETFs) for Bitcoin and Ether are approved, hitting new price highs would not be surprising.
However, for long-term sustainability, innovative applications and an expansion of active network users are crucial to maintaining the value of Ether.
👉 Explore real-time network metrics
Frequently Asked Questions
What is Ethereum's gas fee?
Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum network. They are divided between validators and a burn mechanism.
How does Ethereum generate revenue?
Ethereum's revenue comes primarily from gas fees paid by users. A portion of these fees is burned, effectively reducing the supply and acting as a revenue equivalent.
Why did Ethereum's P/E ratio increase recently?
The P/E ratio rose due to a decrease in network activity and revenue, particularly in the NFT sector, while the price of Ether remained relatively stable or increased, leading to a higher valuation multiple.
What impacts Ethereum's network activity?
Factors include the popularity of DeFi protocols, NFT launches, gaming applications, and overall adoption rates. Market sentiment and technological upgrades also play significant roles.
Is Ethereum a good long-term investment?
While potential exists, especially with upcoming upgrades and ETF approvals, investors should consider both fundamental metrics like P/E ratio and market trends before making decisions.
How can I track Ethereum's financial metrics?
Websites like ultrasound.money provide real-time data on supply changes, fees, and other key indicators to help with fundamental analysis.