## How to Value ETH? Exploring the True Worth of Ethereum Through 10 Models

> **Data Reference: Current ETH price is $3,120, with a historical high of $4,950**

How much is Ethereum really worth? This question has puzzled the entire Web3 industry for years. Unlike Bitcoin, which has a relatively clear value anchor as a pure commodity asset, Ethereum as a smart contract platform should have a widely accepted valuation system. Unfortunately, the industry has yet to reach a consensus.

Recently, research firm Hashed compiled 10 market-recognized valuation models. Among them, 8 indicate that ETH is severely undervalued, with a weighted average valuation of up to $4,766—about 53% higher than the current price. How do these 10 valuation methods work? Let’s analyze each one.

## 10 Valuation Frameworks with Varying Confidence Levels

Hashed categorizes these 10 models into three confidence tiers: Low, Medium, and High. We’ll start with the least credible ones.

### Low Confidence Models (Four Types)

**1. TVL Multiple Method**

The simplest idea: price ETH based on a multiple of DeFi’s Total Value Locked (TVL). Historical data shows that from 2020 to 2023, Ethereum’s market cap to TVL ratio averaged about 7x. Using this logic, current TVL multiplied by 7 and divided by total supply yields an ETH price of approximately $4,129, about 36.5% above the current price.

The problem with this approach is obvious—TVL is a one-dimensional metric and cannot reflect the true health of the DeFi ecosystem. Moreover, complex liquidity mining has inflated TVL figures, making this valuation method overly rough.

**2. Staking Scarcity Premium**

This model’s logic: staked ETH cannot be circulated, so it should carry a “scarcity premium.” The calculation is: current price × √( total supply ÷ circulating supply).

Using this formula, ETH’s fair price is about $3,528, 16.6% above the current price. This model was created by Hashed, using a square root to dampen extreme cases. However, the flaw is that it assumes “locked = scarcity premium,” but in reality, derivatives like liquid staking tokens (LSTs) mean staked ETH can still be traded, weakening the scarcity assumption.

**3. Mainnet + L2 TVL Extension Model**

Since mainnet TVL can be used for valuation, what about Layer 2 solutions? This model adds L2 TVL, giving it a 2x weight (since L2s use ETH for settlement). The formula becomes: (Mainnet TVL + L2 TVL×2), multiplied by 6 and divided by total supply, resulting in about $4,732, 56.6% above current price.

While considering L2, it’s still essentially a TVL game, not escaping the fundamental flaw of the first model.

**4. Commitment Premium Model**

Similar to the staking model, but this time including ETH locked in DeFi. By calculating the proportion of “staked + locked ETH” over total supply and multiplying by a 1.5x premium factor, the resulting ETH price is approximately $5,098, 69.1% above current.

Hashed claims this model is inspired by the theory that L1 tokens are “currencies rather than stocks.” It sounds plausible, but in practice, treating “non-circulating” as “valuable” is a logical flaw.

### Medium Confidence Models (Five Types)

**5. Market Cap / TVL Mean Reversion Method**

A relatively conservative valuation approach. It uses the historical average market cap to TVL ratio (about 6x), then estimates: current price × (6 ÷ current ratio). The result is about $3,541, 17.3% above the current price.

This method appears to reference TVL but actually applies a mean reversion principle, making it more rational than simple TVL-based valuation.

**6. Metcalfe’s Law**

A classic network value theory: the network’s value equals the square of the number of nodes. Academic studies (Alabi 2017, Peterson 2018) have validated this law’s applicability to Bitcoin and Ethereum.

Here, TVL is used as a proxy for network activity, with the formula: 2 × (TVL/10 billion)^1.5 × 10 billion ÷ total supply. The result is about $9,958, 231.6% above current price—an aggressive valuation. Despite academic backing, it still relies solely on TVL, which is a limitation.

**7. Discounted Cash Flow (DCF) Model**

Treats Ethereum like a company, valuing it based on staking yields as “profits,” and applying DCF. Hashed’s formula: current price × (1 + APR() ÷ (0.10 - 0.03), where 10% is the discount rate and 3% is the perpetual growth rate.

Theoretically sound, but the formula has issues. If we calculate based on a 2.6% annual yield, the fair price should be about 137% of the current price. This exposes a fundamental contradiction: if ETH’s purpose is solely to generate staking yields, its price should be much lower than the model suggests.

**8. P/E-like Transaction Value Ratio**

In traditional stock markets, the P/E ratio is key. For ETH, the “transaction value ratio” = market cap ÷ annual transaction fee revenue. Token Terminal uses 25x as a standard for high-growth tech stocks; Hashed claims this is the “industry standard for L1 protocol valuation.”

The formula: annual fee revenue × 25 ÷ total supply, yields about $1,286, 57.5% below current price. Using traditional financial metrics to value ETH results in the most conservative estimate, indicating ETH’s valuation may fundamentally differ from traditional assets.

**9. On-Chain Asset Total Value Model**

This model seems odd at first glance: ETH’s market cap should be proportional to the total value of assets held on-chain. The logic: to safeguard these assets, ETH’s market cap must be sufficiently large.

Calculation: total value of all on-chain assets, including stablecoins, ERC-20 tokens, NFTs, etc., divided by total ETH supply. The result is about $4,924, 62.9% above current price. Although this assumption sounds somewhat tenuous, upon reflection, it can be rationalized.

) High Confidence Model (One Type)

**10. Yield Bond Model**

The only model marked as “high confidence,” widely used by traditional financial analysts to evaluate crypto assets. It treats ETH as a yield-bearing bond, calculating value as annual income ÷ staking APR ÷ total supply.

The result is about $1,942, 36.7% below current price. Interestingly, this “high confidence” model also shows ETH is undervalued—though the margin is smaller. This may suggest that using traditional financial tools to price ETH is inherently flawed.

## Weighted Average: $4,766 and Its Implications

Hashed weights these 10 models by confidence level, arriving at an estimated fair value of about $4,766 for ETH. Even if we account for potential errors in the DCF model and lower the estimate, the final valuation remains around $4,700.

This is close to the all-time high of $4,950, implying that the current $3,120 may indeed be undervalued.

## Multi-Dimensional Valuation Is the Future

But the key question remains: which model should we trust?

To reprice Ethereum, the focus should return to **supply and demand**. ETH has real utility—paying gas fees, participating in DeFi, buying NFTs, providing liquidity—all requiring actual ETH. Therefore, a parameter reflecting network activity and demand-supply dynamics should be established, then calibrated against historical on-chain transaction costs to derive a reasonable price.

Interestingly, over the past two years, Ethereum’s activity has even surpassed the highs of the 2021 bull market. However, due to a significant drop in gas costs, actual demand has not increased proportionally, leading to a supply surplus.

This suggests that: **unless Ethereum’s network activity growth outpaces the decline in costs, it’s difficult to justify a substantial price increase from a supply-demand perspective.**

Yet, there’s an unquantifiable variable—**market imagination**. When the next wave of DeFi enthusiasm arrives, this “imagination factor” could come into play again. At that point, we might need to multiply by an additional “dream multiplier.”