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Ethereum may be overpriced

2019-06-25, Michael Thompson

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Ethereum may be overpriced

Although I’m a fan of Ethereum I wanted to warn potential investors to think carefully before buying Ether at 350+ USD prices. While Bitcoin is apparently becoming a store of value like gold (which is very hard to price), many believe it’s best to treat Ether more like stock. Indeed, Ethereum has the potential to be a very useful platform for many things, but it’s not there yet.

Let’s imagine Ethereum as a public company on a stock exchange. What would its market cap be? I think most people would agree it would be less than AMD or HP, which are both valued around 32B USD. These two companies have already proven their usefulness and the probability of becoming obsolete seems much lower (there’s a relatively high risk of a competing platform overtaking Ethereum’s market by solving some of the technical issues faster or developing a superior technology). Ethereum’s market cap currently far exceeds this 32B USD figure, making it appear overpriced in this sense.

Am I saying it won’t go higher? Absolutely not. It’s already soared well over 100B USD in early 2018 and the fundamentals are apparently much better now. However, I view further increases as a bubble (just like early 2018) and it’s too risky for me to buy at this level.

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