ETH to $50k by 2030?! VanEck's Bull Case

Bankless Nation, we have a special bonus episode for you today. We have Van Eck on the episode today. They made a bold call for the price of ETH. Yes, they brought the numbers. Is ETH price going to 50k? That's what they call their bull case by 2030. They also have a base case and a bear case. We'll talk about all three of those and the variables that go into it. And I gotta say, this is probably the best report that I've read on ETH price, definitely all year, maybe ever. And it's by one of the most respected institutional analysts in the game. This is Van Eck speaking today. A few things that we're gonna cover. And by the way, it's just me solo today. David is out, but I've got this covered. Super excited to talk about what happens when we model ETH the asset as we might model an equity based on block space sales. We also talk about the base case, the bull case, the bear case for ether the asset. 50K is the bull case. We we talk about how we got there and how the variables that went into this analysis and the puts and takes. Can we model Ether the asset as we might model Bitcoin the asset? Or is it different in some way? How about Solana? How about Atoms? How about other alternative layer ones? We talk about that that today. We also talk about what other institutional investors think about ether the asset. Are the institutions even here yet?

Are we about to get another bull market or are we going to have to wait? Maybe another bull market doesn't come. I asked the analysts at Van Ack those questions today. At this point in the intro, I usually ask David what the significance of this episode is. But since he's not here, I'm going to answer the question today. Um, you've heard the mental model for Ether the Asset on Banklist before. We we've talked about how to think about Ether the Asset, but we don't often have the opportunity to get into concrete numbers. Here in today's episode, Van Eck has brought the numbers. That's what's significant and exciting. And I think this episode will help you think like an investor. It'll help you reestablish your conviction on this asset class. It'll help you.

Check your assumptions. It'll arm you with data to predict what will happen next. For instance, at one point we talk about one layer two. What happens if one layer two on Ethereum gets disproportionate market share? They become really big. Is that a good thing or a bad thing for the price of ETH? According to our analysts today, it might be a bad thing for Ether, and they give their reasons why. Another concept this model reveals, will another alternative layer one outstrip Ethereum? Will there be an Ethereum killer? This is an opportunity to look at the actual numbers that would provide a clue to that, the leading indicator of something like that happening. I also think this is an opportunity to see how institutional investors are viewing Ether the asset. Van Eck is in a position to know. Are the institutions seeing what we see? Is there still an opportunity for retail to front-run the opportunity? That's what we always talk about in Bankless. And I think there still is. So this is one of my favorite types of episodes. It's an episode that's really going to sharpen your tools as a crypto investor. And we're going to get right to it with Matthew and Patrick, the analysts over at Van Eck. But before we do, we want to thank the sponsors that made this episode possible. Bankless Nation, we are super excited to introduce our next guest from Van Eck. We have Matthew Siegel. He is the head of digital assets research at Van Eck. He joined Van Eck in 2021. After 10 years in research investment banking, now leads a team of 10 working full time on crypto at Van Eck. And his first hire was Patrick Bush. At least that's what my notes say. Hey Patrick, he is an analyst at Van Eck Digital Research as well. His uh role at Van Eck is to focus on finding tokens that go up.

I don't know who wrote this, but it's brilliant. That's my job too. I try to do that too. Uh he does a lot of financial modeling around crypto assets. These two gentlemen, I believe, were responsible for the report that we're going to be talking about today. Matthew, Patrick, it's great to have you on bankless. How you doing?

Great to see you, Ryan. Thanks for having us. Good to see you.

Good to be here. It's well, you know what? It's good to have you here. It's good to have you writing like this in this space. I think uh David and myself on Bankless, we've been on a quest to um to actually try to understand this this asset called ETH, uh Ether, you know, the the asset that Ethereum produces. And I think you guys have done a fantastic job uh in this report. And I almost feel like um we should just dig right into the report. I've got a lot of side questions for you, but like it kind of starts here.

Uh and here's the report. I'm going to show it on screen. Ethereum price prediction, 11.8K. That's almost 12K by 2030. And here's the opener for me that just kind of like hooks the reader right into this. In light of Ethereum's recent hard fork, which allows users to withdraw staked ETH, and in our view, creates a major new competitor to UST bills. We revisited our Ethereum estimates, and this is the report. A major new competitor to UST bills. How dare you?

Matthew, over to you. How can you say something like this in a report like this?

Well, uh, we are an audacious shop. Vanak is uh is a macro shop. We were founded in in 1955 uh with a history of

Trying to manufacture innovative new products that will capture the investment zeitgeist. And in the 1970s, that was gold gold stocks, believe it or not, right? Gold had been illegal to own for three decades. And the founder of this firm got conviction that something was going to change. And he pivoted an international mutual fund into almost entirely gold stocks in the early 70s. So he was an Austrian economist with a hard money bent. And that mutual fund ended up being the best performing mutual fund in the country throughout the decade of the 1970s. And the firm's DNA was built around that ethos, which is going off the gold standard is going to have unintended consequences. It might take a decade, it might take five decades, but here we are. And we are on the hunt and have been on the hunt for alternative stores of value that will retain the characteristics of hard money during uncertain times. So the founder who did that is deceased, but his son Jan Vanek now owns and runs the firm. And he got conviction in 2017 that Bitcoin could be a major competitive competitor or alternative to gold. And we began investing our gold profits into BTC, into ETH, into venture capital investments in the crypto ecosystem and startups. And we have a number of products that we offer to investors and also off of our own balance sheet that have helped us gain insight and a network and some confidence in the space to try to model something like ETH. So we first took a crack at this in 2021. That was before the hard fork to proof of stake. And we uh staked a de minimis portion of our funds uh after the um.

After the hard fork last September. And now with the Schappella upgrade, we really got a lot more conviction. We've increased our staking by an order of magnitude. And what gave us the conviction to do that is the fact that you can now withdraw. So a lot of the institutional money managers are operating on a monthly calendar. Our private funds get subscriptions and redemptions monthly. And it's crucial to be able to withdraw your staked digital assets in order to satisfy your customer redemption requests. Hopefully we don't have too many of those, but should they come? So when Chappella came, we thought it would make sense to revisit our estimates in light of the consensus mechanism changes and see what price target came out. So that's what Patrick and I have done.

You know, it's so cool here, and I'll say this to the bankless listener. Hearing financial analysts use the term chappella just brings like uh a lot of um warmth to my heart. I mean, these are like esoteric Ethereum hard fork names, and that's how closely this group is kind of paying attention to it, and I think that comes out in the model. Um, I I want to ask more questions in the background of a Van At Eck because I know it's um a trusted name in the institutional space, but I feel like a lot of crypto folks don't know too much about it. So we'll get to that in a minute. But I want to throw the first, I want to throw the same question to Patrick. So this this uh a major new competitor to US T bills, calling ETH that. Okay, Patrick, did Matthew put you up to this? Like uh how did you have the audacity to write this in a report? Is is ETH really a competitor to T bills? What makes you say that? And how does that sound to the typical institutional investor? I'll throw that one to Patrick.

Yeah, I think

Ethereum represents the Guardian knot of finance. At least all crypto does.

Whoever can figure this out controls the future of finance, in my opinion.

And I don't think that's that's uh that's too far to say. Um

I think a really interesting point to look at is the way we see this is it's accruing a lot of value from use case, more than monetary premium. The monetary premium comes in and changes the multiple more than anything else.

I think that's kind of how we view it. Other institutions do not view it in such a way. They view it more

as an asset that's similar to like a really high beta Nasdaq type stock.

We see it as that, but also more.

Okay, well that's good. Um before we get back to Van Eck, then maybe since you've opened the door, Patrick, let's talk a little bit more about the model itself and the numbers here, which are very precise. So we've got 11.8k by 2030, and that's one of the cases pictured here. But I'm gonna pull up the full chart here. This is Ethereum revenue and price targets. We've got today what the price was at the time of this report, you know, uh around uh well, actually, this isn't price, sorry. This is uh Ethereum revenue that that we're looking at, and that's where you're deriving the price target. But the around today, we've got the bottom here, um $1,900. That's what ETH is trading at approximately right now-ish, although I haven't checked the price in the last five minutes. We could be over under by, you know, 25% or something because it's crypto. We've got the base uh 2030 case of 11. Uh, or one, uh 11,849. We've got the bear case, which I don't like to look at, but $343 for the price of ETH. And we've got the bull case of uh 51k, all the dates there by 2030. If you're listening on the podcast, you can't see this. I would encourage you to go check out the report in the show notes or take a look at the YouTube so you can get the um the visual here. Uh and the way you're modeling this, as I understand it, to your point, Patrick, is you're basing this on revenue, on cash flows. This almost looks like the way you might model an equity of some sort. So I think the substance of this report, to your point, Patrick, ignores monetary premium entirely. We'll come back to monetary premium, what that might mean. I think we're looking at this as a uh cash flow type asset. Um, I guess similar in some ways to uh a piece of property or an equity or something like this, something that can be modeled as a

uh an asset that produces cash. Can you talk about this a little bit more and and let's talk about how you're actually able to try to predict the revenue because I think it breaks down to categories. So I'll throw this one to you first, Patrick, and then we'll come back to Math Matthew.

Yeah, maybe I'll just take the first part because there's a top-down element and then there's a bottoms-up element. And the top-down element is what are the principal end markets that intermediate uh transfer of value? So we divide um into three. There's finance, which covers like banking and brokerage and lending. Um there's metaverse, which encounter which encompasses gaming, social networks, advertising, uh, and then there's infrastructure, which is you know decentralized uh storage, decentralized compute. Those are the principal end markets. And we look at what are the revenues that are being generated by those end markets today, and we make some initial assumptions as to what percent of the value in each of those end markets will be intermediated by open source blockchains.

So that's a starting point.

I see. How do you by the way, how did you break that down in Ethereum like transactions? How did you determine, you know, which of those uh, you know, um like which portion of this is attributable to you finance banking payments versus is this a whole like total addressable market type of uh analysis here? Okay.

Yes. So the total addressable market is divided into those three segments: finance,

metaverse.

And infrastructure, we look at existing business models and how much revenue they're producing in those three end markets. And then we make some admittedly unknown assumptions about what percent of that revenue opportunity can be captured

by open source blockchains. So just to dimension that, in the case of finance, our base case, we're only assuming that 5%

of all banking, brokerage, lending, payments, activity, the current revenue stream, only 5% can be or will be addressed by open source blockchains.

In the case of Metaverse, where we incorporate social media as well as gaming, the estimates are much higher, 20%, because we think new markets will be born off of this technology and new use cases. And then for infrastructure, a more modest 10%. So that think of that as the percentage of like AWS or Azure market share that might be chipped away at by decentralized alternatives, which right now might be more costly but provide other use cases. So it's with those penetration levels, I guess, that we kind of set the TAM.

And then to what extent can Ethereum address those end markets? What are the possibilities that Ethereum can take a meaningful market share of those penetration? That's where the kind of the line by line estimates come in. And I'll toss it over to Patrick for that.

Yeah, so like the way that we think about this is that these

end markets have this large revenue base. And going into the future, they're gonna look at crypto as an opportunity both to reduce costs and find new revenue opportunities. So we thought like a logical way to think about a take rate.

Was a construction of how that business would unfold in terms of what they would pay. So in our model, we talk about what current um businesses that are deployed to blockchain, like Uniswap

or Ave or Compound, are paying in terms of block fees versus like what they accrue in revenue. And so we thought that'd be like a logical split.

One of the things that this looks at is it says, okay, the transaction rate is going to have some sort of take rate. We don't precisely know.

What that take rate will be and why. And that gets a little bit more into the modeling going forward. Like one of the problems we run to in our model is if you see significant execution use case on Ethereum, you have substantial burn going forward. And we're not sure if that's kind of the way to look at the ecosystem

being value positive or burning a substantial amount of supply. Like in some years, if you have a massive adoption or massive growth in adoption, you might burn 20 to 30% of the supply. And so we don't really know precisely how these.

Is the the value will be um accrued by blockchain, but transactions seem like the best

point for it.

But that's kind of like the starting point. So

businesses are deployed a blockchain, or they're gonna save costs on blockchain or combination of both. And some of that will accrue value to Ethereum.

Can you talk about like the current state of Ethereum? Because I think some people aren't aware that Ethereum basically produces revenue today, right? They're just they haven't even really looked at uh Ethereum from this perspective. So, how do you get the the numbers in the today column over here?

Yeah, that's simply the gas usage. So we looked at total gas usage going back a year.

And then using Artemis data, we were able to segment the different use cases that are currently using gas in Ethereum. So looking at finance, banking, and payments, we found the

Protocols or applications that logically fit into those segments for an estimate of what the percentage breakdown of the current usage of the chain was.

And so if you extrapolate that further, you look at okay,

what's their burn rate versus what's what's the base rate, the burn rate versus the TIP fee.

Um that's kind of how we looked at it. So we include that as transaction revenue.

Next one item was MEV revenue. Looking at the MEV revenue was a little bit difficult to estimate. There's there's various sources like flashbots and others.

But we figured long term there'd be some sort of take rate on the assets. And that would kind of mirror something you'd see in in Tradify. And looking at like something like the CME group

and the relation to prop traders, that's kind of how I got my estimates for long term MEV was okay, how much capital is deployed

on the blockchain and what's the approximate revenue of these proprietary trading firms.

What units am I in right here? So if I go to Ethereum total revenue today I see two thousand five hundred and thirty nine what is that?

That's $2.5 billion.

So we have we have today's annualized revenues for ETH at $2.5 billion, growing in our base case to $51 billion in 2030.

And you're right that we're looking at this as a traditional cash-flowing

equity, so to speak. So we take that revenue, we tax it, and then we discount it back to today at a weighted average cost of capital of 12%,

which we get by analyzing Ethereum's beta to equities