Jurrien Timmer, macro strategist at financial giant Fidelity, says that Ethereum is currently priced at a big bargain compared to Bitcoin.
In a thread to his 75,000 Twitter followers, Timmer says that Metcalfe’s Law, which states that a network grows in value as the number of users on the network gets bigger, will carry Bitcoin to new heights despite BTC’s recent choppy price action.
The analyst says looking at Bitcoin’s number of users is a more accurate way to forecast price than the stock-to-flow model (S2F), popularized by quant analyst Plan B.
“We tend to look at price, but for me, valuation is the more relevant metric. Here we see bitcoin’s ‘price-to-network’ ratio. Bitcoin’s fundamentals explain a lot of its meteoric price gains. Metcalfe’s Law at work. It’s not just about S2F.”
Timmer says that while Bitcoin’s network is growing steadily, Ethereum’s network (ETH) is growing at a rapid pace. According to the strategist, Ethereum’s faster growth rate may not yet be reflected in ETH’s valuation. He says ETH may be trading a significant discount, potentially because BTC is still being valued for its scarce tokenomics.
“Comparing BTC’s valuation to ETH, we see a big discount for ETH, presumably because investors reward BTC for its superior scarcity dynamics. Whether ETH will continue to catch up to BTC will be an interesting thing to watch in 2022.”