Yesterday's anticipation of the Coinbase listing drove Bitcoin (BTC
) and Ethereum (ETH
) to new all-time highs, but today Ethereum is still picking up and hitting a new peak of nearly $ 2,500. However, the speculative premium shows that there is still a lot of room for increases, even if the price has more than tripled since the beginning of this year.
Ethereum’s speculative premium is still low
While the current price of Ethereum is around $2,440, its “realized price” is at $ 802, that is, the average price paid by all investors who currently own Ethereum. This means that current buyers of ETH are willing to pay 3.04x the price of what all current holders have paid on average for their ETH. While this may sound high, it rose to 6x in the last bull market.
To get to this number, the market value of Ethereum (the current ETH price) is divided by the realized price (what all current holders have paid for their ETH on average). In short, this multiple is called the MVRV ratio. It was invented by David Puell and Murad Mahmudov.
In the past, the MVRV ratio was a good signal for when the bubble got out of control, i.e. when it hit a value above 4, it turned out to be a good time to start selling and a value below 1 turned out to be a good one to be a buying opportunity.
The MVRV ratio could go up to 5 end of May
The MVRV ratio has been in a stable uptrend since December 2019. If this trend continues, and a similar MVRV ratio run-up like in the past is ahead of us, a ratio of 5 could eventually be reached by the end of May. Based on the current realized price of $802, this would suggest a market price of Ethereum of $ 4,010 and that would be a 70% price increase.
Even better, as more buyers enter the market, the realized price is expected to increase over time. In the past month alone, it is up 15.1%. Projecting this to the end of May, the realized price could increase by 26.43% to about $1,014 per ETH. Based on a multiple of 5, this would result in a market price of $5,070 per ETH, which is an increase of 114%.
This projection is a realistic possibility, especially as Ethereum and Bitcoin regularly shoot to new all-time highs. There are no guarantees when it comes to price and time goals. But there are probabilities, and according to this on-chain indicator, the upside scenario has a much better chance of playing out.
$5,000 for one Ethereum by the end of May may sound crazy now, but $2,500 also sounded crazy a year ago, when Ether closed the day at $159.