Korbit Research Center "Ethereum Undervalued Since May... Commodity Prices Must Fall for Recovery"

Improvement in Risk Asset Preference Needed for Undervaluation Recovery
Decline in Commodity Prices and Weakening of Ethereum Selling Pressure Required

[Asia Economy Reporter Myunghwan Lee] Ethereum, considered a leading altcoin, has been evaluated to have entered an undervalued phase since May. It was also analyzed that to recover from this undervaluation, concerns about inflation, such as the decline in raw material prices, need to be resolved.

Korbit Research Center, under the cryptocurrency exchange Korbit, published a report titled 'Checking Ethereum's Undervalued Phase' on the 1st, analyzing Ethereum's undervalued phase and the factors for its recovery.

The Research Center first analyzed Ethereum's undervalued phase based on the 'MVRV Z' score used in previous reports. The MVRV Z score is a standard for identifying whether a cryptocurrency is overvalued or undervalued relative to its fair value, calculated by subtracting the fair value from the market capitalization and dividing by the total standard deviation of the market capitalization. According to this, Ethereum's past undervalued phase was from August 9, 2018, to July 4, 2020. It also pointed out that the current undervalued phase began on May 25, 2022.

Researcher Yoonyoung Choi of Korbit Research Center explained that the main intrinsic factors causing Ethereum's undervaluation include the circulating supply of Ethereum, hashrate, and the proportion of smart contract supply, all present in both periods before the undervalued phases occurred.

Next, when comparing the order of importance of macro factors causing undervaluation, it was analyzed that the order was the same in both periods before the undervalued phases. These macro factors were the U.S. Federal Reserve's federal funds rate, inflation, the spread between long- and short-term interest rates, the dollar index, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), the CRB index, and gold prices, in that order. The CRB index is a commodity index representing the average of futures prices for 19 raw materials, including West Texas Intermediate crude oil, natural gas, gold, copper, and nickel.

Researcher Choi analyzed, "To recover from the current undervalued phase, the preference for risk assets, including cryptocurrencies, must improve. Since raw material prices surged this year, increasing inflation concerns, raw material prices need to decline for this phase to recover." She also added that selling pressure on Ethereum should weaken to support net inflows into exchanges.

However, Researcher Choi emphasized that intrinsic factors of Ethereum, such as the degree of network adoption and increases in transactions and participation on the network, are also relatively important for recovering from Ethereum's undervalued phase.

Researcher Choi stated, "Although not reflected in the analysis results due to a lack of time-series data, among Ethereum's intrinsic factors, the Merge upgrade is also expected to play an important role in recovering Ethereum's current undervaluation."

This content was produced with the assistance of AI translation services.