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Ethereum ‘Massively’ Undervalued, While EOS Exponentially Overvalued: Placeholder Research

July 26, 2019

Placeholder, a New York-based crypto venture capital partnership that invests in decentralized information networks, has released research that indicates Ethereum may be the most relatively undervalued smart contract platform.

Chris Burniske, a partner at Placeholder, tweeted about the company’s Network Value to Token Value Ratio, a model for determining value.

The ratio, Burniske explains, divides the network value of a smart contract platform by the total value of all assets launched on that platform.

“For example, Ethereum currently trades at ~2x the value of all the assets on its platform, whereas EOS trades at 234x.

A hope here is the NVTVratio can help us get around faked transaction volumes and other forms of manipulation that have thus far made the NVTratio less useful for smart contract platforms.”

NVT stands for Network Value to Transactions. Some doubt has been cast on that metric due to intense scrutiny and criticism of crypto exchanges and how they report trading volume data. A report published in March by crypto index and beta fund provider Bitwise found that about 95% of the volume reported at that time on CoinMarketCap was fake.

Burniske says Placeholder’s metric isn’t perfect but represents an upgrade over NVT.

“The ratio has its own flaws, but our thinking is the market price of assets is the most ‘efficient metric’ crypto has.

Dividing the total market value of the base asset (eg, ETH), by all the assets secured by it (eg, ERC20s, ERC721s, etc), yields a less manipulated metric.

As with PE or PS ratios in stocks, the higher the value of the NVTVratio, the more richly (speculatively) the market is pricing the asset.

With EOS at > 200x and ETH at 2x, Ethereum is looking massively undervalued on this basis. Or, EOS+friends = massively overvalued.”

Founded in 2017, Placeholder has several leading cryptocurrencies in its portfolio including Ethereum, Bitcoin, 0x, Decred, MakerDAO and Zcash.

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