Most people think of Mark Cuban as the ‘man’ when it comes to investing. He is a smart guy and I will give him that. He got to where he is today from being a first mover during the internet boom. As a smart investor, he rode out the wave and sold at the top. Kind of what everyone hopes to do when investing but few actually achieve. So what is he missing when it comes to Ethereum? Because you do know he said multiple times that Ethereum/Bitcoin is a “bubble”.
Mathematics Always Wins
When it comes to understanding value you have to look in longer term perspectives. As we all know, assets don’t just grow over night. Generally, it is a marathon and not a sprint in everything you own. That is part of the reasons why I can’t understand his thinking.
The above table shows the projected user growth I assumed for Ethereum based on the current growth rate which has been doubling each year. My first step was to go to a site that tracks wallet growth in the blockchain.
After seeing that the blockchain has currently 14,400,000 users I multiplied it by 30%. I took 30% because not every blockchain user owns Ethereum. Next, I used the current market cap and divided it by user growth in order to get the average amount in each account. So the average account with Ethereum is worth $5,555. Now in the near-term that may seem a bit stretched.
But how about when you go two, three, or five years out as user growth begins to compensate for market cap. In year two, the average amount in each account starts to come down significantly if we keep the same market cap. As long as user growth continues at an exponential rate, then by year five each account will only need $347.
Final Conclusion: If all of this data stays true then by year five Ethereum will at the very least be trading at roughly $500 per share with a market cap of $48,000,000,000. Tell me again why this is a bad investment. Share so I can speak to Mark Cuban.