The idea has been put forward that the high level of Gas fees relative to the current Ether price in Ethereum and decentralized finance (DeFi) ecosystem may actually indicate a rise in price.
Commentator Ryan Sean Adams claimed that Ethereum was “actually getting cheaper” in terms of price / selling ratio, referring to the “Valuation of Ethereum” topic in this week’s Grayscale research article.
Here’s what’s crazy…
From a P/S perspective ETH is actually getting *cheaper* pic.twitter.com/xyz9yuVCyZ
— Ryan Sean Adams –rsa.eth (@RyanSAdams) February 4, 2021
A price-to-sell ratio (P / S) is usually calculated by dividing a company’s market value by revenue from sales. In this case, dividing Ethereum’s market value of $ 184 billion by the total revenue from transaction fees offers a similar metric. The lower the P / S ratio, the more attractive the investment (although there is debate as to how applicable to decentralized digital assets).
According to the Grayscale report, Ethereum’s P / S ratio in early 2021 is around 0.02, the lowest in three years.
While Ethereum is not a company and its transaction fees are technically unproductive, enterprise-level investment instruments such as Grayscale often use traditional methods to help value assets. He said in the report:
“A lower rate on the network indicates that Ether is generating higher revenue relative to its historical market value, and therefore its value remains low.”
On the other hand, high transaction fees are an indicator of high demand for the network. While it’s not very suitable for those who want to use it on a daily basis, it’s good news for miners and long-term investors.
The average Ethereum transaction fee has skyrocketed to an all-time high of $ 23, according to BitInfoCharts. This amount makes it completely impossible to use the network for smaller transactions. DeFi protocols are becoming obsolete for individual investors.