Nick Szabo, a prominent computer scientist known for introducing the concept of smart contracts, claims that "a fundamental problem" with Ethereum's valuation is that its use cases are "largely external" to the market value of the popular cryptocurrency.
As Szabo explains, Ethereum apps can garner great revenue, but the ETH price would remain relatively low (or vice versa).
In fact, the cryptographer is certain that there is actually barely any connection between the Ethereum (ETH) price and its utility.
On the other hand, Bitcoin's main use case is specifically a store of value (SOV), which is "strongly linked" to the price of the leading cryptocurrency.
Since ETH cannot properly mimic Bitcoin's SOV use case, it has to rely on other use cases that are not directly linked to its price.
Narrative-driven rally
Szabo's comment comes after Syncracy Capital co-founder Ryan Watkins noted that Tom Lee's Bitmine was the main thing that was able to push the price of ETH from $1,400 to $5,000 in a matter of months.
Earlier this year, Ethereum was considered to be a "dying" platform, but the narrative has dramatically changed.
"It’s a game of flows and narratives until the party stops," Watkins added.
Ethereum's rally
On Monday, the price of ETH surpassed the $4,700 level once again.
The cryptocurrency recently logged its best-performing Q3 to date, and it is on track to record yet another stellar Q4.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team