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The Ethereum network’s stock rose past large corporations such as Nestle and P&G after its market cap reached a record peak of $337 billion.
In 2021, the price of Ether (ETH) has increased by more than 200 percent, resulting in a whopping $337 billion market capitalisation. This remarkable figure vaulted the Ethereum network’s valuation above the overall market capitalisation of large corporations such as Procter & Gamble ($326 billion) and PayPal ($308 billion).
The market cap is calculated by multiplying the most recent trade price by the total number of coins in circulation, regardless of when they have been transported. As a result, it rarely represents the average price at which most investors transacted.
Standard finance investors evaluate ‘value’ by contrasting multiples and valuations. These are often measured in the context of profits, revenue, and market share, and applying these same ‘worth’ metrics to cryptocurrencies of various usage cases creates confusion and discomfort.
Ether is a multi-faceted asset that is difficult to evaluate
There is no foolproof criterion for determining how Ether’s worth compares to its potential. The cryptocurrency could serve as a digital store of value as well as the token used to enter the Ethereum network.
Therefore, one must consider the coins deposited on exchanges or the percentage effectively changing hands when comparing different asset classes. The existence of regulated derivatives markets allow institutional investors to bet against the asset’s price, and it is another factor that should be accounted for.
Although the benefits of comparing the market capitalizations of various asset groups are debatable, the metric functions exactly the same way for commodities, bonds, and mutual funds.
Ether recently exceeded the market capitalizations of Nestle, Procter & Gamble, PayPal, and Roche, according to data from Infinite Market Cap.
P&G, an American international consumer goods firm created in 1837, has a diverse brand portfolio that includes personal wellbeing, consumer protection, and grooming. Of 100,000 staff globally, the conglomerate recorded a nett income of $13 billion in 2020.
On the other hand, Ethereum has 2,320 average monthly developers, according to the Electric Capital’ Developer Report’. Although it is not a secular company, its decentralized applications (dApps) handle over 100,000 daily active addresses. Even more impressive is the $12 billion daily transfer and transactions on the Ethereum network. These numbers alone are outstanding even for an S&P 500 company.
Stocks have their own risks, which can’t be ignored
A 183-year-old business that is largely reliant on manufacturing and delivery is unlikely to have several parallels with a technology-based protocol. Equity holders, on the other hand, reap the benefits of returns, and while others might argue that Ether may be staked for a return, there are more serious risks involved.
Investors in the ETH 2.0 contract have the option of being a complete validator or entering a pool, but their coins may be lost as a result of fraudulent activities or failure to verify network transactions. When lending Ether through centralised services and decentralised protocols, similar risks arise.
On the other hand, listed companies can create new shares to benefit from excessive valuations or increase their cash position.
Other challenges that stockholders can face include tax increases, operational liability, and regulatory changes. According to a case unsealed in September 2019, Roche was recently sued by the government for $4.5 billion for deceiving the CDC.
Decentralized protocols are virtually free of these risks, which may explain their exorbitant valuations.
Given the risks outlined above, investors can infer that keeping Ether is less risky than purchasing stocks. At the very least, self-custody is an option, which reduces the asset’s reliance on third parties and illegal transactions.