1. Supply statistics
At this moment in time there are 92M coins of Ether available. Supply of Ether will become flat data over time. For now, the supply of Ether keeps on growing, but we will soon reach a point, probably in one or two years, where new coins will be equally created against the number of coins that go out of circulation. That is the intent of the Ether community, so we take that as our working assumption. So for long term forecasting the supply of Ether is not a very important indicator; supply is certainly relevant in the short term but our forecasting timeframe has a long term horizon.
2. Ether application demand statistics
A very important indicator is the usage of Ether in decentralized applications. To us, this is the real intrinsic value of Ethereum.
Many applications are being launched and developed at this point, and we clearly see a trend in the number of Ethereum based blockchain applications. Here again, we lack specific data, because most of those applications are private in nature, and associated usage stats are not released.
Case in point: The Ethereum Alliance, for instance, was set up to create a “spot trade” on the foreign exchange market for global currencies using an adaptation of Ethereum as the settlement layer. The Alliance was created by giant companies like Microsoft, JP Morga, and the likes.
Ethereum is playing a major role in applications like predictive analysis, decentralized market places, cross border payment services, digital signature in transactions, digital rights management, crowdfunding, and many more.
One of the problems Ether solves is offering Smart Contracts, as explained on Ethereum‘s wiki page.
Ether is well on its way to become the standard in decentralized applications among cryptocurrencies, used by many giant corporations.
It is hard to calculate the demand and future usage. The finance sector is where Ethereum offers major value. That sector has a huge potential. From that perspective, it is really fair to say that Ethereum’s usage in decentralized blockchain applications will go up 20 to 30 fold over the next 5 to 7 years. That is not an overstatement, but rather an understatement.
3. Ether investment demand
The other demand aspect is investment driven demand.
Right now, Ethereum is closed to the public. One can buy Ether as an investment only with access through a wallet. That really is not mainstream at this point.
In April 2017, Grayscale launched The Ethereum Investment Trust (ETC) which is a private fund in Ethereum. It is a real success, and the chart below illustrates how investors are rushing to invest in Ethereum, with the value of ETC almost quadrupling within a month. However, it is a private fund, so not very accessible to a wider audience.
It will really become explosive once the huge group of traditional investors and, more so, institutional investors start buying Ether for investment purposes. That group has no positions whatsoever in Ether currently, apart from the private fund mentioned above. Imagine what happens with investment demand once just 0.1% of that group starts buying Ether.
Furthermore, there is no Ethereum ETF yet. Such an ETF would open up access to the large group of traditional investors as an ETF needs to hold a minimum of Ether once it launches.
The first Bitcoin IRA is a fact, but there is no Ethereum IRA to drive the price of Ethereum higher. Imagine what happens if just 0.01% of retail public starts buying Ether for their IRA.
All in all, we get a clear picture of the enormous long term potential of Ethereum as we examine the supply and demand components. That brings us to the following Ethereum price forecast: supply will be neutral over time, usage demand will go up at least 20-fold, and investment demand will provide incredible leverage.
Because of that, it really fair to conclude that an Ethereum price forecast of $1000 will be achieved before 2020, which is a fivefold increase against today’s price level.
