Is Ethereum Undervalued? A Deep Dive into 12 On-Chain Valuation Models

The debate over Ethereum's intrinsic value has intensified in 2025, with a growing consensus among on-chain analysts that ETH is significantly undervalued. According to Ki Young Ju, CEO of CryptoQuant, nine out of 12 widely used valuation models suggest Ethereum trades below its fair value, with a composite estimate of $4,836-implying a 58% upside from current levels. This analysis explores the methodologies of these 12 models, their implications for strategic entry timing, and the broader case for Ethereum's undervaluation.

Network Effect Models: Scaling the Value of a Decentralized Network

Network effect models, such as Metcalfe's Law, treat Ethereum as a communication protocol, valuing it based on the square of active users or nodes. At $9,534, this model suggests Ethereum is over 213% undervalued. Similarly, the Settlement Layer model, which views ETH as a medium of exchange for on-chain settlements, estimates a fair price of $5,105. These models highlight Ethereum's role as a global infrastructure layer, where value grows exponentially with adoption.

Yield-Based Models: Staking and Revenue Dynamics

Yield-based models focus on Ethereum's financial mechanics. The DCF (Discounted Cash Flow) staking yield model, for instance, calculates fair value by discounting staking returns at 9%, projecting a price of $8,996. Meanwhile, the Validator Economics model compares target staking yields to current APR, arriving at $6,985. Conversely, the Revenue Yield model, which divides annual network revenue by staking yield, argues ETH is overvalued by 57% at $1,433.8. These divergences underscore the tension between growth optimism and income-focused skepticism.

Ecosystem-Based Models: Capturing the Value of DeFi and L2s

Ecosystem-based models quantify Ethereum's role in decentralized finance (DeFi) and Layer-2 (L2) scaling. The L2 Ecosystem model, which incorporates total value locked (TVL) in L2 networks, values ETH at $4,716.1. The App Capital model, aggregating on-chain assets like stablecoins and NFTs, estimates $4,920.5. The TVL Multiple model, comparing TVL to market cap, arrives at $4,110.5. These models emphasize Ethereum's expanding utility beyond a settlement layer, capturing value from its role as a foundational infrastructure for innovation.

Composite and Discrepancies: Balancing the Models

While most models lean bullish, outliers like the P/S Ratio (25X) model, which compares market cap to annual transaction fees, suggests ETH is overvalued at $923.4. The Composite Fair Value model, averaging all 12 estimates, places ETH at $4,535.1, aligning with the broader undervaluation thesis. These discrepancies reflect the complexity of valuing a decentralized network, where traditional metrics often clash with on-chain dynamics.

Strategic Entry Timing and Intrinsic Value Assessment

For investors, the key lies in aligning entry timing with Ethereum's intrinsic value. The majority of models-particularly those emphasizing network effects and ecosystem growth-suggest a long-term undervaluation. Strategic entry could involve dollar-cost averaging into ETH as on-chain metrics like TVL and staking yields normalize. However, caution is warranted against models like the Revenue Yield framework, which prioritize short-term income over growth.

The case for Ethereum's undervaluation is further strengthened by its role as a global public good. As noted in a report by VanEck, Ethereum's value extends beyond financial returns, encompassing its utility as a settlement layer and its potential to capture market share in digital commerce. This dual role-both as a financial asset and a foundational infrastructure-complicates traditional valuation but reinforces its long-term appeal.

Conclusion

Ethereum's valuation landscape in 2025 is a mosaic of methodologies, with most models pointing to significant undervaluation. While yield-based and P/S ratio models offer cautionary perspectives, the broader consensus favors Ethereum's intrinsic value as a decentralized infrastructure. For investors, the challenge lies in balancing these models with macroeconomic and on-chain signals to time entries strategically. As Ethereum continues to evolve, its valuation will likely remain a dynamic interplay of utility, growth, and market sentiment.