Is ETH overvalued or not? Recently, the community has been discussing whether ETH is going to be in trouble. However, few people have recalculated the valuation of ETH based on the current fundamentals to see if it is reasonable. Let's try to shed some light on this. The value of ETH can be roughly divided into 5 parts: 1. Gas revenue. The current annual gas revenue is $548 million. If we calculate the price-to-sales (PS) ratio, it is 500. In comparison, SOL's PS ratio is around 300. Looking at this, ETH appears to be significantly overvalued. 2. The current annual value burned is $400 million. 3. The annual issuance is $2.22 billion. 4. With the addition of ETFs, ETH has gained some commodity-like properties and market capitalization. 5. The moat of the ETH ecosystem, including Layer 2, DeFi, and the strongest developer community in the crypto space. Let's analyze this: 1. The current low gas revenue is mainly due to Layer 2 solutions not paying gas fees. Layer 2 is a clever and efficient way to use block space; it is ETH actively reducing its own revenue but increasing the moat of the ecosystem. On the surface, the PS ratio looks very poor. But this is actually ETH's choice to sacrifice short-term profits, offering 80% discounts to sell block space, in order to strengthen the ecosystem moat. From the Foundation's internal perspective, this choice is more beneficial than maintaining a low PS ratio. Therefore, ETH's true earning power is not fully reflected in the PS ratio. From the MC/Volume perspective, ETH does not have a premium over Visa. 2. Whether it's the cost of issuance or the revenue from burning, for long-term holders, it does not significantly impact their overall interests. Therefore, the issuance and burning have little impact on ETH's valuation. 3. How much is the commodity-like property worth? I found another commodity ETF: iPath Pure Beta Precious Metals ETN (BLNG), which has a market cap of only $2 billion. This suggests that the ETF approval will not provide much of a boost, and the core is still the intrinsic value of the underlying asset. Although the ETF approval does psychologically increase ETH's market cap, conservatively, we can consider ETH's commodity value contribution to be 0. 4. How much is the value of the ecosystem moat? Considering it together with the PS ratio means that ETH's willingness to offer discounts can support a higher PS ratio. The most complete ecosystem moat is the best asset to sell block space. 5. At this time, ETH is not as overvalued as it appears. But there is still some overvaluation. The market expects on-chain activity to increase 2-3 times in order to justify the valuation based on cash flow. There is also a risk of the market losing patience. However, historically, once the market warms up, on-chain activity can increase 10 times or even dozens of times in a short period of time. With future rate cuts and balance sheet expansion, ETH can absorb the liquidity. At this time, ETH has some premium, which is understandable. Conclusion: The current price of ETH is reasonable, and there is no obvious overvaluation, but it is not very cost-effective at the moment.