The pseudonymous host of Coin Bureau thinks Ethereum has the potential to surge past $20,000 with the help of an emerging sector of the crypto markets.
In a new video, the popular analyst who goes by Guy says that decentralized finance (DeFi) and its ability to replicate the services of traditional finance without the drawbacks will be the catalyst that pushes Ethereum to the stratosphere.
Guy tells his 1.13 million YouTube subscribers that traditional finance is “completely replaceable.”
“Unsurprisingly, the banks have been performing pretty poorly over the past decade. From the US banks, to those of China, Japan and Europe, an abysmal performance from a once-towering industry. Just try to picture that: this is the sector that caused the 2008 financial crash. They have honed the craft of privatizing gains and socializing losses. However, despite this, they have still been unable to capture any value for their shareholders…..
So the question then becomes: what services are these banks providing and can they be replicated in DeFi?”
To answer that question, Guy points to an essay penned in April by Arthur Hayes, the former chief executive of the derivatives exchange BitMEX.
In his essay, Hayes explains how DeFi can easily replicate savings accounts, checking accounts and trust services. He does note, however, that while DeFi can offer loans, the sector is heavily over-collateralized, meaning that banks tend to do a better job with loans despite their shortcomings.
Still, Hayes notes that if Ethereum can capture some percentage of the five-year average earnings of banks and the big four audit firms, it would skyrocket in value.
Based on Hayes’ equations, if the Ethereum ecosystem managed to capture 0.5% of traditional finance’s revenue, it would 10x ETH in value to more than $20,000. Capturing 5% of traditional finance’s revenue would send it to $200,000.
The host of Coin Bureau asserts that capturing 0.5% of traditional finance’s revenue is a reasonable expectation for DeFi.
“This realization is the reason that institutional investors are lapping it up. This realization is the reason that Goldman has dived right into [Ethereum] options before offering them on Bitcoin. Now, of course, a lot of it does hinge on the upcoming updates. Pushing forward such fundamental upgrades won’t be an easy feat on a network worth over $300 billion dollars. But they are necessary.”
Featured Image: Shutterstock/Kamenetskiy Konstantin