Analyzing Ethereum’s Market Cycle With Block Subsidy and Mayer Multiple Models

Key Takeaways

• The Mayer Multiple and Block Subsidy Models help price Ethereum.
• The Block Subsidy model shows that Ethereum is middle of its bands.
• The Mayer Multiple model shows extreme undervaluation for Ethereum.

The two previous Ethereum (ETH) market cycles have been similar in many respects. One is that the ETH price moved well above its moving averages and thermocap near its top. The opposite was true at the bottom.

The Mayer Multiple and Block Subsidy models can help visualize the price’s position relative to the indicators. Let’s analyze them and see how Ethereum fares.

Block Subsidy Model

The Block Subsidy Mode estimates the value of an asset by comparing it to the price of an asset to the cost of production for its supply, otherwise known as the thermocap.

The Block Subsidy Model uses multiples of the thermocap to show how much the asset’s value exceeds its production cost.

Historically, Ethereum bottoms (black circles) have reached values twice as high as the thermocap while tops at values 32 to 64 times higher (red circles).

However, the current cycle has been different. The July 2022 bottom was at the 4x thermocap line (green), and the price has not even reached the 16x thermocap line (yellow).

This is different from the previous cycles, when ETH reached the 32 and 64x thermocap lines, respectively.

According to the Block Subsidy model, the ETH price could be in the middle of its bullish trend. However, the fact that the model never visited the lower extremes of this cycle casts some doubt on its predictive powers for the current one.

Furthermore, in both previous cycles, the Ethereum price did not fall below the 8x thermo cap line once crossing it, while it has done so in the current cycle.

Mayer Multiple Model

The Mayer Multiple Model compares Ethereum’s price to its 200-day moving average (MA) to determine whether it is overbought or oversold. In previous market cycles, values above 2.4 indicated a top, while those below 0.8 signified bottoms.

The ETH price is below the 0.8 Mayer Multiple, signifying undervaluation.  The current reading is similar to that of March 2020.

In that cycle, the Mayer multiple crossed over 0.8 and reached a high of 2.02 before falling under 0.8 again.

An almost identical reading has happened in the current cycle. So, if the ETH price follows a similar trajectory, it will soon begin to increase rapidly.

So, the Mayer Multiple model suggests that Ethereum is undervalued and has not even started its bullish trend yet.

Undervalued Ethereum

Because of the lack of similarity to the previous market cycles, the Block Subsidy Model cannot be used accurately to predict the current ETH price movement.

However, the Mayer Multiple Model shows readings nearly identical to those of March 2020, shortly before the ETH price began the most rapid portion of its increase.

Hence, it suggests that the Ethereum price is undervalued.