Where is ETH in the cycle? | Michael Nadeau

What It Covers

Michael Nadeau of The DeFi Report analyzes ETH's position in the current bear market cycle, examining on-chain metrics including MVRV at 0.84, stablecoin supply at $180B, and diminishing returns across three cycles — from 175x in 2017 to just 5.6x in the most recent peak.

Key Questions Answered

• •ETH Cycle Returns Compression: ETH delivered 175x gains in the 2017 cycle, 61x in 2021, and only 5.6x in the most recent cycle, barely exceeding its previous all-time high at $4,953. Investors should assess whether this compression reflects a structural shift or a one-time disruption caused by the L2 roadmap decision.
• •L2 Roadmap Self-Disruption: The EIP-4844 blob upgrade in early 2024 caused ETH L1 fee revenue to collapse significantly, as L2s no longer paid substantial fees to anchor data. Ethereum essentially improved its product for end-users while reducing value accrual to ETH holders — a deliberate tradeoff that suppressed price performance this cycle.
• •Fair Value Zone Identified via MVRV: ETH's MVRV ratio currently sits at 0.84, near the 0.70 cycle bottom recorded in 2022. Only 39.4% of ETH supply is currently in profit, below the 2022 bear market low. These metrics suggest ETH is in a fair value zone, with deep value potentially beginning around $1,500–$1,700.
• •Stablecoin Supply as Balance Sheet Proxy: Ethereum hosts over $180B in stablecoins — roughly 60% of total crypto stablecoin supply — while ETH's market cap sits near $230–250B. Treat stablecoin supply as a hard asset floor similar to book value; when market cap converges toward combined stablecoin and TVL figures, it historically signals undervaluation.
• •Inflation Rate as Token Economic Signal: ETH's annualized issuance rate is currently 0.83%, roughly equal to Bitcoin's inflation rate, even with depressed fee revenue. Staking yields are now over 90% derived from new issuance rather than fees. This means ETH maintains store-of-value token economics even during low-activity periods — a structural advantage over high-inflation competing L1s.