Nick Szabo Highlights Core Issue with Ethereum’s Valuation and Price Disconnect

Nick Szabo, the renowned computer scientist and cryptographer who pioneered the concept of smart contracts, has raised concerns about Ethereum’s valuation model. According to Szabo, a “fundamental problem” lies in the fact that most of Ethereum’s use cases are externally driven and do not directly contribute to the cryptocurrency’s market value. While Ethereum-based applications and projects may generate substantial revenue, this success doesn’t necessarily translate into a higher ETH price.

Szabo argues that there is little correlation between Ethereum’s price and its actual utility. In contrast, Bitcoin’s main purpose—as a store of value (SOV)—is closely tied to its market price. Bitcoin’s value proposition centers on being a digital asset for preserving wealth, which creates a direct relationship between its adoption and price appreciation. Ethereum, on the other hand, cannot effectively replicate this role, forcing it to depend on other use cases such as decentralized applications (dApps) and smart contracts that have weaker ties to ETH’s intrinsic value.

Szabo’s remarks follow comments by Syncracy Capital co-founder Ryan Watkins, who credited Tom Lee’s Bitmine for fueling Ethereum’s dramatic surge from $1,400 to $5,000 in just months. Watkins emphasized that the crypto market often runs on “flows and narratives,” suggesting Ethereum’s rally was more sentiment-driven than fundamentally backed.

Despite these critiques, Ethereum continues to perform strongly. The cryptocurrency recently surpassed $4,700, marking one of its best quarters ever and setting the stage for a potentially record-breaking year-end. However, Szabo’s insights serve as a reminder that Ethereum’s long-term valuation challenge remains unresolved, hinging on how well its ecosystem can connect real-world utility with ETH’s price performance.