Bankless Episode Summary
Title: Where is ETH in the Cycle? | Michael Nadeau
Date: March 11, 2026
Guests: Michael Nadeau (Defi Report)
Host: Ryan Sean Adams

Episode Overview

This episode of Bankless features Michael Nadeau, founder of the Defi Report and noted cycle analyst, for a deep dive into Ethereum’s (ETH) position in the current crypto market cycle. The discussion covers ETH's historical performance across its three major cycles, why its most recent cycle saw muted returns, how to value ETH in a shifting technological and economic context, and what fair value and cycle metrics are signaling for ETH holders and investors. Insights are particularly tuned to those looking to evaluate ETH against both bullish expectations and its primary benchmark: Bitcoin.

Key Discussion Points & Insights

1. ETH’s Cycle History & Diminishing Returns

• Timestamps: 00:03–06:07
• Ryan introduces Michael, noting his neutral, data-driven approach to ETH and comparing ETH’s returns across three cycles:
  • Cycle 1 (2016–17): $8 → $1,400 (175x)
  • Cycle 2 (2018–21): $80 → $4,878 (61x)
  • Cycle 3 (2022–25): $881 → $4,953 (5.6x)
• Ryan [05:51]: "Was this just a skipped cycle for ETH or is this now the new normal?"

2. The L2 Roadmap: Disruption and Underperformance

• Timestamps: 06:07–15:51
• Michael [06:07]: ETH’s underperformance is unique and tied to its L2 roadmap. Ethereum, in attempting to scale and grow via layer 2 (L2) solutions, disrupted its own fee capture and value accrual at the L1 level.
  • "Ethereum sort of disrupted itself, right, so that it could grow and so that we could scale via these L2s, and in doing so, they ... sort of hurt themselves in the near term." [08:54]
• Major apps migrated to L2s, but the UX is still fragmented, and no blockbuster L2-native app has emerged.
• Solana’s resurgence captured more high-velocity and speculative crypto use cases.
• Ryan and Michael agree the next cycle could offer reversion if lessons from the L2 "side quest" shift focus back to scalable L1 DeFi.

3. Valuing ETH: Multiple Models, Big Discrepancies

• Timestamps: 15:51–23:25
• Ryan outlines three main valuation frameworks:
  • Monetary/Store of Value Model (like gold/Bitcoin).
  • Cash-flow/Tech Stock Model (discounted network fees and yields).
  • Network/Metcalfe’s Law Model (network value vs. economically active capital).
• The range of valuations generated by these is vast: from $2 (strict fee-based) to $24,000 (network settlement model).
• Ryan [19:37]: "The market is just trying to figure out how the hell to actually value this asset."

4. The “Nation State” Analogy

• Timestamps: 23:25–27:34
• Michael’s preferred frame: Ethereum as a “nation state” where ETH is currency, and users pay tax (fees) for infrastructure. Network fundamentals—from tokenomics to the “GDP” of assets atop Ethereum—matter most.
  • "We think the way to think about L1s is like as nation states and a token is the currency and ... the blockchain handles that and then it charges a tax to all of the users..." [20:33]
• The market’s consensus on ETH’s core valuation method is still unsettled, partly pre-regulatory clarity.

5. Impact of Scaling on ETH Revenue & Staking

• Timestamps: 27:34–34:57
• ETH’s L1 fee revenue fell sharply post-L2 expansion (notably after 2024’s “blobs” upgrade enabled much cheaper L2 data anchoring).
  • "Ethereum’s revenue declined significantly because of that." [27:46]
• Staking yield has dropped from 5%+ (2022) to ~1% as revenue is now mostly from issuance (inflation), but ETH inflation is still <1%—comparable to Bitcoin and far better than most L1s.

6. DeFi & Stablecoin Dynamics

• Timestamps: 34:57–37:29
• Ethereum’s DEX volumes are high compared to peers in the bear, but it’s “slow DeFi,” designed for lower velocity but better quality assets.
• Massive stablecoin supply—ETH houses ~60% of all stablecoins, nearly $180B—remains bullish and indicates robust “hard value” for the network.
  • "I think of stablecoin supply as like the hard value ... the base of like what the economy is on top of Ethereum." [36:15]

7. Cycle & Fair Value Metrics

• Timestamps: 37:29–47:30
• Michael uses on-chain cycle metrics such as MVRV (Market Value to Realized Value), Z-scores, ETH/BTC ratio, and supply-in-profit to judge cycle lows:
  • ETH at or near “fair value zone”—not yet deep value, but close to cycle bottoms based on historical patterns.
  • Only 39% of ETH supply is in profit; key historical buying zones in prior cycles were similar.
  • ETH is below its 200-week moving average, suggesting capitulation/bottoming.
  • Deep value: ETH ~$1700–$1500. Fair value now is ~$2,000.
  • "It’s possible that ETH has actually bottomed ... It’s also possible that we’ll see more weakness for Bitcoin in 2026 that could bleed into ETH." [43:40]

8. What Will Make ETH a Buy Again?

• Timestamps: 47:30–53:21
• Michael remains watchful. For TDR’s portfolio, mere “fair value” is not enough; ETH must also offer a strong case for outperforming BTC in the upcoming cycle.
  • "It just comes down to: do I have more confidence in those things from a fundamentals perspective, from a valuation perspective, from a token economic perspective and buybacks and things..." [51:56]
• He’s cautious—currently 40% crypto, 60% cash. ETH is a contender, but faces fierce competition from other (unspecified) assets also on the TDR watchlist.

Notable Quotes & Memorable Moments

• Michael [08:54]: "Ethereum sort of disrupted itself, right, so that it could grow and so that we could scale via these L2s..."
• Ryan [19:37]: "The market is just trying to figure out how the hell to actually value this asset."
• Michael [20:33]: "We think the way to think about L1s is like as nation states and a token is the currency..."
• Michael [32:58]: "Right now it’s about 0.83% annualized, around the same inflation rate as Bitcoin."
• Michael [43:40]: "It’s possible that ETH has actually bottomed ... It’s also possible that we’ll see more weakness for Bitcoin in 2026 that could bleed into ETH."
• Michael [51:56]: "I'm confident that ETH is going to do well and have an expansion in the next cycle and I would hope that it'll definitely get past those 5K all time high. But the question is ... do I have more conviction in that and ETH potentially outperforming Bitcoin this cycle..."

Important Timestamps

• 00:03 – Intro & framing ETH’s historical cycles
• 06:07 – The L2 roadmap and ETH’s “skipped” cycle
• 15:51 – Valuation approaches: fees, store of value, network effects
• 20:33 – ETH as nation state; valuation model
• 27:46 – L2 impact on fees and staking
• 34:57 – DEX volumes, stablecoin dynamics
• 37:29 – Cycle/fair value metrics; on-chain indicators
• 43:40 – Interpreting cycle signals and fair value
• 47:30 – What ETH needs to prove for portfolio inclusion

Conclusion & Takeaways

• ETH’s muted performance this cycle is largely attributed to its L2 scaling roadmap, which has reduced fee capture at the L1 despite robust technological progress.
• Valuing ETH remains complex and unresolved in the marketplace, as different frameworks produce extremely divergent “fair values.”
• Cycle metrics suggest ETH is near or at historical bottom levels (“fair value”), but market structure and macro risk could push it into “deep value” ($1500–$1700) before next expansion.
• For Michael Nadeau, ETH’s inclusion as a fresh buy in the next cycle will depend not just on price or fundamentals, but on whether it looks set to outperform Bitcoin and other leading crypto assets.