Arthur Hayes, the co-founder and former CEO of crypto derivatives exchange BitMEX, explained in a recent blog post why he believes that 2022 will be a big year for Ethereum (ETH).
He argues that the network he calls “the commodity that powers the world’s largest decentralised computer,” not only has a positive yield in its currency but post-merge, or after transitioning to proof-of-stake (POS) consensus, it will function as a commodity-linked bond.
“As global real rates are deeply negative, I want to own an asset that has a positive yield in its own currency – and at the moment, that is ETH,” Hayes says.
In contrast, he sees Bitcoin (BTC) not having “an implicit yield in BTC terms at the protocol level,” therefore Hayes says the benchmark cryptocurrency is “pure money” that intrinsically “yields nothing.”
This statement stands in stark contrast to many other experts in the space who believe that bitcoin has intrinsic value due to its ability to be used as a medium of exchange.
Hayes however, insists in his view. In fact, he goes on to say that when viewed against fundamental ratios such as price to total-value-locked (TVL) or price-to-address ratio, Ethereum is a better and cheaper investment not only to bitcoin but also to other Layer 1 (L1) protocols, which he notes trade on much higher multiples than ETH.
Expecting Ether to continue outpacing its L1 chain rivals in terms of both price and usage, Hayes set the price target for Ethereum in 2022 at $10,000 a coin.
Basing his opinion on the results of his excellent analysis, Hayes also outlined his reasoning for increasing his allocation of Ether in his portfolio. He noted that he now views ETH as more than just a cryptocurrency – he sees it as an investment vehicle that has the potential to offer significant returns in the coming years.
As such, he says he has increased his target allocation for ETH from 50% to 75%. This follows his prior 50% BTC and 50% ETH allocation at the beginning of the year. While this may come as a surprise to some, it is clear that Hayes is confident in his conviction that ETH will continue to outperform Bitcoin (BTC) in the years ahead. Given his track record of success in the cryptocurrency space, it would be wise to pay attention to Hayes’ latest forecast – it just might end up being another great call.
In terms of the the potential yield from staking ETH, Hayes quoted the analysis completed by Justin Drake, an ETH researcher who projected stakers could see an APR of around 8–11.5% after the merge.
Hayes also outlined that in the case of a 5-year ETH local currency bond, the ETH price would have to deteriorate 29.35% after five years – assuming an 11.5%/yr yield – for investors to lose money in greenback terms. As such, it seems that those looking to stake their ETH may be in for a very lucrative return on their investment.
According to Hayes, the transition to POS consensus scheduled to occur in the second quarter will be the game-changer that puts Ethereum ahead of its competitors.
BTC traded 1.34% higher at $46,673.02 at press time, while ETH traded 1.45% higher at $3,504.56.