ETH Hits All-Time Highs
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Recently Ethereum, the second largest cryptocurrency by market cap, hit an all-time price high of $1,439.
While Bitcoin may have a stronghold on the digital gold narrative, Ethereum currently leads as the platform/blockchain of choice for smart contracts and decentralized applications. If Bitcoin is gold, Ethereum is silver. If Bitcoin is the initial cryptocurrency for investment, Ethereum is right behind as the next choice.
During this current bull run, we’ve seen institutional capital, corporations, and wealth management platforms get exposure to Bitcoin, enabling/motivating retail to soon follow. While institutional capital is still educating and getting into Bitcoin, folks will be taking profits and going into Ethereum, other smart contract platforms, and token projects building decentralized applications along the way.
What makes Ethereum compelling right now?
1) Scalability
Ethereum recently launched the first phase of its upgrade to Ethereum 2.0 with the launch of the beacon chain on December 1, 2020. Ethereum 2.0 hopes to bring scalability and a proof of stake consensus system, where users will be able to vote with their tokens/monetary value to secure the network. So far 2 million ETH has been staked.
In addition, a number of Layer 2 scaling technologies/solutions have emerged with the idea that data can be kept on-chain, while moving execution off-chain to handle faster performance while maintaining security. You can see the landscape of solutions below, who funded them, and which projects they are working with.
2) DeFi Growth
DeFi, or decentralized finance, is when you transact value in a peer-to-peer trustless way over a blockchain. Early in 2020, DeFi has $1 Billion in total value locked within DeFi protocols and recently, DeFi hit $24 Billion in total value locked, a 24x increase in about a year which is astonishing.
Decentralized exchange volumes have reached a high of 16% of all centralized exchanged volumes through platforms like Uniswap, 1inch, Sushiswap, and 0x. Stablecoins have reached up to $24 Billion in issuance as of December 2020. Stablecoins are cryptocurrencies that usually hold a fixed fiat value (primarily dollars) and are used as a store of value or trading asset. Decentralized lending protocols like Aave and Compound have brought innovation around flash loans, liquidity, and governance. Total DeFi users have growth quite well in the last year.
3) Rise of NFTs (non-fungible tokens)
Non-fungible tokens are a type of token that allows for artists to sell unique digital artwork. In December 2020, Beeple, a digital artist, sold a collection of artwork for a combined $3.5 million.
Recently, Justin Roiland released Rick and Morty art pieces and one sold for $290,000.
You can see the growth of crypto art volume and it allows creators to have supplemental income and for new artists to break into the industry and make a name for themselves.
In addition, NFTs aren’t limited to digital artwork and can be applied to unique digital items in gaming or even real-world assets. What becomes even more interesting is when you use the blockchain to track fractionalized ownership of collectibles. Imagine community-owned platforms where users have the decision-making capabilities and better economics. I really expect this sector to do well in 2021.
2021 ETH Prediction
Ethereum starts to get momentum on the institutional side later this year after further progress on both scalability and applications built on ethereum, leading to more record highs.
- Paul V
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IN THE TWEETS
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ABOUT ME
Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. The firm invests in equity, pre-auction ICOs, and cryptocurrencies on the secondary markets. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.