The former BitMEX CEO explained to his readers why 2022 will be a big year for Ethereum. He considers that the network – after the transition to proof-of-stake consensus – will function as a commodity-linked bond. In contrast, the former CEO called BTC “pure money” that intrinsically “yields nothing.”
Hayes sees Ethereum as a better investment than not only bitcoin but other L1 protocols, which are mostly overvalued. Moreover, the transition planned for the summer of this year will be a game-changer and put Ethereum ahead of its competitors.
Ethereum as a Currency Bond
Arthur Hayes, the co-founder of BitMEx, didn’t shy away from his deep conviction on Ethereum in this most recent blog post. He stated that his target allocation for 2022 would be 25% BTC and 75% ETH. This came after the prior allocation as 50% BTC and 50% ETH at the beginning of the year.
Hayes made such an adjustment in part because he viewed bitcoin as money while post-merger ETH was a commodity-linked bond.
“ETH is a commodity used to power the computer, not a pure monetary instrument.”
Regarding the performance of Ethereum staking, Hayes cited analysis by Justin Drake, an ETH researcher who predicted that stakingrs could see an APR of around 8-11.5% after the transition. . Hayes pointed out that, for a 5-year ETH local currency bond, the ETH/USD price would need to drop 29.35% after five years — assuming an 11.5% annual return — for investors to lose weight. ‘money.
For hedging the risk of buying this “ETH bond,” investors can choose to sell a 1-year ETH/USD forward futures contract. Hayes wrote:
“The broker quoted me an average premium of +6.90%. This means that for covering my local currency ETH bond, I am actually RECEIVING income.
To institutional bitcoin holders like Michael Saylor, who issued corporate bonds to purchase BTC, Hayes recommended that they should issue debt and purchase Ether instead. The reasoning behind it was that he saw that “a boring STONK” buying ETH will naturally be branded as a “Metaverse” and “DeFi” company, which can help hype up the stock price. Issuing ETH bonds, meanwhile, is a “positive-carrying” trade to the company.
Since the proof-of-stake mechanism is much more environmentally friendly than the proof-of-work mechanism, Hayes explained, ETH bonds can attract ESG funds and are immune to regulatory concerns.
Ethereum Killers
Hayes’s bullish take on Ethereum also derives from his analysis on the major “Ethereum killers” on the market. Ethereum has the largest number of developers compared to other L1 protocols, while This Price / Developer Ratio shows that Ethereum has the lowest score among all competitors.
“Ethereum has approx. 4,000 developers, which is 3 times more than the chain with the second largest developer cohort, Polkadot, which has the second largest developer cohort.
Also, looking at the Price / TLV & Price / Address Ratio, Hayes concluded that Ethereum is the least expensive, with concrete performance that positions itself as a great investment against other smart contract platforms.
Expecting ETH to significantly outperform any L1 chain promoted as faster and cheaper than Ethereum, Hayes set the price target for Ethereum in 2022 at $10,000.
