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Hedge Fund Pantera Says Solana Surge Shows Why This Crypto Rally Will Be Different – DL News
- Pantera Capital says Bitcoin ETFs won’t be the only cryptocurrency stock this year.
- Bitcoin’s DeFi ecosystem, halving, and tokenization will all take center stage in 2024.
Analysts at US cryptocurrency hedge fund Pantera Capital he wrote in a recent report that the cryptocurrency rally was unlikely to end despite bearish performances across the sector.
Let’s delve deeper into it.
To calm down
The cryptocurrency market has cooled since BlackRock and others launched spot exchange traded funds Bitcoin earlier this month, ushering in a new era for the industry.
Bitcoin plunged 20%, from $49,000 to less than $39,000, while Ethereum fell 16%. Solana, what outperformed on the rise, it is now 30% cheaper than its January high.
Various cryptocurrency Stocks – Coinbase, Marathon Digital, MicroStrategy – also took a hit.
Despite the headwinds, cryptocurrencies are emerging from the 2022 crash on much stronger footing than previous bear markets, Paul Veradittakit, managing partner at Pantera Capital, said in the Jan. 16 report.
His main argument?
Major crypto projects today are not fueled by pure speculation, unlike 2017.
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Party like it’s 2021, not 2017
“With hindsight, you can say that it was speculative froth and hype on unproductive tokens,” Veradittakit said. “What’s interesting about this rally is how little has changed.”
He added that while the 2022 recession has been just as tough on cryptocurrency prices as previous bear markets, it is not because cryptocurrencies are facing an existential crisis.
Instead, prices collapsed due to leverage and bad actors, Veradittakit said.
“That’s why it’s not surprising that we see the same projects coming back,” he said. “They weren’t down because they weren’t good projects, they were out of tune with the general market.”
“Solana is a particularly good example,” added Veradittakit, referring to the coin once championed by FTX co-founder Sam Bankman-Fried, who was convicted of seven counts of fraud last year.
Solana has seen a 975% increase since hitting bottom in December 2022.
Bitcoin on the DeFi tracks
Bitcoin ETFs aren’t the only things the largest cryptocurrency will make this year, Veradittakit said.
The fourth halving, which will see the network halve how much Bitcoin miners earn for maintaining the blockchain, is currently scheduled for April 2024, he noted.
Halvings have historically preceded strong rallies for the market’s largest cryptocurrency.
It can also be tough times for inefficient mining companies: with fewer rewards doled out for their work, revenue can take a hit.
Veradittakit also wrote about an increase in Bitcoin’s recently revamped programmability, which could lead to an explosion of DeFi activity on the network.
“There is clearly a huge demand for Bitcoin in DeFi,” Veradittakit said, citing the $6 billion in Bitcoin tokens packaged used on other blockchains such as Ethereum.
Ethereum I had $32 billion in total value locked in its DeFi ecosystem – about 11% of the network’s $280 billion market capitalization.
Bitcoin’s DeFi play may be catching up, he said.
“As Bitcoin’s DeFi infrastructure matures, we could potentially see Bitcoin [DeFi] rise from the current $300 million [in value locked] at 1-2% of Bitcoin market capitalization: $10-15 billion at current prices,” he said.
Veradittakit also predicted an explosion of Bitcoin NFT activity thanks in part to the rapid rise of Ordinals, the network’s approach to native non-fungible tokens called inscriptions.
“Since Bitcoin has much higher cultural recognition and memetic value, it is possible that web2 brands, such as luxury retailers, will choose to release NFTs on Bitcoin, similar to how Tiffany collaborated with Cryptopunks” in 2022.
Outperform the market
Another area of interest has been the intersection of traditional finance and crypto technology.
“TradFi assets will be ‘mirrored’ in DeFi, while crypto assets will have greater exposure in TradFi markets, thus creating TradFi-DeFi ‘bridges’ that bring these two worlds closer together for greater liquidity and diversification for investors,” Veradittakit said .
The report also covered the growth of zero-knowledge technology, specifically the fusion of zero-knowledge proofs and modular blockchains.
“In the coming year, I expect this trend to continue, with the emergence of zero-knowledge proofs as the interface between different components of the modular blockchain stack,” Veradittakit said.
“On the consumer side, zero-knowledge proofs could see an increase in use cases as a way to preserve identity and privacy, for example in the form of zero-knowledge-based decentralized IDs,” he added.
Drivers of the cryptocurrency market
- Since Monday, Bitcoin has fallen 1.36% to just under $39,000.
- Ethereum collapsed by 4.28%, to settle just above $2,200
What we are reading
Tom Carreras is a markets correspondent at DL News. Do you have advice? Please contact tcarreras@dlnews.com