Even after its recent strong rally, the second-largest cryptoasset by market capitalization, ethereum (ETH) is “insanely cheap” and can still rally 5-10x, while bitcoin (BTC) dominance willl go down due to ETH and DeFi assets, according to Joey Krug, Co-chief Investment Officer (CIO) at US-based major crypto investment company Pantera Capital.
“It’s an insanely cheap asset compared to anything else in the public markets with that kind of growth relative to its revenue multiple. It’s not entirely crazy to see ethereum being able to 5–10x from here, especially when compared to traditional equities markets,” he said in a newsletter today.
Krug argued that ETH still trades at a price-to-sales (P/S) ratio of 40x, “which will become earnings for ETH stakers when value switches to Ethereum 2.0.”
Pantera has positioned the Pantera Liquid Token Fund around the opportunities surrounding DeFi and the Ethereum ecosystem and this fund was up 98% in January versus BTC up 15%, per the CIO.
“We think that similar to the last cycle, Bitcoin dominance (BTC’s percent of overall market cap in the space) will eventually go down into the forties again. In our view, the primary beneficiaries are likely to be Ethereum and Ethereum based decentralized finance assets, as well as eventually DeFi assets on other chains like Polkadot later in the year,” Krug said.
Today, BTC dominance hovers around 60%. It was in a range of 40% – 50% in 2017-2018.
The CIO said that DeFi assets are “only *4%* of the total cryptocurrency market cap.”
“By the end of this cycle, we think they could potentially be 20%, or a relative outperformance of 5x,” he added.
Also, he estimates that as the market gains confidence that DeFi is here to stay and isn’t a fad, multiples will go up too, and things will begin to be valued by price/revenue/growth in DeFi.
“I think multiples could expand 4–5x across the board from here. As the protocols get more liquidity and their valuations go up, they also become more useful,” Krug said, adding that Pantera believes that DeFi “is the best opportunity in the crypto space since Bitcoin and Ether themselves.”
At the time of writing (10:43 UTC), ETH trades at USD 1,769 and is down by 1% in a day, trimming its weekly gains to less than 7%. It’s up by 690% in a year. At the same time, BTC trades at USD 45,355 and is down by 3% today, but is still up by 21% in a week. In a year, the price jumped by 359%.
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