He explained to his readers why 2022 would be a significant year for Ethereum. After the transition to proof of stake consensus, he believes that the network will function as a commodity linked bond. The former CEO compared BTC to pure money that “yields no intrinsically.”
Hayes believes that Ethereum is a better investment than bitcoin and other L1 protocols which are often overvalued. The game-changer for Ethereum will be the transition that takes place in the summer of 2018.
Ethereum as a Currency Bond
BitMEx co-founder Arthur Hayes didn’t hesitate to express his deep belief in Ethereum in the most recent blog post. His target allocation for 2022 was 25% BTC and 75% Ethereum. This was after the previous allocation of 50% BTC, 50% ETH at January’s beginning.
Hayes made this adjustment because he saw bitcoin and the post-merged ETH both as money.
“ETH” is a commodity that powers the computer and not a monetary instrument.
Hayes cited Justin Drake’s analysis of Ethereum stakes, who predicted that stakers would see an APR between 8 and 11.5% following the transition. Hayes stated that for a 5-year ETH/USD bond, the price of ETH/USD would need to fall 29.35% over five years, assuming an 11.5% annual yield, in order for investors to lose their money.
Investors can sell 1-year ETH/USD forward contracts to hedge the risk of purchasing this “ETH bond”. Hayes wrote:
“The broker offered me a premium in the mid-market of +6.90%. This means that I actually RECEIVE income from my local currency ETH bond.
Hayes advised institutional bitcoin holders such as Michael Saylor to issue corporate bonds to buy BTC. Instead, they should instead issue debt and buy Ether. He believed that “a boring STONEK” who buys ETH would be labeled as a “Metaverse”, “DeFi” company and this could help boost the stock’s price. The company can also issue ETH bonds as a positive-carrying trade.
Hayes argued that ETH bonds are more environmentally friendly than proof-of work because they can attract ESG funds. They also have no regulatory concerns.
Hayes’ bullish view on Ethereum is also based on his analysis of the “Ethereum killers”. This Price / Developer Ratio shows Ethereum to have the lowest score of all L1 protocols. Ethereum also has the most developers.
“Ethereum is home to approximately. “Ethereum has approximately 4,000 developers. This is 3x more than Polkadot which has the largest number of devs.
Hayes also looked at the Price/TLV and Price/Address Ratio to conclude that Ethereum is the most affordable, with a concrete performance that makes it a great investment in comparison to other smart contract platforms.
Hayes predicted that Ethereum would outperform L1 chains that are promoted as being faster and more affordable than Ethereum. He set the price target of $10,000 for Ethereum in 2022.
Marla Brooks – Financial Analysis
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