- Cryptocurrencies have enjoyed a breakout year that was full of twists and turns.
- Brian Mosoff, the CEO of Ether Capital, shared five crypto-market trends he has a close eye on.
- Solana and ether may be great long-term bets, but the latter may struggle early next year, he said.
A once-in-a-generation investing phenomenon is underway, as evidenced by the explosion in popularity of cryptocurrencies, digital artwork, and virtual real estate over the past year and a half.
What’s next for this revolution, however, is up for fierce debate.
Brian Mosoff, the CEO of Ether Capital, a firm that hoards cryptocurrencies like ether, sees another big year ahead for crypto, though he acknowledged that 2022 would have its up and downs.
In a recent interview with Insider, Mosoff identified five trends set to define the year ahead: the rise of solana, more volatility for ether, clarity about government regulation, and increasing awareness of decentralized autonomous organizations, or DAOs, and cryptocurrency staking.
Solana stands out in the altcoin pack
Bitcoin and ether have had a fantastic year, rising by 69% and 440% — but solana puts them both to shame. The so-called ethereum killer facilitates faster, cheaper transactions than ether and has grown hundredfold in 2021 to become the fifth-most-valuable cryptocurrency. Mosoff said he believes the token’s best days are ahead of it.
“I think solana is something still definitely to be watched,” Mosoff said. “There is a huge community rallying around solana. There’s an argument that they use a different programming language, Rust, which may have more flexibility or more developer support from people who aren’t familiar with Solidity, the language on ethereum. So solana, to me, is kind of the forerunner of this batch of ETH competitors.”
Mosoff said the token should continue to gain market share and had “the right ingredients in place” to be the best complement to ethereum, even if it’s not going to replace the larger token.
Solana is far from a perfect protocol, as evidenced by recent attacks on its blockchain that led to slowdowns, exposed its network’s vulnerability, and may damage developer confidence about its reliability. The attacks indicate that solana and its Layer 1 competitors “have big uphill battles” to fight before they have any chance of dethroning ether, Mosoff wrote in a message to Insider.
Ether’s biggest near-term risk? Profit taking
Ether may become a victim of its own success after quadrupling this year. Mosoff said countless crypto investors would owe taxes after enjoying massive rallies this year, which may lead to near-term
. Don’t be shocked if ether sells off early in 2022, Mosoff said, but expect it to bounce back because of high levels of “pent-up demand” for the token.
“There’s a lot of people who may not have sold into fiat ready to pay those taxes,” Mosoff said. “So in the short term — we’re talking now to the first month or so of next year — maybe there will be a sell-off. Maybe that sell-off is a market that just needed to cool off after so much run-up. Maybe it’s driven by people who literally need to sell to fulfill their tax obligations.”
Regulation rulings are vital as crypto gains influence
The rapidly developing cryptocurrency industry has gained the interest of institutions and retail investors — and, therefore, regulators. How the US government approaches crypto will be critical for investors to watch and could define the nation’s future as an innovator, Mosoff said.
“The US wants to get this right, and they recognize that the stakes are higher than ever,” Mosoff said. “Again, you’ve got a multitrillion-dollar industry. There’s over $3 trillion of crypto assets alone, aside from just the businesses and those valuations. And so they recognize that there’s an opportunity here to be the leader in the free world for this new asset class.”
Don’t expect any groundbreaking government decisions in 2022, Mosoff said, adding that before any clarity can come, the US must first determine which regulatory body will be responsible for overseeing the burgeoning asset class.
DAOs are set to be a 2022 buzzword
The rise of decentralized autonomous organizations, or digitally organized, self-run groups with no central leadership, is another top trend to watch in 2022, Mosoff said.
“More anonymous, global coordination between developers and DAOs is something you’re going to see,” Mosoff said. “The regulators, in a knee-jerk-reaction way or in an unintended way, end up stimulating or encouraging developers to be more anonymous, to exist outside of a jurisdiction that they can control. That is going to be a very tricky balancing act. But I would assume we’re going to see more activity taking place in anonymous ways.”
Big returns are at stake in staking
Staking, or the process of locking up crypto holdings in return for interest payments, will be one of the largest crypto-market trends of 2022, Mosoff said.
“As more investors become confident and comfortable with the asset class as a whole, and that it’s one that’s here to stay, they’re going to be looking for other ways to participate,” Mosoff said. “And one of them is going to be taking these historically unproductive commodities and turning them into yield-generating instruments.”
There are a few important things to know about staking. First, not all cryptos are eligible. Bitcoin, the largest cryptocurrency, can’t be staked because of its proof-of-work system, Mosoff said. By contrast, passively held ether can be staked because of its proof-of-stake system. Mosoff said returns could range from 5% to 10%, depending on how many other ether holders are staking.
Staking isn’t for everyone. Tokens must be locked up to earn a risk-free yield, Mosoff said, so holders can’t sell them if the price plummets — or if they need to raise money for taxes — without invoking a huge fee.
Also, investors need to hold 32 ether, worth $130,000 as of this week, to stake on their own — but there are ways around this. Investors can stake using exchanges as an access point when the platforms pool other users’ ether and split the yield between them, minus a fee.
Mosoff’s firm, Ether Capital, aims to be a pioneer in staking; it announced on Wednesday that it’d become the first public firm to implement staking at scale.
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