Arthur Hayes, co-founder of BitMEX: “My target allocation is 25% bitcoin and 75% ether”

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Thursday, March 31st), Arthur Hayesco-founder and former CEO of crypto derivatives exchange BitMEXtalked about Bitcoin and Ethereum, and specifically the portions of his crypto portfolio allocated to these two cryptoassets.

In his blog postHayes explained why he is currently more bullish on Ethereum than Bitcoin:

My crypto wallet at the start of 2022 was 50% Bitcoin and 50% Ether. I believe in the cheapness of ETH compared to the rest of the crypto firmament. Therefore, my target allocation is 25% Bitcoin and 75% Ether. Bitcoin becoming the biggest baddest rockstar again will require a change of narrative. Similar to Ether, Bitcoin is considered just another risky asset, but it’s a great risky asset because it trades 24/7 and is the only free market left in the world.

Bitcoin should again be seen as a store of value and a hedge against inflation, as it is the hardest form of money ever created. Ether isn’t money – it’s a commodity that powers the world’s largest decentralized computer. As I explained in “Yes, I have read the white paper”the Ethereum community has clearly decided that ETH is a commodity used to power this computer, and not a pure monetary instrument.

Bitcoin has no implied return in terms of BTC at the protocol level. After the merger, ETH will. Therefore, Bitcoin is money and ETH is a commodity bond.

Since global real rates are deeply negative, I want to own an asset that has a positive return in its own currency – and right now, that’s ETH. Bitcoin earns nothing. Therefore, from a pure interest rate differential perspective, I should own more ETH than Bitcoin. This will change when the price of ETH increases enough to accommodate future ETH cash flows, due to the new rewards and validation system. And finally, ESG muppets will be able to “safely” invest in ETH after the merger, but not in Bitcoin.

Hayes also compared to his competitors (like Solana):




Hopefully the previously released charts clearly demonstrate that ETH is trading low based on network fundamentals, while its competitors are trading on a brighter future. Again, competing L1s can achieve their dreams of dethroning ETH, but they’re not there yet.

With the upcoming implied yield of ETH and the possibility for ESG investors to allocate to ETH, it will be very difficult for investors to keep their hopes up. Better they trade something that they can justify as “cheap” at a fundamental network level.

A final note on bridges to nowhere. The Wormhole and Ronin (Axie Infinity) bridges lost user funds to the tune of nearly $1 billion worth of ETH, other cryptos, and stablecoins. At their core, these bridges are the ecosystems attempt to import all of the amazing dApps built natively on ETH onto the faster and cheaper Ethereum killer blockchains. If traders tire of worrying about whether their bridge will be the next to implode, they can simply migrate their TVL and business to ETH, which, at the margin, is negative for any competing L1.

As for his price target for $ETH by the end of 2022, Hayes had this to say:

I wrote an article years ago where I predicted that ETH would become a 2-digit US dollar coin. This happened for a short while. I then backed the truck into ETH when I saw a graph showing that the total value of dApps built on Ethereum was greater than the market value of ETH itself. It was a screaming buy signal.

I have gone through the current highs and lows and am very happy with the relative size of my ETH allocation within my crypto portfolio. The rest of 2022 will be the year of the ERC-20 angels led by His Highness Vitalik. When the dust settles at the end of the year, I believe ETH will be trading north of $10,000.

Warning

The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing in or trading crypto-assets involves the risk of financial loss.

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