Hedge Fund Managers Think Ether More Like ‘Digital Tungsten’

According to Exponential Investments crypto fund managers, Ether is digital tungsten to Bitcoin's gold.

Two crypto fund managers say Ether is neither a worthy asset for investors nor a great store of value. According to a report posted June 11 by Steven McClurg and Leah Wald of Exponential Investments, Ether is a “risk-on asset” and not a reliable investment as many in the crypto community believe. 

Ethereum exploding with DeFi usage
Ethereum exploding with DeFi usage

The crypto fund managers liken ETH to “digital tungsten” rather than the digital gold which Bitcoin has come to be known as in some circles, in that the token is not stable enough against future purchasing power:

“Ethereum does not have one of the greatest value propositions of Bitcoin: predictable scarcity. Instead, the antithesis is the reality.” 

The report states that the monetary policy surrounding Ether issuance is inconsistent, making the supply of the token vulnerable to inflation and unsuitable for a store of value:

“Given Ether’s inability to adequately serve as a store of value, it remains a highly risky speculative instrument. Ether traders look to take profit from its subsequent price changes over a short time-horizon. They chase high returns, coupled with high risk. Visions of digital ingots dance before their eyes. However, these visions are formed without evidence. Like Ether, they are pure speculation.”

Wald’s and McClurg’s remarks come after a PwC report stated crypto hedge funds’ assets under management doubled in 2019 to $2 billion. 67% of those portfolios included investments in Ether.

Yet the pair conclude “Ether is both a poor store of value and a terrible cryptocurrency to speculate on.”

Grayscale Investments doesn’t seem to agree with this assessment. Cointelegraph reported on June 5 that the firm has purchased $110 million in ETH in 2020. Its Ethereum Trust totaled $290 million as of May 19.

These statements seem biased against Ethereum because they fail to even mention exploding DeFi usage. This aspect alone means strong constant demand for Ether as it is required to be spent as gas on transactions.

Bitcoin on Ethereum has exploded
Bitcoin on Ethereum has exploded

Oh and how can we forget that the most popular way to use bitcoin off-chain is on ETHEREUM! Since 2016, software engineers have worked to extend the oldest and largest cryptocurrency’s use cases through a variety of companion protocols, like the Lightning Network for payments or the Liquid Network for trading. But to date, the most popular off-chain protocols that use bitcoin (the currency, with a small “b”) run on the largest rival to Bitcoin (the network, uppercase).

In fact, Ethereum projects including WBTC and imBTC hold 70% more bitcoins than Lightning or Liquid. This is “ironic” to Camila Russo, author of “The Infinite Machine“, a forthcoming book about Ethereum, but she’s not surprised. 

Ethereum was designed to be “more flexible,” Russo explained, which allows these tokenized protocols to “thrive.” Bitcoin, on the other hand, was built “to do one thing well, which is to transfer value trustlessly and in a censorless way.” 

“Tokenized bitcoins,” as these projects are called, allow users to denominate in bitcoin when transacting in the Ethereum network’s emerging ecosystem of decentralized financial products. Instead of using ether (Ethereum’s native currency) to make loans or earn interest, for example, transactions are, in effect, made with bitcoin. 

The supply of tokenized bitcoin has grown 330% year to date!

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