- Ethereum is attractive because it can now generate a yield, said Brian Mosoff, CEO of Ether Capital.
- Its success has bred fierce competition as critics knock the network’s high fees.
- Mosoff named four altcoins to watch in the current “alt season.”
- See more stories on Insider’s business page.
A historic run for cryptocurrencies that’s recently stalled has some investors nervous that history will repeat itself and that digital assets will crash like after the blow-off top in late 2017.
But those concerns are overblown, says Brian Mosoff, CEO of Ether Capital, even as bitcoin (BTC), the leading cryptocurrency and a barometer for smaller coins, has slipped substantially from its all-time highs as China on Friday reiterated a call to crack down on digital assets.
Mosoff, a self-described “crypto degenerate,” has been in the space since 2013, which makes him a veteran in the nascent world of cryptocurrencies. He’s seen several crypto market cycles and notes that this crypto bull rally has been driven by a wave of support from non-tech-savvy individuals, corporations, and governments that’s unlikely to reverse anytime soon.
Bitcoin bulls have long-time crypto skeptic Jerome Powell, the chairman of the
Federal Reserve
, to thank for the digital asset’s mammoth 46% year-to-date run. By continually expanding the money supply, critics say Powell’s Fed has crippled the dollar’s value while making rampant inflation a threat. Bitcoin, which has a capped supply, is seen as a solution to easy Fed policy.
Bitcoin inevitably inspired legions of hopeful competitors aspiring to be the next hot coin after garnering mainstream attention in late 2020 as a store of value akin to a “digital gold.”
“Bitcoin is the gateway for everyone to enter into the space,” Mosoff told Insider in an interview. “… You’ve got bitcoin season, and then you have ‘alt season.’ And then there’s kind of this rotation of capital that goes first into bitcoin — that’s what drives these runups — and then it kind of hits these plateaus, and then that capital looks for other ways to find more leverage to the sector.”
Ether’s ‘hard to ignore’ success inspires copycats
Those looking for crypto exposure beyond bitcoin tend to find ether, the ethereum blockchain’s native token and the second-largest crypto by market capitalization. Count Mosoff’s Toronto-based firm, which prioritizes ether among the digital assets it stockpiles, in that group.
Ethereum is attractive for several reasons, Mosoff said: It’s well-established, has broad developer support, is currently the backbone of the decentralized finance (DeFi) movement that promises to bank the unbanked, and also now allows ether holders to earn passive income via returns of roughly 6%, which dwarf the interest payments that banks offer.
These steady, low-risk returns are achievable through “staking,” a process where ether holders are rewarded for locking up tokens for a set amount of time to secure the network. Ethereum staking turns previously “unproductive commodities” into yield-generating assets, Mosoff said.
“Against the backdrop of [interest] rates at zero, if you wanted to bet on crypto over the next five or 10 years, ether is a really compelling investment,” Mosoff said. “You get that hedge, that store of value, that nonpolitical-agenda asset while getting some type of return by staking it.”
Ethereum’s growing success is “hard to ignore,” Mosoff said. Naturally, competitors have taken note. A new wave of “ethereum killers” has popped up in hopes of stealing market share and capitalizing on the network’s most-criticized weakness: transaction charges called “gas fees” that critics say are unreasonably high.
A pair of crypto networks — polkadot and solana — has emerged as frontrunners in the race to be the leading alternative to ethereum, Mosoff said. But he said they’re really competing with ethereum layer 2, which is a network that runs on top of the ethereum mainnet.
Basically, ethereum has a first-mover advantage that smaller networks will struggle to catch up with even if they offer lower fees or more advanced networks. Transaction fees are far from the only relevant factor that DeFi developers must consider. Security and stability, two hallmarks of the ethereum network, are hard for competitors like solana to match — evidenced by an unexpected 17-hour shutdown that its network suffered in mid-September.
“A lot of new entrants to the market are very focused on just the transaction-fee narrative, and they’re not looking at the wider picture,” Mosoff said. “… If you can stay inside that ethereum ecosystem and remove all the friction of bouncing between different platforms, keep that capital formation into the same ecosystem, and have all the infrastructure, there’s no reason for the capital to go somewhere else.”
With that said, Mosoff isn’t an ethereum maximalist. He shared with Insider four altcoins that have promise and offered commentary for each name. Mosoff said that the only one of these altcoins he owns is polkadot.