- Bitcoin and ethereum may be range-bound for a while, said crypto expert Mehdi Farooq.
- The director of research at Token Metrics shared which three altcoins he’s bullish on instead.
- Each can pose a serious threat to ethereum, even if the bigger crypto survives long term.
Bitcoin and ethereum may be victims of their own success. The two largest cryptocurrencies have, in the eyes of many, legitimized digital assets over the past half decade — but by doing so they have laid the groundwork for a wave of new competitors that have built superior networks.
Contrary to what bitcoin maxis will argue, “there is definitely better tech out there,” said Mehdi Farooq, the director of research at Token Metrics, in a recent interview with Insider.
But while Farooq doesn’t see either bitcoin or ethereum logging big gains anytime soon, he also said that he’s not bearish on them because both have achieved scale, which should allow them to survive for the long term.
“Crypto is all about network effects,” Farooq told Insider. “So you don’t necessarily have to have a superior technology to achieve that. That’s why there’s a lot of emphasis on marketing.”
Large and small cryptos have, for the most part, had a dreadful year. Concerns about runaway inflation — and the Federal Reserve’s decision to quickly raise interest rates in response to it — have gripped the crypto market and are worth watching closely, according to Farooq.
“The monetary policy and the fiscal policy in the US was very loose,” Farooq said. “And now you’re going to see the Fed aggressively hike rates. And this is something that markets do not appreciate.”
What’s next for bitcoin and ethereum? More of the same
Unlike many of his contemporaries who predicted that bitcoin would top $100,000 in 2021, Farooq didn’t get carried away with his price target for the token. He told Insider in late November that he thought bitcoin would only reach $70,000 over the next 18 months — a level it had nearly hit just two weeks earlier. It has since fallen about 30% from the mid-$50,000s to $39,800 today.
Five months later, Farooq’s view on bitcoin hasn’t changed much — with one big exception: He now sees inflation as a headwind for the token instead of a tailwind. But besides that, the Token Metrics research director is still lukewarm about bitcoin compared to its altcoin peers, and said he expects it to stay range-bound between $40,000 and $65,000 over the next two years.
“I just do not see any futuristic catalyst unless markets start to price bitcoin as an inflation hedge, and we are seeing a lot of confusion there,” Farooq said.
The only significant price driver Farooq sees for bitcoin is the same reason he has a hunch that the crypto will one day be treated as an inflation hedge: the next iteration of its halving cycle, which isn’t scheduled to occur until March 2024.
Bitcoin has a capped supply, which is why some have called it “digital gold,” and the 50% reduction in new bitcoin circulated should make each token relatively more scarce, in theory. Either way, Farooq said the bitcoin halving should trigger a surge of investment in the crypto.
Ethereum, like bitcoin, has done little in recent months to make Farooq more bullish on it, even though it too has the promise of a key technical change on the horizon. Though supply for ether, the native token of the ethereum blockchain, isn’t capped like bitcoin’s is, its upcoming “merge,” or move to a
proof-of-stake
consensus, may lift sentiment in the near term, Farooq said.
However, ethereum still has “major headwinds” in the medium term, Farooq said, which is why he expects the token to trade between $3,500 to $5,000 indefinitely, like he said in November.
According to Farooq, the main reason why ethereum’s fundamentals aren’t very strong is because the upgrade to Ethereum 2.0 will affect three key parts of its network: its composability, and how it handles execution and settlement.
Composability refers to how decentralized applications on blockchains can leverage and build off of one another “like Lego blocks,” Farooq said. That may be negatively affected as ethereum shifts consensus protocols, the research director said.
“That was the beauty of ethereum,” Farooq said. “So with ethereum 2.0, you have this roadmap where you’ll have sharded architecture, and you’ll have rollup. So execution and settlement and computation all will get fragmented. And this could create issues.”
3 promising altcoins to watch
In November, Farooq shared a trio of altcoins that he saw potential in: Moonriver, Polymath, and Efinity Token.
But now, three different cryptos top the Token Metrics research director’s list heading into the summer. They’re tokens that he said he would be “scared about” as an ethereum investor, even though the larger crypto is unlikely to ever disappear.
“You’ll have different competitors that will carve out their own niches,” Farooq said.
Below are three altcoins that Farooq said he’s currently interested in, along with the symbol, market capitalization, use case, and thesis from Farooq for each. Coincidentally, all three were also top picks by Brian Mosoff, the CEO of Ether Capital, seven months ago.