William Cai, the co-founder of asset management firm Wilshire Phoenix, has argued that bitcoin (BTC) may not be the future of the cryptocurrency industry.
Instead, investors should pay more attention to the wave of new developers, not BTC market capitalization, in order to get exposure to the most promising projects, he says.
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Speaking to BeInCrypto, Cai said while bitcoin continues as the industry benchmark, it will not be the driving force of the entire space as several projects start to scale on their own.
He pointed to the developments in decentralized finance (DeFi) and in Web3, the new internet of the future built on blockchain technology’s idea of decentralization, as examples of this divergence.
“Market capitalisation is a snapshot of the current state of the crypto space and crypto tokens,” explained Cai, who believes that blockchains such as Solana (SOL) and Ethereum (ETH) have already started building a more solid infrastructure base for the Web3 economy compared to bitcoin.
“Similar to the stock market, looking at a stock’s current market cap by itself does not reveal much of its future potential. One should look at other metrics that can be predictive or are leading indicators,” he added.
Developer activity key
Cai said one of the easiest ways to detect emerging key platforms is by keeping an eye on developer activity.
“For the crypto space as a whole, one interesting metric is the movement or growth of developer headcount or the amount of code. This metric can help reveal where the latest interest or growth is, especially in a very noisy and volatile token price environment, ” he said.
According to a report by Santiment, the top 20 projects by aggregated development activity for 2021 included blockchains such as Cardano, Kusama, Polkadot, and Ethereum.
Developer interest in Solana was evidenced by the attendance at the blockchain’s Hackathon events, with the number of participants spiking to 13,000 last year from just 1,000 a year earlier.
Wilshire Phoenix focuses on launching new investment products
Wilshire Phoenix is a New York-based company that describes itself as “an emerging fund sponsor that focuses on launching new investment products to provide investors with more direct and efficient access to the markets.”
The outfit has previously sought approval for a bitcoin exchange-traded fund (ETF) that was rejected by the U.S. Securities Exchange Commission (SEC) in March 2020. The ETF proposed to hedge bitcoin against U.S. Treasury Bills.
The idea was that an exchange-traded fund would help retail investors gain bitcoin exposure at a low cost.
William Cai spoke as cryptocurrency markets crashed, with the total market capitalization falling more than 20% to $1.36 trillion from $1.7 trillion over the previous 48 hours, according to Coinmarketcap.
The figure is down 55% from its all-time high of $3 trillion in Nov.
Bitcoin accounts for 43%, or $589 billion, of the total market capitalization. The crypto asset tanked more than 25% to about $30,400 after the U.S. Federal Reserve raised interest rates last week to curb inflation.
Terra’s LUNA has led the rout, tumbling by over 80% to $4.25 at the time of writing, as the ecosystem’s stablecoin, UST, lost its dollar peg, dropping to $0.34.
Several people believe this may be the end for LUNA and UST. Ethereum is down by over 23% at $2,300.
“In the near future, we see the price of bitcoin continue to be an important barometer of the overall crypto space – price volatility will remain, but with upside growth potential,” Cai predicted.
Tread with caution, warns Cai
Cai, the Wilshire co-founder and managing partner, warned that while it was important to keep an eye on developer activity, some market booms are deceptive and should be treated with caution.
“One should be cautious that explosive growth areas can produce tremendous winners but also many others that will flame out to zero,” he said.
His comment brings into perspective the emerging developments at Terra [LUNA], a crypto behemoth that at some point boasted about $40 billion in value. That value has dropped spectacularly since May 9, to just about $3.1 billion.
Cai said bitcoin needs improvement in several areas. In Nov, Bitcoin Core saw its first major upgrade since 2017, which aimed to make transactions cheaper, faster, more private and more efficient.
But analysts criticized the Bitcoin Taproot upgrade as a “minor improvement to a technology that is already obsolete.” It is familiar criticism for the top blockchain and crypto, routinely rapped for being too slow, or rigid, to change at a time when competitors are making big changes and improvements to their blockchains.
Commenting on Wilshire Phoenix’s rejected bitcoin exchange-traded fund proposal, Cai maintains that the idea of such a product will improve the cryptocurrency immensely. He refused to give up.
“We strongly believe that the market deserves a better bitcoin product than what’s currently available. We continue to work with the SEC to look to provide a regulated and efficient spot bitcoin product for investors interested in bitcoin exposure,” he said.
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