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(Kitco News) – Mitigating risk with Ethereum, in general, is the main approach that Valkyrie Investments has taken in recent months as the buzz around the upcoming Ethereum Merge has been growing across the cryptocurrency space.
Kitco Crypto recently sat down for an interview with Bill Cannon, head of portfolio management for Valkyrie Investments, to get insight into the company’s outlook on Ether and the wider crypto market ahead of the much-hyped transition to proof-of-stake.
“We really haven’t scaled back dramatically, but we are just looking at it, trying to see what is happening and what is going on with developers,” Cannon said in regards to developments related to the Merge.
“Obviously, there are great benefits to the transition, but overall, we are just being careful. We are looking at what we can do and are looking for opportunities across all platforms, across all protocols.”
The Merge is one of the biggest events to happen within the crypto sector in several years, a “generation-changing event,” according to Cannon, since “Ethereum is part of the overall growth strategy of crypto.”
As for whether or not the top smart contract platform will form the basis of the new internet, Cannon compared its evolution to that of the internet boom in the late 1990s and early 2000s, where many of the initial companies that received a lot of attention actually gave rise to a lot of smaller ones.
“People forget that on the NASDAQ 100 at the end of 2000, there was a little company called Apple. They didn’t have the IPOD or the revolutionary Mac pros back then, they were just ideas.”
Cannon suggested that we are now in a similar position and just getting started in the development of blockchain technology.
“There are so many growth and opportunities, people are enthusiastic about innovation in the sector, and I think it’s just a matter of time.” The pace of development can make it a challenge to stay up to date with all that is going on, according to Cannon, who “can’t even keep up with the news and innovations that are happening on a daily basis, if not hourly.”
“We think Ethereum will perhaps be a leader, but we’ll see what happens. People like to innovate from other things,” Cannon said.
One of the driving forces of change within the ecosystem has been an increase in regulatory actions, which have led to more institutional-backed money coming in and reshaping the landscape.
Cannon sees this as a positive development as it’s attracting more multinational corporations into the blockchain space, which will bring more use cases for the average user.
The early days of digital payment processors like PayPal and Zelle saw hesitation from the retail side of things as people were initially afraid to transact over the internet. Eventually, the public opened up to digital payments; it just took time to build trust.
“Those kinds of changes in society are slowly happening in blockchain,” Cannon said. “It’s just a matter of people having a better understanding of what blockchain can offer.”
As for now, the main focus of the blockchain sector should be to flush out bad actors, which are an issue with every growth sector that is attempting to establish itself.
The benefit of regulations
On the regulation front, Valkyrie welcomes a more transparent set of guidelines as it will help institutions better understand how to serve the blockchain community in a legal way.
“We are in favor of regulation because that implements a set of rules, a set of guidelines that all people can play under. Now the game is set, and now people can start creating because they know the rules,” Cannon commented.
For those who think that more rules and guidelines would stifle growth in the sector, Cannon objected, suggesting that it would actually have the opposite effect.
“It would make it better, make it safer for folks. That’s probably one of the key issues why some regular investors are timid, because of the lack of regulation.”
As for how crypto and blockchain can really benefit society, Cannon pointed to places like Argentina, which have been experiencing hyperinflation as of late.
“They are using crypto as their solution. They are getting their paychecks; they are getting into certain projects in crypto. All from their phones, that’s the magic part of it. That’s the innovation that did not happen before. Where people can find solutions to better their lives through a phone and applications.”
People in the U.S. and other affluent countries with functioning financial systems have yet to need these types of benefits from crypto, but they may one day in the future.
Discussions about Bitcoin being used as an inflation hedge are still “too early,” according to Cannon, who suggested that it will probably take another 3-5 years for that to become more of a reality. As for now, Bitcoin and other cryptos are seen as “more tied to risk assets” for Valkyrie.
On the topic of what comes next, Cannon pointed to the “sustained hawkish comments from the Fed,” which have taken people by surprise as a source of the currency weakness across the crypto market.
There is little reason to believe that the central bank will divert from its plans on raising interest rates unless something seriously breaks in the economy. “We do see more rate hikes, especially for this year. Internally, we are looking at a terminal rate of 4% in terms of raising rates, which is still a ways away,” Cannon said.
Midterm elections in the U.S. are also an influencing factor on the market, which could lead to “more stress in the markets in the next couple of months.”
On that front, Cannon noted that “Both parties are now realizing that digital assets and crypto are the future, or at least part of our future. They are going to be part of what society needs, some of that transparency, some of that security.”
Overall, the future of crypto really comes down to what services it can provide the average user to help improve their everyday lives.
“We are looking for utility in the sector, and we are looking for people to embrace crypto as part of their lives.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.