Rahul Rai
- Rahul Rai, a 24-year-old hedge fund founder, believes ether could overtake bitcoin in the next six or so months.
- The ethereum token has the potential to "power the rails of all global finance" through DeFi use, he told Insider.
- Ether has climbed to new highs recently, and there is around $100 billion in total value locked on the network.
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Crypto hedge fund manager Rahul Rai believes the market will see ether overtake bitcoin in terms of market capitalization before the middle of next year, in what experts call "the flippening".
The native token of the ethereum network hit record highs above $4,600 this week, after CME Group, the world's largest derivatives exchange, said it would launch micro ether futures in early December.
Ether's rise was propelled by a series of developments that underscored the growing momentum in the digital market beyond pure cryptocurrencies.
Facebook recently said it would rebrand itself as Meta, in a nod to its commitment to expanding its activities in the metaverse, while metaverse gaming platform Sandbox raised $3 million in a day. Even K-pop sensations BTS are set to launch digital photocards in the form of non-fungible tokens (NFTs), thanks to a collaboration unveiled this week between their agency and South Korea's biggest cryptocurrency operator.
The ethereum network now has around $100 billion total value locked onto it, according to The Block data. Yet ethereum is still very much second to bitcoin in terms of market value. This might not be the case for very much longer, according to Rai, the co-head of market neutral at BlockTower Capital.
"I definitely think there's a really good chance for ether to surpass bitcoin. I wouldn't be surprised if it happened within the cycle," the 24-year-old told Insider.
"Very tough to predict when this cycle will end. My take is mid-next year," he continued.
Bitcoin is the number one crypto with a market capitalization of over $1 trillion, while ether is in second place with a market cap of $535 billion - meaning it's edging closer to its rival.
Two years ago, bitcoin accounted for almost 67% of the entire crypto market, but its portion has dropped to 45%. Meanwhile, ether's market share has risen from 8.5% to nearly 20%.
This year, bitcoin has hit record highs near $70,000, powered by major investors including the cryptocurrency in their portfolios as a means of diversifying their holdings and as a hedge against inflation.
"Bitcoin is a store of value, it's digital gold. And so its market cap, at most, is going to be somewhere around gold - maybe larger, because it has some properties that are better than gold. But that's roughly the benchmark you're going to use to cap its market size," Rai said.
Gold's market cap is currently around $11 trillion, according to CompaniesMarketCap data.
Rai, who sold his crypto hedge fund Gamma Point Capital for $35 million this year, said the versatility of the ethereum network would be the key attraction for developers and investors alike.
Ethereum is a layer one network that allows payments, lending, trading and staking. It enables peer-to-peer activity without a broker or bank as an intermediary. Unlike bitcoin's network, the blockchain is programmable, meaning it can run other applications such as smart contracts, NFTs and even the metaverse.
"Ethereum is trying to power the rails of all of global finance in the future, and that is a much bigger market, if it does succeed," Rai said.
"If it does succeed, and if the thesis plays out, then the market value is going to capture trillions of dollars in global activity, and that's a much bigger market than (what) bitcoin's going up (toward)," he added.