- Matthew Sigel is the head of digital assets research for the $81.3 billion money manager VanEck.
- Sigel lays out what he believes to be the 3 drivers fueling the crypto market’s latest bull run.
- He shares 3 competitors to ethereum, including one that could soon overtake Nasdaq’s market cap.
With the total market cap of cryptocurrencies almost doubling from as low as $1.19 trillion on July 20 to just under $2 trillion as of Tuesday, there is no denying that a bull run is in effect for the still-nascent industry.
But the latest bull market appears to be very different from the one dominated by bitcoin’s relentless ascent to a peak of more than $64,000 in April.
For starters, bitcoin (BTC) rose just 1.75% in the past week to trade above $45,000 as of Tuesday afternoon, while altcoins such as Cardano (ADA) and Ripple (XRP) were up 32.48% and 42.69%, respectively, during the same period, according to CoinMarketCap.
Underneath the altcoin-led rally, there have been three main drivers fueling the upward price trajectory in the crypto market, according to Matthew Sigel, head of digital assets research for money manager VanEck, which managed $81.3 billion in assets as of June 30.
One of the most significant drivers is perhaps the crypto industry’s unified effort against the $1.2 trillion infrastructure bill’s crypto tax provision, which mandates that crypto brokers report transfers of digital assets and includes a broad definition of broker that would encompass developers and miners.
"Not only did the crypto community insert themselves into the infrastructure bill debate, but they've also made a push to pick off a number of lawmakers on the left," he said in an interview. "I think that there is an emerging consensus that digital assets are a tool of the youth and that politicians cannot ignore that part of the electorate."
The resurgence of the NFT mania is another factor fueling the bull run. According to CoinMetrics, NFT sales on OpenSea, the largest NFT marketplace, peaked at over 60,000 per day in the last week, nearly eight times the March top.
"We are seeing every weekend $50 million in pudgy penguins sold since the launch, which just further illustrates how the youth are spending their weekends especially in the days of the Delta variant," Sigel said, "which is at home enjoying this digital creator economy."
The political developments and new use cases of NFTs, combined with the successful execution of ethereum's London upgrade earlier in the month, have all played a part in propelling the market higher, Sigel said.
3 of ethereum's biggest competitors
As the second-largest cryptocurrency, ethereum has not only performed better than bitcoin over the past year but also enabled the rise of lucrative offerings such as decentralized finance and NFTs. It is no wonder that other blockchain platforms have emerged in an attempt to solve ethereum's high transaction costs, slow speed, and other scalability issues.
In Sigel's view, the top contender that could one day rival ethereum is Solana (SOL), which is designed to facilitate the creation of decentralized applications and aims to improve scalability by introducing a hybrid of proof-of-history and proof-of-stake models.
Solana claims to be capable of supporting 50,000 transactions per second with over 200 nodes on testnets. It is also home to Serum, a decentralized exchange that was founded by crypto billionaire and FTX founder Sam Bankman-Fried. (VanEck participated in FTX's $900 million series B fundraising round.)
"If Solana can truly hit 50,000 transactions per second in a live trading environment, that type of speed could be truly revolutionary at changing the competitive dynamic versus permissioned exchanges like Nasdaq," Sigel said.
Aside from the power that comes with Solana's potential speed innovation, there is also a lack of traditional investor awareness of the ultrafast blockchain. Both factors could drive it to overtake Nasdaq's market value in the next year, according to Sigel's estimates.
Given Solana's market cap of $18 billion and Nasdaq's market value of $32 billion at the time of the interview, that could translate to a near doubling of Solana's valuation. (Solana's market cap has already soared to $20.8 billion as of Tuesday afternoon.)
Cardano (ADA), which shot up 1,384% in the past year to become the third-largest crypto, is another blockchain seeking to compete with ethereum. The network is expected to go through an upgrade that will bring smart contracts, allowing it to enable decentralized finance applications.
"I look forward to seeing the data as their blockchain rolls out this smart contract capability," Sigel said. "We want to know how widespread the adoption of their smart contracts is. At a certain point, it will require more than headlines but right now, I wouldn't be surprised if the market cap grows."
Polkadot (DOT), which was created in 2016 by ethereum co-founder Gavin Wood, has also established itself as a legitimate competitor to ethereum, Sigel said. The so-called "internet of blockchains" aims to enable different public and private blockchains to connect with each other.
In all, Sigel looked into some half dozen smart contract platforms "with the track record, size, and community engagement to perhaps someday rival ethereum," he said in a recent research report.
"The aggregate market cap of the smart contract platforms is still relatively small versus the Web 2.0 giants," he said. "With so many new projects and use cases clearly capturing investor and user imagination, we are bullish on more than one smart contract platform."