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Hayes Says He Aims to Rebalance Portfolio in Favor of Ethereum, Sets New Price Target for ETH

Fredrik Vold
Last updated: | 3 min read
Source: Adobe/Avi


Former BitMEX CEO Arthur Hayes hinted he may rebalance his investments away from bitcoin (BTC) and in favor of Ethereum’s native ETH token, arguing “a massive wall of money” will enter ETH once it is seen as an ESG-friendly, yield-bearing asset to push its price north of USD 10,000.

Writing in a new essay titled Five Ducking Digits, Hayes said that he used to have a portfolio of “50% bitcoin and 50% ether.”

However, given his view that ETH is now relatively cheap compared to the rest of crypto, he said that a more appropriate target is “25% bitcoin and 75% ether.”

Hayes said this is his preferred allocation, despite admitting that “the macro is not there,” and that both stocks and the price of ETH could fall by 30% to 50% in a coming US recession.

For bitcoin to withstand such a crash, the narrative must change from it being just a risk asset to being seen as a store of value and an inflation hedge, he said, noting that it still is “the hardest form of money ever created.”

Ether, on the other hand, “is not money,” Hayes said, calling it instead the “a commodity that powers the world’s largest decentralized computer.”

“As global real rates are deeply negative, I want to own an asset that has a positive yield in its own currency — and at the moment, that is ETH,” Hayes said, adding that “Bitcoin yields nothing.”

“Therefore, from a pure interest rate differential perspective, I should own more ETH than Bitcoin. This will change when the price of ETH sufficiently rises to incorporate future ETH cash flows,” he said before arriving at his ETH price prediction for 2022:

“When the dust settles at year-end, I believe ETH will be trading north of USD 10,000.”

The investor also explained that, in his view, ETH is “perhaps the least expensive” among the tokens from major Layer 1 smart contract platforms when viewed against the fundamental activity that is taking place on the platforms.

According to Hayes, ETH is fundamentally cheaper than both Solana’s native SOL token and Polkadot’s DOT, and is much cheaper than Cardano’s ADA token, which Hayes opined trades “purely on hopium.”

“If you are a capital allocator who either already holds some of these coins, or has to choose which smart contract layer-1 coin to invest in, wouldn’t you want to buy the cheapest one,” the former exchange CEO said.

He added that he expects to see ETH “significantly outperform” tokens from other competing Layer 1 chains that refer to themselves “faster and cheaper” than Ethereum.

“That narrative worked from 2020 to the end of 2021, but now Ether supports extremely positive price fundamentals from a flow of and return on capital basis,” he said.

Hayes further noted that the ESG (environmental, social, and governance) narrative around ETH will drive more investors into the asset, as the network transitions to the less energy-intensive proof-of-stake (PoS) consensus mechanism.

“A massive wall” of ESG compliant money will come from more traditionally-minded investors, as investment advisors finally start to pitch ETH as something more like a bond their clients can invest in,” Hayes predicted.

“There is a significant amount of money managers that would like to allocate to ‘crypto’ […] but the proof-of-work consensus mechanism is considered energy wasteful,” he wrote in the essay.

Moreover, another reason more activity may move back to Ethereum from its competitors is the vulnerability of inter-blockchain bridges. This was demonstrated with the recent hacking of a bridge connecting the Ronin sidechain to Ethereum, where attackers got away with over USD 600m.

“If traders tire of worrying whether their bridge will be the next to implode, they may just migrate their TVL [total value locked] and business back to ETH,” Hayes wrote, noting that this would be negative for network’s competing with Ethereum.
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