- Ren Yu Kong is a DeFi portfolio supervisor at digital asset hedge fund BKCoin Capital.
- Present funding alternatives, per Kong, embody staking options like Rocket Pool and Lido.
- Ethereum’s Mainnet Merge is tentatively scheduled for September 15, in response to its builders.
Crypto markets have proven continued indicators of resiliency, with ether and bitcoin up 41% and 14% previously month, respectively, in response to Messari. Regardless of the Federal Reserve’s try to fight inflation — and even amid contagion issues from the downfall of main business gamers like hedge fund Three Arrows Capital — main tokens have extra gained traction.
Ren Yu Kong, a 25-year-old DeFi portfolio supervisor, says one of many driving forces for this uptick is the Ethereum community’s extremely anticipated upcoming improve, the Merge.
“There’s undoubtedly a robust outlier that everybody can see and it is Ethereum,” Kong, who manages a forthcoming DeFi fund for digital asset hedge fund BKCoin Capital, instructed Insider. “Crypto is rarely absolutely decorrelated from equities or conventional markets, however the Merge is certainly a really robust narrative proper now.”
The Merge, which is the primary of 5 deliberate upgrades on the community, transitions Ethereum from the extra energy-intensive proof-of-work idea to a proof-of-stake mannequin. Slated for mid-September, this can “set the stage for future scaling upgrades together with sharding,” and can scale back its power consumption by round 99%, in response to a press release from the Ethereum Foundation. Addressing the blockchain’s environmental influence might additionally result in an inflow of each institutional capital and retail participation for the ecosystem.
Kong thinks the primary apparent purchase is ETH itself. However what else is there?
Staking and scaling options as a shopping for alternative
Kong says tokens associated to staking options like Lido (LDO) or Rocket Pool (RPL) might have enormous upside potential into the Merge.
Lido permits holders to earn passive earnings by staking — or validating transactions or contributing to a blockchain in an effort to make it safer and environment friendly. Buyers of a token can then generate yields with out having to promote their holdings. Based on Kong, Lido has the biggest liquidity out there as a staking answer within the case an investor desires to exit their staked ETH place rapidly. (Lido’s complete worth locked, or TVL, which measures the quantity of person funds deposited in a DeFi protocol, is $1.5 billion.)
Second, there’s Rocket Pool. That is the second-largest staking supplier behind Lido, which provides a 4.03% common APR for ETH2 staking. Primarily, the Merge ought to create a extra sturdy business for staking, leading to beneficial properties for each RPL and LDO token holders.
“Rocket Pool is among the most decentralized staking options, despite the fact that they’ve lower than 5% of ETH staked compared to Lido, they’ve 47 instances the variety of nodes of Lido,” the 25-year-old stated. “These are each undoubtedly very attention-grabbing alternatives and may have an enormous upside as extra individuals stake their ETH.”
Kong says tokens related to Ethereum scaling options like Polygon (MATIC) and Optimism (OP) may be engaging funding alternatives. Each are layer-2s, that are constructed on prime of Ethereum, however have cheaper gasoline charges and faster transaction instances than the good contract community.
“Optimism may benefit from the Merge because of Ethereum’s ‘Rollup-Centric Roadmap,’ which turns its primary chain right into a settlement and knowledge availability layer and locations scalability within the arms of layer-2 rollups through ‘danksharding,'” Cointelegraph beforehand reported.
Though, the Merge won’t influence transaction throughputs or decrease gasoline charges, Kong stated the improve’s “narrative is robust sufficient” to drive up token costs.
“Vitalik and the Ethereum basis have made rollups a key part of Ethereum’s scaling answer. There’s a number of causes to be enthusiastic about Polygon, one among which is their zkEVM tech that they’re engaged on and so they have one of many strongest enterprise growth groups within the house,” Kong stated. “Scaling options that use rollups like Optimism are additionally thrilling as a result of they’ve a number of revolutionary protocols which are seeing elevated person exercise and powerful developer ecosystems, even amongst the robust market situations. “
In a recent note to clients, Fundstrat exec Sean Farrell additionally touted OP, MATIC, RPL, and LDO as “high-beta performs,” which means the investments are liable to volatility, with potential for increased returns within the weeks to return.
