In its latest newsletter, Pantera Capital patted itself on the back for closely predicting in April 2020 the bitcoin price in January 2021. Then it looked at the fundamental differences between the 2017 bubble and the current situation. It also examined Ethereum, and found it undervalued compared to bitcoin.

One week off

Pantera Capital started its January newsletter by looking at the price movements of bitcoin since the halving in May 2020. After explaining the theoretical effects of the halving on bitcoin supply and pricing, the company presents the correlations to its predictions. Simply put, they more or less came true.

The market lagged the projected price set by Pantera by as much as 15 weeks in summer 2020. However, by the end of December, the market price of bitcoin was equal to the projection. Furthermore, by mid-January, the projection was behind by one week. 

The next date, Feb. 15, 2021, has a projected price of $45.268. The table shows prices through Aug. 1, 2021, with a peak price of $115,212 at that time.

This time it IS different – and not

After pointing to the similarities of bitcoin’s cycles based on supply and reward pricing, Pantera looked at the differences between the current boom and the 2017 bubble. The authors point in particular to the dominance of “now-proven” bitcoin and ethereum in this run. Combined, the two account for 86% of the market volume now, as opposed to roughly 50% in 2017. 

Also, the market understands the environment more clearly this time. In the prior run, the other half of the market volume was “mostly non-functioning tokens”. Pointing to the hype around the ICO projects at the time, they provide a scathing assessment. “Obviously it’s impossible to come up with 50 genius ideas each week, every week.”

Is Ethereum undervalued?

The third major theme for the co-CIOs is Ethereum’s value. Joey Krug notes that some bitcoin-related data point to an upcoming turn toward Ethereum. For example, Bitcoin dominance is at the high end of its range, which could lead to a rotation to Ethereum. He warns against comparing BTC and ETH much, though, “as digital gold and DeFi are two different things.”

At the same time, Krug states that on P/E multiples, Ethereum is low. Thus, the case for Ethereum is high. How much? Based on transaction fees, the current implied P/E multiple is 79. However, “underlying usage is growing 25x (total value in DeFi) – 100x (DEXs) year over year”.