- 21Shares is a leading European crypto investment firm with nearly $2 billion in assets under management.
- Its lead researcher Eliezer Ndinga breaks down the bull case for polkadot.
- He shares his outlook for a number of layer-one blockchains, including solana and cardano.
In less than nine months, crypto investment firm 21Shares has built its assets under management from $250 million in January to just shy of $2 billion today.
With spectacular growth of around 700% in assets, the firm has become one of the major players in Europe’s crypto investment market. Clients have access to investment products ranging from individual exchange-traded products to index-style funds that track baskets of crypto assets.
21Shares’ products include some of this year’s most popular crypto assets, including the stars of the most recent bull run, such as solana (SOL), cardano (ADA) and ethereum (ETH).
The ability to spot leading products investors want exposure to partly comes down to the research team led by Eliezer Ndinga.
21Shares’ research is free and independent. Investors can get insight into the outlook for the crypto market, as well as the rationale for buying into the products the company launches.
“All of these [stakeholders] need to feel comfortable that we’re actually launching a product that has an investment rationale,” 21Shares managing director Laurent Kssis said.
This transparency and accessibility of 21Shares research is one of the reasons that star stock picker Cathie Wood joined the board of the startup in May.
“We really try to research into and spot the trends that are ahead of the market coverage,” Ndinga said.
Polkadot bull case
For Ndinga, one part of the market investors are overlooking is polkadot.
Earlier in the year, the layer-zero polkadot (DOT) token rallied by as much as 440% to a record of almost $50. It’s since come back to around $33, marking a year-to-date gain of about 252%. But Ndinga thinks there’s still room to grow.
“A lot of people think that polkadot is a smart-contract platform,” Ndinga said. “It’s not. It’s an intercommunication platform that connects different blockchains with one another.”
Layer-one represents the various blockchain technologies, such as ethereum, bitcoin and solana. Polkadot is a a layer-zero protocol and will eventually be able to seamlessly connect with any layer-ones.
This is becoming increasingly important as activity starts to increase on “ethereum killer” blockchains, such as solana and binance smart chain.
“That’s why for us in the next few months is going to be very important for polkadot because they’re going to launch their main technology set in order to connect all these blockchains, [which is] parachains,” Ndinga said.
Ndinga thinks of each crypto blockchain like a startup hub. He sees ethereum as similar to San Francisco, with lots of startup activity. But there are also other busy hubs popping up, such as solana, which he compares to New York, and avalanche, which he compares to Boston.
“Ethereum has a lot of activity on, especially developer-wise,” Ndinga said. “But we see a lot of brain-drain coming from ethereum to other blockchains, such as solana, and we’re very optimistic about polkadot, because they really enable the communication between all these different ecosystems, which does not exist today.”
Most investors still don’t understand the case for buying into something like that, because they aren’t able to see the connections between blockchains happening yet, Ndinga said.
“The main upgrade for polkadot to connect all these different blockchains is going to happen over the next month or so,” Ndinga said. “And that’s when we’re going to see a lot more inflows into, for example, our polkadot ETP and obviously the underlying assets in crypto services.”
Looking at layer ones
With so many different blockchains competing for attention, it will be hard to know what the crypto landscape will look like in the next few years, Ndinga said.
He’s confident, however, that interoperability will grow and developer activity is a big component in his research process.
In the last month, competitor blockchain solana (SOL) has seen incredible investor interest, with its token surging around 363%. Though this particular “ethereum killer” is securing more developer interest, Ndinga still has confidence in the outlook for the original ethereum network.
“Most of our engineers told us that the framework used by solana is very similar to ethereum in 2016,” Ndinga said. “It’s quite glitchy, it is very, very hard to really smoothly build applications compared to what ethereum provides today. That gives us a lot of insights into how early it is for all of these layer ones ecosystems compared to what ethereum provides. That’s why we’re still bullish on ethereum, but also in other layer ones “
The layer one blockchain he likes the least is cardano (ADA), which has also seen a significant surge in interest in the last month with its token surging 75%. This largely down to the fact the blockchain has said a network upgrade will bring smart-contract capabilities with it later this month.
Based on the price-to-value ratio, which is market capitalization divided by total value locked (TVL) on smart contract platforms, Ndinga sees cardano as overvalued based on the lack of smart-contract functionality.
“So cardano with $0 in TVL, as the smart contract function is not yet available – is overvalued, because the market cap is very similar to that of ethereum in early January this year, when it had $25 billion in TVL,” Ndinga said. “And that’s why we think that cardano today is a lot more overvalued and overbought compared to what it provides for users in that vertical versus ethereum, solana, and avalanche as the smart contract functionality is already available in the aforementioned L1s.”