Crypto was once almost exclusively the province of retail investors, but that’s changed in a big way over the past year or two.

Fund managers like Cathie Wood’s ARK Invest and venture capital firms like Marc Andreesen’s Andreesen Horowitz (a16z), Sam Bank Friedman’s Alameda Research and Olaf Carlson-Wee’s Polychain Capital have poured into the space, bringing a more professional and sophisticated eye to investing.

There’s a number of institutional investors in Australia and Stockhead reached out to them to get their take on what to expect in the new year.

Eth2 merge a ‘seminal event’ in Ethereum’s history

“I think we’re likely to see a few of the predictions that those involved in the space have been foreshadowing for years, finally start to emerge,” says David Mack, managing director of Koji Capital, a Brisbane-based crypto venture capital firm that’s invested in a number of early-stage web3 projects.

“Probably the most important of those is Ethereum scaling.”

“The biggest event to watch out for will be the ETH2 merge which is expected to land in Q1 or Q2. This will be a seminal event in Ethereum’s history and we should expect to see mainnet radically improve in functionality after the merge – I’m certainly expecting it to be a success.”

“In the last twelve months, consumer consciousness around crypto has really picked up, so we’re expecting the growth of users and user assets to expand as it has done in the last two years and if anything, far more aggressively than what we’ve experienced so far.”

“We’re really early in this ball game, so every year in crypto is set to be the biggest yet, and this year is no exception to that rule. We’re excited and committed as ever to seeing this space grow.”

A multichain future

“We believe the ‘multichain’ narrative will continue into 2022 with the notion that one chain will need to excel at the demise of another or others ‘Eth Killers; being improbable,”  says Henrik Andersson, chief investment officer at Melbourne-based crypto investing firm Apollo Capital.

Solana, Terra, Avalanche and Binance Smart Chain have enjoyed tremendous years, excelling into valuations worth 10s of billions.

“These chains will continue to grow, given innovation and applications continue in the trajectory seen in 2021.

“Ethereum, at its half a trillion-dollar valuation, will remain relevant too, with the arrival of many Layer 2s mainnets around the corner.

“Essential to a ‘multichain’ future are protocols that enable bridging of assets from one chain to another.

“Therefore, we see this use case as a substantial investment opportunity for 2022.”

Web3 gaming the next game-changer

Mark Witten, the Brisbane-based chief investment officer of Portal Asset Management, a Cayman Islands-registered crypto hedge fund with Australian operations, expects a bumpy 2022 but sees plenty of opportunities out there, especially in gaming.

“We see the likelihood of inflation causing interest rates to rise and a potential reduction in investment liquidity,” he said.

“This could cause volatility in crypto assets in the short term. Investors should remain cautiously positioned with no leverage.

“Web 3.0 continues to grow with the promise of decentralised platforms profiting and empowering individuals. The user-owned economy will most definitely outperform the monopolistic tech giants one as the risks are completely skewed in their favour.

“Gaming is the next game-changer with some 3.4 billion gamers globally, and their rate of adoption into crypto has already proven to be much quicker than any other demographic.

“We will continue to see the bifurcation of the industry as investors realise that not everything is a cryptocurrency and there are real cash-generative business models appearing via NFTs and distributed computing platforms, and especially now in the play-to-earn gaming space.”

Moving beyond BTC and Eth

Matt Harry, the head of funds with Perth-based DigitalX (ASX:DCC), which as of October 31 had $39 million in crypto-assets under management across two investment funds, expects more coins beyond the two biggest names to go mainstream.

“We expect to see continued broadening of institutional adoption of digital assets beyond just Bitcoin and Ethereum and to trickle down across the top market cap assets first,” he says.

“We also see spot based crypto ETFs proliferating, commencing very early in 2022 with Australia as one of the first movers and the shift in focus away from passive strategies to more active strategies as the market matures.”

“We expect to also see continued growth in play to earn and metaverse related assets and the silly and rather expensive fad of NFT based digital artwork ownership to fade into the background.”

“While the metaverse is not a new concept, the nature of our rapidly evolving digital worlds is, and we expect that this sector will see strong growth.”

“We now have money, identity and ownership (via NFTs) to support this world and we expect strong but still somewhat speculative rather than organic growth there during 2022.”

Metaverses on the rise

Stockhead profiled Ishan Haque back in May, after a big bet the then-21-year-old recent Queensland University of Technology graduate placed on Animoca Brands paid off big time, making him a multimillionaire.

These days the enterprising young man is in the middle of co-founding a fund to invest in metaverse properties, and as you might expect is bullish on the red-hot sector.

“My belief coming into 2022 is that more people will start to price metaverses like countries instead of stocks and the re-rating coming into Q4 21 is backing this thesis,” he told Stockhead.

“Why? Many in the space share the same belief that you cannot apply traditional value investing frameworks (used for stocks) to blockchains. If you use P/E or P/S, they look absurd (1000x+ ratios).

“The way to value these metaverses is to understand fundamentally what they are. They are communities of people that own and trade the assets within the worlds they’re ‘living’ in. Similar to a country. So what you should be really looking at is GDP growth and the value of the chain/metaverse comes from how much economic activity it supports.”

“So if the number of new wallets or transactions rise, you could expect prices to rise. There’s been people that have found a ~1:1 relationship between the growth of ‘token GDP’ and price appreciation,” Haque said.

“So if one day your grandkids will care the same if not more about their digital lives than their physical one (by working, studying, playing, socializing digitally), does that mean GDP of a city with a million people and a metaverse of a million people will be similar?”

“Starts to make $b valuations seem cheap to the ones that will onboard millions and one day, billions.”

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

At Stockhead, we tell it like it is. While DigitalX is a Stockhead client, it did not sponsor this article.

The author holds Solana and Avalanche tokens.

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