Pantera Capital’s Cosmo Jiang Predicts the Future of Crypto: Fundamental Investing Will Drive Long-Term Growth

Cosmo Jiang, portfolio manager at Pantera Capital, predicts that the cryptocurrency market is heading towards a future where fundamental investing takes precedence, marking a significant shift in how the industry operates. As the market matures, Jiang believes that the days of speculative tokens like those named after animals and internet memes will give way to a more grounded approach centered around value-driven projects.

Crypto investing has often been synonymous with high-risk speculation, where tokens of little intrinsic value have soared, simply based on hype. Yet, Jiang, a former banker and private equity investor, argues that this trend cannot last forever. In a recent interview with CoinDesk, he expressed, “If the industry doesn’t adopt fundamental investing, it will mean we’ve failed. All assets eventually follow the laws of gravity, and the only thing that ultimately matters to investors—whether it’s been in traditional markets or crypto—is cash flow.”

Jiang points to the explosive growth of the cryptocurrency market, which has surged from zero to a market cap of $3.4 trillion, largely driven by retail interest. However, for the market to continue its growth trajectory, Jiang believes it must attract institutional investors, who will only be interested in projects with solid fundamentals. “Institutional capital will only care about fundamentals. That will be the only way to sustainably grow the asset class,” he added.

Pantera Capital’s Shift to Fundamentals

Pantera Capital currently manages around $5 billion in assets, with about 75% of these funds invested in venture capital, and the rest in liquid assets. As the head of the firm’s liquid token fund, Jiang focuses on publicly traded cryptocurrencies. His investment strategy revolves around identifying projects with strong product-market fit, particularly those that address substantial real-world demands. Jiang’s approach to investing in crypto projects is simple but effective: Does the team have the ability to execute their vision, and can the token capture the value generated by the product?

“This might seem like common sense to anyone experienced with traditional asset classes, but for some reason, it’s not the consensus in crypto,” Jiang said. “This is how most people in other markets think, but in crypto, it’s rare.”

Evaluating Layer-1 Networks: Solana vs. Ethereum

Jiang has a particular interest in layer-1 networks—blockchain platforms that support smart contracts and decentralized applications. These platforms are the backbone of the crypto ecosystem, with Ethereum and Solana being the leading networks in this space.

Ethereum, while still a dominant force in the space, has shown signs of slowing down in recent months. According to Jiang, Ethereum’s growth has plateaued, with fewer new users flocking to the network. Solana, on the other hand, has seen substantial growth. The network recently surpassed 3 million daily active addresses, compared to Ethereum’s 454,000. Additionally, Solana’s revenue has surged by 180% over the past month, while Ethereum’s grew by just 37%.

Jiang is particularly impressed by Solana’s scalability and efficiency, which has enabled it to attract more users and increase its revenue rapidly. Despite Solana’s impressive performance, it still has a market cap four times smaller than Ethereum’s, presenting a significant investment opportunity for those who believe in its continued growth.

“The numbers are clear. Solana is gaining market share and Ethereum is losing it,” Jiang observed. “Ethereum has a fantastic ecosystem and roadmap, but Solana is growing much faster in terms of adoption. If you look at the revenue numbers, it’s not even close.”

Solana’s Monolithic Architecture vs. Ethereum’s Modular Approach

A key difference between Solana and Ethereum lies in their architecture. Ethereum has adopted a modular approach, splitting various network tasks between the Ethereum base layer and layer-2 solutions like Arbitrum and Optimism. In contrast, Solana uses a monolithic design, where everything happens on the same blockchain.

Jiang believes this gives Solana an advantage in terms of user experience and efficiency. Solana’s simpler design allows it to capture value more effectively through its native token, SOL. Meanwhile, Ethereum’s modular structure results in value being split across multiple tokens and layers, which makes it harder for ETH to capture the full network value. That said, Ethereum’s throughput has been increasing, which could allow it to catch up with Solana, but Jiang remains skeptical of its ability to match Solana’s rapid growth.

“Ethereum’s philosophy is to maximize decentralization, but I don’t think decentralization for the sake of decentralization is always necessary,” Jiang explained. “There’s a point at which decentralization stops adding value. Solana’s approach, while less decentralized, seems to be working better in terms of performance.”

Exploring DePIN and Real-World Use Cases

While Jiang is bullish on layer-1 networks, he also sees significant potential in DePIN (Decentralized Physical Infrastructure Networks). These projects, such as Render Network (RNDR) and Arweave (AR), aim to create real-world infrastructure using blockchain technology. Render, for instance, allows users to lease computing power, while Arweave provides decentralized data storage.

Jiang believes DePIN projects could offer real-world solutions that appeal to institutional investors. “These are businesses that people can actually get behind,” Jiang said. “They have a tangible, real-world application. That’s the kind of crypto project that will attract institutional capital.”

The Future of Memecoins

Though he focuses on more fundamental projects, Jiang doesn’t dismiss the potential of meme-driven tokens. While he wouldn’t invest directly in memecoins, he sees value in the platforms that facilitate their trading. “I wouldn’t invest in a blackjack player, but I’d invest in a casino,” he said. Jiang sees potential in the broader memecoin ecosystem, particularly in projects that generate revenue through decentralized exchanges and trading bots, noting that the global gambling market’s size dwarfs the current revenue of the crypto space.

Bitcoin vs. Blockchain Projects

Despite his optimism, Jiang acknowledges that his strategy has yet to outperform Bitcoin, which has seen a 132% return in 2024. He attributes this to Bitcoin’s maturity in its bullish cycle, while blockchain technology as a whole is still in its early stages. However, Jiang believes that blockchain projects have higher potential for returns in the long run.

“As blockchain technology scales and the market matures, the returns on other tokens will likely outpace Bitcoin,” Jiang concluded. “Over time, blockchain will reach billions of users, and everything else will grow faster than Bitcoin.”

Jiang’s vision for the future of crypto is clear: fundamental investing will dominate as institutional investors take a larger role in the market. With an emphasis on real-world use cases, efficient networks, and sustainable growth, Jiang believes that the crypto industry is poised for a new phase of maturation.