Hedge Fund Issues Bearish Call on Ethereum and Sides with BTC

Hedge fund Tetras Capital has issued a bearish call on ethereum and opined that bitcoin has more upside potential. The New York-based fund has been blessed with perfect timing, with ETH falling in BTC terms following the publication of its report 24 hours ago, while bitcoin has rallied strongly.

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Tetras Capital Gives Ethereum the Thumbs Down

Single-handedly, no investment fund can commandeer the market and short a particular asset. But by issuing an unequivocally bearish call, it can capture the attention of other traders and attempt to convince them of its wisdom. Convert enough of them, and it might be sufficient to make the pessimistic prediction come true. That seems to have been the intention of Tetras Capital, who caught the headlines on Monday after publishing a “Bearish Thesis” on ethereum.

A blog post outlining the fund’s reasons for going short on ETH linked to a comprehensive 42-page report that detailed its case in forensic detail. Tetras Capital was hoping for headlines and its wish was quickly granted. Not only has the hedge fund’s proclamation gained traction, but so far, its call appears to be bearing fruit. Every single crypto asset in the top 100 has rallied in the last 24 hours, with bitcoin predictably leading the charge. Ethereum has slipped in BTC terms, however, dropping from around 0.072 at the time of Tetras Capital’s report to 0.0684 BTC at the time of publication.

Long on Bitcoin, Short on Ethereum

“Just as ETH benefited from irrational exuberance, it will inevitably suffer further as the market sobers up,” claims the hedge fund, before continuing:

We believe that ETH’s current price is still significantly overvalued; still significantly decoupled from the Ethereum network’s current and near-term technological state. Our research has led us to believe that the market and technology is still far too immature to justify current valuations. This nascent asset class has taken off due to speculative narratives, and we believe that the current marketplace is not sophisticated enough to properly evaluate risks or general economic concerns.

In setting its stall firmly in the anti-ETH camp, the New York hedge fund is going against the predictions of ethereum maximalists such as Coinbase CEO, Brian Armstrong, who is firmly in Team ETH. Even Vitalik Buterin has been forced to concede that ethereum has had its problems of late, noting that $15m has been wasted on gas recently due to network spam which has caused ETH fees to surpass those of BTC.

Making Bearish Predictions is Good for Publicity

Bill Ackman

There’s a history of investors making very public calls to short particular assets, and in doing so going against the prevailing market sentiment at the time. Legendary hedge fund manager Bill Ackman, for example, tried shorting Herbalife for years, before eventually calling off his long-running campaign, at great expense to his wealth and reputation. Tetras Capital will be hoping for a greater ROI from shorting ethereum, be it literally or symbolically by putting the bulk of its assets into BTC instead.

The hedge fund’s bearish forecast finishes: “We believe the coming months will be extremely telling for Ethereum’s future. Network strain (from Dapp usage), competition (from alternative Dapp platforms), and regulation (towards ICOs) will test the speculative hype and price of ETH.”

Do you think Tetras Capital is right to be bearish on ethereum? Let us know in the comments section below.

Images courtesy of Shutterstock, and Tetras Capital.

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