Pantera Capital’s Cosmo Jiang: Crypto Must Evolve to Focus on Fundamentals
Cosmo Jiang, portfolio manager at Pantera Capital, is predicting a shift in cryptocurrency investing, one that will prioritize fundamentals as the market matures. While the cryptocurrency landscape has largely been driven by speculative interest, Jiang believes that to sustain its growth, the market must move toward a more traditional investment approach, much like the stock market.
Jiang, who transitioned into the crypto space from a career in banking and private equity in 2022, argues that the era of blindly investing in meme coins or unproven projects will eventually end. “If fundamental investing doesn’t come to crypto, it means we’ve failed,” Jiang said in a recent interview with CoinDesk. “Over time, all assets must follow the laws of gravity. Cash flow is the only thing that matters at the end of the day.”
The Role of Institutional Investors
According to Jiang, the crypto market’s initial explosive growth was largely fueled by retail traders, but the future success of the industry will depend on attracting institutional capital. Institutional investors, he argues, will only invest in crypto projects that demonstrate clear value through their fundamentals—especially cash flow.
“Retail investors have driven crypto to its current $3.4 trillion market cap, but to keep growing, we need institutional investors. And institutional investors only care about fundamentals,” Jiang emphasized. “If we want this market to evolve, it has to be supported by sustainable business models, just like any other asset class.”
Jiang manages Pantera Capital’s liquid token fund, which focuses on publicly traded crypto assets. The firm has roughly $5 billion in assets under management, with about 75% of that allocated to venture investments. His strategy involves targeting crypto projects that have a proven product-market fit and significant demand for their services.
A Focus on Product-Market Fit
Jiang’s approach to investing centers on identifying crypto projects that address real-world needs and have strong teams that can execute their vision. “We look at whether the team can deliver their product and whether the token can capture value from the network,” he said. “This is the way we evaluate investments in traditional asset classes, and it’s time the crypto market adopts a similar approach.”
This emphasis on fundamentals might seem like common sense to investors in traditional markets, but it is still a minority perspective within the crypto space. “In crypto, this method is non-consensus,” Jiang noted. “But in traditional finance, it’s the foundation of how we evaluate investments.”
Ethereum vs. Solana: A Shift in Market Dynamics
When it comes to evaluating layer-1 blockchain projects, Jiang is particularly focused on Ethereum and Solana. Ethereum, while still dominant, is starting to show signs of stagnation, according to Jiang. Although Ethereum remains the leader in smart contracts, the network is facing challenges in scaling effectively and attracting new users.
In comparison, Solana has been gaining momentum. “Solana’s revenue growth has outpaced Ethereum’s in recent months,” Jiang pointed out. “While Ethereum’s revenue has grown by 37%, Solana’s has increased by 180%. And this has made a significant difference in the annualized revenue numbers.”
Jiang is particularly impressed by Solana’s growth in daily active users, which has surpassed Ethereum’s in recent months. He notes that Ethereum’s modular design—splitting tasks between the base layer and layer-2 solutions—has created a fragmented ecosystem, while Solana’s monolithic design keeps all transactions on a single blockchain, making it easier for users to interact with.
“Solana’s design allows it to capture more value with its native token, SOL,” Jiang said. “Ethereum, on the other hand, spreads its value across multiple tokens and layers. Solana is catching up to Ethereum in terms of revenue, even though its market cap is still much lower.”
DePIN: The Future of Blockchain
Jiang is also looking beyond layer-1 networks to decentralized physical infrastructure networks (DePIN). DePIN refers to projects that aim to use blockchain technology to build real-world infrastructure, such as decentralized data storage or computing power rental. Projects like Render Network (RNDR) and Arweave (AR) are key examples of DePIN, and Jiang sees them as major opportunities for investment.
“When I speak with institutional investors, DePIN projects are the only ones that really get them interested,” Jiang said. “These projects are solving real-world problems and have clear business models that make them appealing to investors.”
Memecoins and Crypto Ecosystem Growth
While Jiang is focused on investing in fundamental projects, he acknowledges the role of memecoins in the broader crypto ecosystem. He is not necessarily bullish on memecoins themselves but sees value in the platforms that facilitate their trading.
“I would never invest in a blackjack player, but I’ve made money investing in casinos,” Jiang explained. “In the same way, I’m interested in the platforms that enable memecoin trading, even if I wouldn’t invest in the coins themselves.”
He believes that while memecoin trading currently represents a small portion of the market, it has the potential to expand, especially as the global gambling market continues to grow. The revenue generated by memecoin platforms like decentralized exchanges and trading bots could become more significant over time.
Bitcoin’s Future and Blockchain’s Potential
Despite focusing on fundamentals, Jiang acknowledges that Bitcoin continues to outperform other assets in 2024. However, he believes that blockchain technology, as a whole, has greater long-term potential. “Bitcoin may be leading the market now, but as blockchain reaches more users and scales, other crypto projects should outperform Bitcoin in the long run,” Jiang said.
Jiang is optimistic about the future of blockchain and its ability to reach billions of users. “If blockchain scales as expected, everything else will grow much faster than Bitcoin,” he concluded. “The future of crypto is not just about Bitcoin, but about the entire ecosystem maturing and finding real-world use cases.”
Jiang’s strategy for Pantera Capital is clear: the focus must shift toward projects that demonstrate real-world value, are backed by strong teams, and have a clear path to profitability. As the crypto market matures, fundamental investing will become the new standard, ensuring the industry’s long-term sustainability.
