- Ren Yu Kong is a DeFi portfolio manager at digital asset hedge fund BKCoin Capital.
- According to Kong, current investment opportunities include staking solutions such as Rocket Pool and Lido.
- The Ethereum mainnet merge is tentatively scheduled for September 15th, according to the developer.
According to Messari, the cryptocurrency market continues to show signs of resilience, with Ether and Bitcoin up 41% and 14%, respectively, last month. Even amid contagion concerns from the downfall of major industry players like hedge fund Three Arrows Capital despite the Federal Reserve’s attempts to combat inflation, major tokens are more has gained traction.
Ren Yu Kong, a 25-year-old DeFi portfolio manager, says one of the drivers of this rise is Merge, the much-anticipated upcoming upgrade to the Ethereum network.
Kong, who will manage the upcoming DeFi fund at digital asset hedge fund BKCoin Capital, told Insider: “Crypto will never be completely decoupled from equities and traditional markets, but merging is definitely a very strong story right now.”
The merge, the first of five planned upgrades on the network, will move Ethereum from a more energy-intensive proof-of-work concept to a proof-of-stake model. According to a statement from the Ethereum Foundation, this is due in mid-September and will “prepare for future scaling upgrades, including sharding,” reducing energy consumption by about 99%. Addressing the environmental impact of blockchain could also lead to an influx of both institutional capital and retail participation in the ecosystem.
Kong believes the first obvious purchase is ETH itself. But what else?
Staking and scaling solutions as buying opportunities
Kong said tokens associated with staking solutions such as Lido (LDO) and Rocket Pool (RPL) could offer significant advantages to Merge.
Lido allows owners to earn passive income through staking. Or you can validate transactions or contribute to the blockchain to make it safer and more efficient. Token investors can generate yield without selling their holdings. According to Kong, Lido has the maximum liquidity available as a staking solution in case an investor wants to get rid of his staked ETH position quickly. (His Lido Locked Total Value, or TVL, which measures the amount of user funds deposited in DeFi protocols, is $1.5 billion.)
The second is the Rocket Pool. This is his second largest staking provider after Lido who offers his APR of 4.03% on average in ETH2 staking. Essentially, Merge should create a more robust industry for staking, benefiting both RPL and LDO token holders.
“Rocketpool is one of the most decentralized staking solutions.We stake less than 5% ETH compared to Lido, but we have 47x more nodes than Lido.” It’s definitely a very interesting opportunity and should have a huge advantage as more people stake ETH.”
Kong said tokens related to Ethereum scaling solutions such as Polygon (MATIC) and Optimism (OP) could also be attractive investment opportunities. Both are Layer 2 built on Ethereum, but Smarthe has cheaper gas rates and shorter transaction times than contract networks.
“With Ethereum’s ‘rollup-centric roadmap’, optimists could benefit from merging. It gives rollup hands scalability,” Cointelegraph previously reported.
While the merger won’t affect transaction throughput or lower gas prices, Kong said the upgrade’s “narrative is strong enough to push token prices higher.”
“Vitalik and the Ethereum Foundation have made Rollup a key component of their scaling solution for Ethereum. There are several reasons to be excited about Polygon. We have one of the strongest business development teams in the space,” Kong said. “Scaling solutions using rollups like Optimism are also exciting, as there are some innovative protocols that are seeing increased user activity and strong developer ecosystems, even in challenging market conditions.”
Fundstrat executive Sean Farrell touted OP, MATIC, RPL and LDO as “high beta play” in a recent memo to clients.