The ‘age of tokenization’ of real-world assets is coming

There are a lot of reasons to be bullish on what’s happening with Ethereum even if you can’t unstake your ETH just yet, Ether Capital CEO Brian Mossoff said in an interview with The Block.

Mossoff says he is “bullish on Ethereum staking in 2023,” arguing that upgrades to the protocol — like the long-awaited switch to proof-of-stake and a soon-to-be-release update that will allow unstaking on the network — will potentially drive additional capital into ETH.

Ether Capital recently upped its staked ETH balance by 7,488 ETH ($11.8 million). This brings the total amount staked by the company to 28,000 ETH ($44.2 million), or about 62% of its total ETH holdings.

Despite setbacks that may have given some the impression that “upgrades are never going to ship,” Mossoff takes the position the successful Ethereum Merge should have “put those ideas to bed.”

“It’s not important if they happen on time or get delayed,” said Mossoff, adding, ”The reality is developers are in the business of shipping things when they’re going to work,” as opposed to timelines imposed by the profit-driven expectations of investors.

For its long-term goals, Ether Capital aims to stake as much as 100% of its ETH when possible, although there is “no rush to get there,” said Mossoff.

Still, the company’s capacity to provide accounting, reporting, and back office monitoring leaves Ether Capital well positioned to go “full steam ahead on ETH staking,” according to Mossoff.

Capital unleashed by The Merge and un-staking

As “one of the most important and technically complex upgrades in crypto history or in any Internet protocol,” the Ethereum Merge served as a catalyst that potentially unlocked sidelined institutional capital, Mossoff noted.

Indeed, The Merge introduced the capacity to stake ETH in lieu of proof-of-work mining as a means of consensus. However as of now, any staked ETH cannot be unstaked until a much-anticipated Shanghai goes live, scheduled for March.

Once it is possible to stake and unstake ETH, creating liquidity outside of current liquid staked ETH token offerings, Mossoff reckons that institutional perspectives of the ecosystem will begin to change. “I think that people will, from an institutional standpoint, be excited about ETH once it has liquidity,” he said.

But for some organizations, that enthusiasm has been quashed as institutions that were avidly watching for entry points into crypto may be more likely to be sidelined at present following the bust of multiple trustworthy platforms at the end of 2022, said Mossoff. This could stay the case until comfort levels return.

Diversification and self custody

For those that manage to allocate assets into crypto, Mossoff said he doesn’t expect every Exchange-Traded Fund or family office to custody their own assets and run a multi-signature contract like Ether Capital. However, at minimum, “they should be thinking about diversification.”

“There isn’t meaningful insurance in this space. I know that some custodians say that there’s insurance on the hot wallet, insurance on the Cold Wallet, but when you really start reading the terms, you realize that some of these custodians may be holding tens, you know, $30, $40, $50 billion-plus of crypto assets, but there’s only a few hundred million [dollars] of cover,” said Mossoff. This sometimes may be covered by the company’s own balance sheet.

In the case an insurer without sufficient coverage goes under, with losses in the billions, “I’m not sure that a few hundred million dollars is going to go a long way,” said Mossoff. The best form of insurance, he said, comes either via self-custody following best industry practices and procedures, or integrating multiple custodians and staking providers with a means to holistically monitor them.

What lies ahead for crypto

In the future, “there’s more likely a scenario where the businesses fail and the tokens do well over the next five or 10 years,” said Mossoff, estimating Bitcoin may trade around $100,000 with ETH trading between $5,000–$10,000.

What does the next cycle hold? “The age of tokenization of actual real world assets,” said Mossoff, meaning where those assets begin to manifest in markets like Uniswap or others like it. Amid a full spectrum of crypto-native activities, he said that banks and governments will build stablecoins and central bank digital currencies.

Mossoff doesn’t foresee Ether Capital diversifying beyond ETH in terms of crypto allocation. “I don’t see us wavering from that in terms of Treasury exposure,” said Mossoff. “I just don’t think that that’s part of our DNA.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.