Pantera Capital Believes Crypto Will Soon Shift Focus from Cash Flow.

Pantera Capital’s Cosmo Jiang: The Future of Crypto Will Be Driven by Fundamentals

Cosmo Jiang, portfolio manager at Pantera Capital, believes that as the cryptocurrency market matures, the focus will shift from speculative hype to solid fundamentals, much like traditional asset classes. Jiang’s perspective comes at a time when the industry is transitioning from a phase of explosive growth fueled largely by retail interest to one where institutional capital is set to play a pivotal role.

Jiang, a former private equity investor who joined the crypto space in 2022, argues that the current speculative nature of crypto investing, where dogecoin-inspired tokens often outperform more substantial projects, cannot persist. “If fundamental investing doesn’t come to crypto, it means we’ve failed as an industry,” Jiang told CoinDesk in a recent interview. “All assets eventually fall to gravity. The only thing that matters at the end of the day—whether in traditional markets or crypto—is cash flow.”

The Transition to Institutional Capital

The crypto market has grown exponentially, reaching a market cap of $3.4 trillion. However, according to Jiang, this growth has been driven by retail traders, and to sustain the next phase of expansion, the market must attract institutional investors. Institutional capital, Jiang explains, will only invest in projects with strong fundamentals, making cash flow a key determinant for future success.

“Institutional capital will only care about fundamentals,” Jiang said. “If we want this industry to continue growing, it needs to evolve from being driven by speculative retail interest to being supported by sound financial principles.” Jiang’s firm, Pantera Capital, currently manages about $5 billion in assets, with 75% of the portfolio locked in venture capital funds and the remainder in liquid assets.

A New Approach to Crypto Investment

Jiang’s strategy as the head of Pantera’s liquid token fund focuses on investing in publicly traded cryptocurrencies that have a clear product-market fit. For Jiang, the key questions are whether the project team has the ability to execute their vision and whether their token can capture the value generated by the product or service. While this approach might seem basic to traditional investors, it remains a novel concept within the crypto market.

“This approach might sound basic to people familiar with traditional asset classes, but in crypto, this is still not the consensus approach,” Jiang noted. “It’s how we evaluate investments in other markets, and it’s about time crypto follows suit.”

The Battle of Layer-1 Networks: Solana vs. Ethereum

Layer-1 blockchains, which form the foundation for most decentralized applications, are a major focus for Jiang. Among the most well-known projects in this space are Ethereum and Solana. While Ethereum has been the leader in smart contracts and decentralized finance (DeFi), Jiang believes it is starting to lose its edge.

Ethereum’s market cap is massive—around $435 billion—but Jiang is concerned about the network’s ability to scale effectively. Ethereum’s transition to a modular architecture, splitting tasks between layer-1 and layer-2 networks, has resulted in a more fragmented ecosystem. By contrast, Solana’s monolithic design keeps everything on a single blockchain, which Jiang believes gives it a user-friendly advantage.

“Solana’s simplicity allows it to capture more value with its native token, SOL,” Jiang explained. “In contrast, Ethereum’s value is diluted across multiple tokens and layers. Even though Ethereum has a large ecosystem, it’s starting to lose market share to Solana, and the growth numbers are telling.”

Jiang points out that Solana’s revenue growth has far outpaced Ethereum’s in recent months. Solana’s revenue has increased by 180% in the last 30 days, compared to Ethereum’s 37%. This shift in performance suggests that Solana is gaining traction, particularly in terms of active users.

DePIN and Real-World Crypto Use Cases

While Jiang sees promise in layer-1 blockchains, he is also interested in DePIN—Decentralized Physical Infrastructure Networks. These projects aim to leverage blockchain technology to build tangible, real-world infrastructure. Projects like Render Network (RNDR), which allows users to lease computing power, and Arweave (AR), a decentralized data storage network, are examples of real-world applications that could attract institutional capital.

“When I talk to institutional investors, DePIN projects are the only ones that really get them interested,” Jiang said. “These are real businesses solving real-world problems, which is exactly what will draw institutional investment.”

Memecoins and Crypto Gambling

Although Jiang focuses on fundamentally strong projects, he’s not entirely dismissive of the memecoin sector. While he wouldn’t invest directly in the tokens themselves, Jiang sees value in the platforms that facilitate memecoin trading, much like how a casino operator can make money without playing blackjack.

“I wouldn’t invest in a blackjack player, but I’ve made a lot of money investing in casinos,” Jiang remarked. He believes the memecoin ecosystem has room to grow, especially considering that the global gambling market generates significantly more revenue than the crypto space currently does.

Bitcoin’s Role and Blockchain’s Future

Despite his focus on fundamental projects, Jiang acknowledges that Bitcoin continues to outperform the broader market, with a 132% return in 2024 alone. He attributes this to Bitcoin’s maturity in its current bullish cycle, while blockchain technology as a whole remains in its infancy.

However, Jiang believes blockchain projects have greater long-term potential. “As blockchain technology scales and more users adopt decentralized platforms, the returns on projects outside of Bitcoin should eventually outpace it,” Jiang said. “Blockchain’s future lies in expanding to billions of users, and as that happens, everything else will grow faster than Bitcoin.”

Jiang’s outlook for crypto is clear: to sustain long-term growth, the industry must evolve beyond speculative investments and focus on projects with real utility and sound fundamentals. As institutional investors begin to dominate, crypto will enter a new phase of maturity, one that will be shaped by cash flow, user adoption, and real-world use cases.

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