Jeff Dorman, Chief Investment Officer (CIO) of cryptocurrency investment company Arca, argued that the fundamental reason for the disconnect between prices and actual adoption in the cryptocurrency market is that the largest assets by market capitalization are weak in terms of investment value.
According to Dorman, the fact that the sector relies heavily on four major assets makes it difficult for a healthy valuation mechanism to develop in the market.
Dorman criticized Bitcoin, Ethereum, Solana, and XRP, which are among the largest crypto assets by market capitalization.
Dorman stated that one of the most significant risks for Bitcoin is the quantum computing threat, adding that while a technical solution is possible, implementing such a change from a governance perspective could be difficult.
He also argued that Bitcoin is now dominated by large institutional players and has therefore ceased to be a “cool” asset. According to Dorman, the presence of alternatives in the market, such as tokenized gold, weakens the “digital gold” narrative of Bitcoin. Furthermore, he stated that the proliferation of derivative products and structured financial instruments reduces the impact of the 21 million supply limit, and that Bitcoin is no longer used as a strong hedge against inflation or a widely accepted means of payment.
For Ethereum and Solana, he pointed out the problem of high inflation and value capture. According to Dorman, the fee revenues of the networks are insufficient to offset token inflation. Furthermore, the excessive block space compared to the current usage level and the increasing competition from new layer-1 networks make it difficult for these projects to justify their current market capitalization. Despite this, Dorman stated that both Ethereum and Solana have strong potential for ecosystem growth, but this growth may not be directly reflected in the coin price.
Regarding XRP, Dorman was more critical, arguing that the token’s design was weak and that it lacked a strong direct economic connection to Ripple. He also claimed that Ripple used the billions of dollars it earned from selling XRP annually for share buybacks.
According to Dorman, the weakness of the sector’s largest assets in terms of investment means that the crypto market appeals to short-term traders and macro funds rather than investors focused on fundamental analysis. He stated that this situation increases the mismatch between crypto prices and real-world use cases.
On the other hand, Dorman also emphasized that the sector does not have an entirely negative picture. According to the analyst, the fastest growing areas for cryptocurrency and blockchain use fall under three headings: stablecoins and payment systems, decentralized finance (DeFi), and tokenization of real-world assets (RWA). He stated that projects developed in these areas can directly capture value from the actual adoption of blockchain technology.
*This is not investment advice.
