Analysts at crypto hedge fund Pantera Capital are naming two altcoin projects they’re optimistic about for the bull run.

In its latest Blockchain Letter, Pantera analysts Cosmo Jiang and Erik Lowe say they are looking for crypto projects that are gaining fundamental traction.

“Tokens [with] underlying protocols that have product market fit, are guided by strong management teams, and have a path to sustainable unit economics will perform best in the coming cycle.”

The analysts first mention Stacks (STX), a project that aims to help scale Bitcoin (BTC) and bring smart contract capability to the leading cryptocurrency by market cap.

Say the analysts,

“Stacks’ mission to bring innovation to Bitcoin is thus both exciting and timely. Interestingly, in this moment in time, Stacks is also the only live-generalized smart contract layer-2 on Bitcoin today, which contrasts with the Ethereum ecosystem where there are dozens of competing layer-2s jockeying for market share.

While there may be multiple viable Bitcoin layer-2s over time, given its first mover market positioning, we believe Stacks has a competitive edge for quite some time against any new competition that emerges – and we expect they are coming.”

Next, Pantera says that Ethereum (ETH)-based decentralized exchange dYdX (DYDX) is one to look at given its strong revenue and economics.

“One key reason we believe dYdX is interesting is that its unit economics have inflected positive over the last year. The business model is straightforward. They collect commission fees, roughly 2.5 basis points of volume, and they pay for customer acquisition costs. dYdX makes a profit of roughly one basis point of volume for a healthy 40% margin.

The second reason is that there was an inflection in capital allocation put in place late last year. dYdX began returning capital in the form of staking rewards (analogous to equity dividends) to token holders in conjunction with its v4 upgrade in December. dYdX protocol profit is now getting distributed directly to token holders, making the token value accrual concrete.”

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