Bitwise CIO: Election removes crypto’s remaining ‘reputational risk’

By admin On Ноя 12, 2024

Donald Trump’s election win, and the high number of pro-crypto Congress members set to be on the Hill, “removes the last vestige of reputational risk from crypto,” according to Bitwise Chief Investment Officer Matt Hougan.

Bitcoin’s price rise has reflected this, at least in the short term, climbing to a new peak of nearly $85,000 early Monday.

“It has still been the case, even post ETF, that in the mind of professional investors, there’s been this lingering cloud of risk,” Hougan told Blockworks last week. “You had a hostile regulatory environment, you had a [Securities and Exchange Commission] investigation every couple of weeks, you had people not certain where it was going.”

The expected regulatory clarity will drive buying, while long-time bitcoin holders are unlikely to want to sell before the $100,000 mark, Hougan added.

Many won’t necessarily need to wait to see if the Trump/GOP crypto promises are delivered on, Hougan argued — given the explicitness of the pledges and how involved the crypto industry was from a funding and lobbying perspective.

Bitcoin is harder to short given that the US could establish a strategic bitcoin reserve, Hougan noted. Other countries could also front-run such a move by the US. The executive said he expects BTC to hit $100,000 by the end of the year and move higher in 2025.

“As good as it is for bitcoin, I think it’s probably better for other crypto assets, because they’ve really been stifled by this lack of regulatory clarity,” Hougan added. “I have a high degree of confidence that will lift, and I do think that will lead to a golden age of crypto applications.”

Continue reading for more excerpts from Blockworks’ interview with Hougan.

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Blockworks: What do you expect in terms of institutional adoption of crypto given Trump’s win and crypto-friendly Congress?

Hougan: Importantly, this was a trend that was already underway. This was a trend that was happening win, lose or draw in the November election. What the election does is dramatically accelerate it, because it does remove that lingering risk.

I was on the record as saying I think crypto will do fine in either scenario, but that a Harris win would have weighed on the market, just because it would have extended the window of uncertainty. With a Trump win…that window of uncertainty is closed.

There are other major institutions that are close. You’re going to see them come in in Q3 and Q4. Anecdotally, my experience in the field is that there was a dramatic pickup in institution allocation from the start of October.

Blockworks: But the adoption pace might differ from institution to institution?

Hougan: Institutional capital…which is the thing that’s going to go from zero to a trillion dollars, just moves slower than we want.

If the head of research at an endowment saw the news and thought this is good for crypto, he can’t allocate 2% tomorrow. He has to get it on a calendar meeting, they have to have that calendar meeting, they probably need to do another one the next quarter, they bring in experts, they change the investment policy. All of that takes time.

So I do think you’re going to see institutional ownership show a step-function increase in Q4 and then I think it follows an exponential curve from Q1 onwards, just because it takes a while to play out.

Blockworks: How might the election impact your projection around bitcoin and ether ETF flows?

Hougan: Bitcoin was already shooting to end the year with $30 billion of inflows; who knows where we’ll get to. The flows have just been so massive, [and] I do think they’ll accelerate.

And I think you’ll start to see a pick-up in ETH [adoption]. But I suspect the ETH story is really still an institutional story and it still takes a while to tell. I don’t think you’ll see a dramatic pick-up immediately, but I think 2025 will be a very good year for Ethereum ETFs.

I always thought Ethereum ETFs launched too close to bitcoin ETFs and that the professional investors hadn’t yet swallowed bitcoin and were ready to deal with ETH. So the timeline was always going to be better in 2025. But now when [institutions] underwrite ETH in 2025 — when they get around to that — they’re going to be doing it within such a stronger regulatory setting.

Blockworks: And the ether ETFs gaining the ability to stake their holdings would likely increase adoption too, right?

Hougan: Staking would be great. We’ll see how that goes; it’s certainly a more dynamic discussion in a new SEC than the old one. It would definitely help, but just more broadly there’s a removal risk.

I know Ethereum was through the window — there was already an ETF — but to assume there’s no regulatory risk there was just wrong.

The SEC had mixed opinions and the applications built on Ethereum all had significant regulatory risk, and that suppressed the development of new breakthrough applications, because entrepreneurs were afraid to build. That can reverse and start to create a really exciting environment in the next 12 to 24 months.

Blockworks: What are the outstanding concerns asset allocators still have about crypto?

Hougan: There are still concerns about volatility and whether the capital asset market assumptions that you would use to model its role in a portfolio will persist, which is a reasonable concern. Crypto is only 15 years old. Modern data is only five to 10 years old. If you’re a capital allocator, how much can you trust the historical statistics when you’re looking to see how it fits in a portfolio?

There are still concerns about illicit use and headline risk, which are reasonable concerns. I think when you get beyond bitcoin and ethereum, there still are regulatory risks. Not every asset is going to be OK in any SEC administration; you look at the FIT21 bill, and there are assets on both sides of that line.

But the biggest [risk], which I think was a reputation overhang…has been significantly mitigated, if not removed. And I think we’ll get to the point where it’s reversed and it becomes weird not to have an allocation to crypto.

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