Bitwise Chief Investment Officer Matt Hougan released a compelling investor memo titled “Washington Awakens: This Is What Alpha Looks Like,” predicting a monumental shift in the crypto market influenced by changing regulatory landscapes, potentially surpassing the impact of BlackRock’s foray into Bitcoin and altcoins.
This Crypto Development Is Bigger Than BlackRock
In his memo, Hougan outlines the significant, yet underappreciated shifts in Washington D.C.’s attitude towards digital assets. “Few outside the crypto bubble seem to notice Washington’s evolving attitude toward crypto. That could spell alpha,” Hougan writes, pointing to the recent bipartisan movements in US legislation that signal a warming stance towards digital assets.
Alpha signifies an investment strategy’s ability to outperform the market, often reflecting an edge or advanced insight. Hougan, leveraging his experience managing the world’s largest crypto index fund, argues that understanding nuances in regulatory changes could be the key to unlocking such alpha.
The memo details recent legislative actions, such as the House vote on May 8, where 21 Democrats sided with Republicans to repeal SEC’s SAB 121, a regulation that hinders large banks from handling digital assets. Additionally, on May 20, a notable 71 Democrats joined 208 Republicans to support FIT21, a comprehensive bill favoring oversight by the crypto-friendly Commodity Futures Trading Commission (CFTC).
These actions, however, face challenges, highlighted by President Biden’s recent veto of the SAB 121 repeal, marking a setback in the legislative process. Despite this, Hougan remains optimistic about the evolving political climate. “We’ve been sailing upwind for a decade in crypto. Finally, the winds have started to change,” he states.
Hougan’s memo also underscores the significant surprise approval by the SEC, under Chair Gary Gensler, to list spot Ethereum ETFs—a move few expected this spring, which reflects a gradual but meaningful shift in regulatory stance towards digital assets.
Highlighting the disconnect between Washington’s actions and public perception, Hougan comments, “I’ve been on the road speaking at conferences […] and, try though I might, I cannot get this story to resonate with people.” He suggests that the complexity of the situation and the indirect impact of these changes have kept them from catching the public’s eye.
Yet, the potential for substantial market movement is immense. Hougan illustrates, “Imagine, then, how much of that $20 trillion will go into crypto when the biggest barrier gets lifted.” He refers to the long-standing issue of regulatory uncertainty, consistently cited as the main hurdle by US financial advisors wary of increasing Bitcoin and crypto holdings.
Comparing the potential market movement to the entry of BlackRock into the space, Hougan posits that a full acceptance by Wall Street could dwarf the effects seen from BlackRock’s involvement. “If you think BlackRock’s move into the crypto space positively impacted the market, imagine if all of Wall Street accepted crypto as a normal part of the market,” he elaborates.
Concluding his memo, Hougan hints at a bullish future, “The market will wake up to the fact that we are in a new era for crypto, and when it does, I suspect it will move the industry towards all-time highs.” However, he notes, “But until it does, there may just be some alpha laying around.”
At press time, Bitcoin traded at $71,018.
Featured image from Shutterstock, chart from TradingView.com
