Bitwise Asset Management CIO Matthew Hougan talks with Yahoo Finance Live about cryptocurrency’s 2022 outlook, long-term cryptocurrency trends, blockchain advantage, and crypto stocks as regulations are being debated. Discuss investing in.
EMILY MCCORMICK: Welcome home. I’m Emily McCormick. You are watching Yahoo Finance specials. [? Crypto ?] Announced by Intuit Turbotax Live in 2022. And now, with us, Matt Hogan, Chief Investment Officer of Bitwise Asset Management, a true pioneer in the investment world. Matt, it’s an honor to meet you. Thank you for being with us this afternoon. First I would like to ask about the price behavior we see in cryptocurrencies.
Currently, Bitcoin is less than $ 40,000 and Ethereum is less than $ 2,700. And this, of course, comes after the record run we saw at these prices last year. But as CIO, is this latest slide relevant to you?
Matt Hogan: I always feel uncomfortable when the market goes down, but I think it’s actually going very well in the second half of the year. You see, the current pullback is driven by three things that we are trying to solve. Of course, one is the widespread market shift to the risk-off market, which is pushing all kinds of risk assets, one of which is cryptocurrencies.
I think we are on most of the path to adapting to this new reality. The second part is Biden’s presidential directive on cryptography, which will be released this week. Once you get over it, it’s a relief and a tax-related sale. So I think there is a short-term hurdle in front of us.But looking at the underlying trends, I’m very [? bullish ?] Where to go by the end of this year.
EMILY MCCORMICK: Also, where do you think Bitcoin will end at the end of this year if you have specific price targets in mind?
Matt Hogan: I want to set a price target. I think it will be quite expensive. As long as things are moving in the positive direction, we wouldn’t be surprised if we challenged and surpassed the highest ever. An example of what that means is that if the Bitcoin ETF is approved, if the results of reasonable regulation are seen from Washington, DC, and if there is a broader and more continuous positive trend regarding the institutional adoption of cryptography. If so, I’m sure it’s always new. If you look at something like that, you’ll see highs by the end of the year.
EMILY MCCORMICK: And when it comes to the price behavior we’re looking at right now, we’ve recently seen these major cryptos sold out alongside other risk assets like stocks. A two-part question here-what do you think is driving this increase in correlation? And second, does this create a bitwise issue? If you want to create an ETF that can generate returns that can outperform the market, but your holdings are also moving towards at least a wider market, does that affect your thinking about your holdings?
Matt Hogan: Oh, I think that’s a very nice question. What investors are learning about cryptocurrencies is that crypto assets are driven by two factors. First, they are risk assets. Therefore, if the market tends to be risk-off, they may not be endorsed from a short-term perspective. There are also crypto-specific drivers, right? The basic features of these types I have talked about earlier-adoption of institutions, positive regulatory advances, technological advances.
In the short term, that risk-off sentiment can overwhelm those long-term trends. And that’s what we’re looking at right now. That’s what we saw in March 2020, which sold out at the start of the pandemic. The important thing investors should keep in mind is that those long-term trends are exactly that. They are long-term trends and very powerful. Therefore, for a meaningful period of time, the correlation between cryptography and other equities and other risk assets is very low.
Only during these short risk-off periods can we see this correlation bounce back to 1. The message to investors and what we emphasize on a bitwise basis means that you need to hold on in the long run and think of these pullbacks as an opportunity to establish a new position.
EMILY MCCORMICK: And Bitcoin remains the dominant cryptocurrency by market capitalization, with the overall market value of cryptocurrencies currently below $ 2 trillion. It is also the top holding of Bitwise’s 10 crypto index funds. Do you expect Bitcoin to remain a crypto leader, or is it possible that others will overtake it?
Matt Hogan: Oh, that’s a great question. I think Bitcoin is locking the digital gold market and the non-sovereign currency market. I am very surprised to see another crypto asset overcome the Bitcoin lead. Too suitable for that particular market. You’re pointing out that this Cambrian explosion of a new crypto application (DeFi, Web3, Metaverse, NFT, all built on a non-bitcoin blockchain) is seen on the Ethereum blockchain. I think there is a Solana blockchain, such as other blockchains.
Ultimately, I think the addressable market captured by these higher performing blockchains could undoubtedly be bigger than Bitcoin. Will you get there this year? do not know. Will you finally get there? I wouldn’t be surprised. We are very bullish on that all-purpose blockchain space- [? layer ?] One space led by Ethereum.
EMILY MCCORMICK: Bitwise also has a fund that directly provides a basket of crypto assets and exposure to crypto-related stocks. What do you think will bring greater long-term investment opportunities? Is it investing in crypto stocks like Coinbase or crypto assets like Bitcoin?
Matt Hogan: You know, I love all my children equally. Take a look, we believe that the crypto asset index, which owns Bitcoin Ethereum, a diverse basket of crypto indexes, is a great way for many investors to access the market. In the long run, there are probably more opportunities in the field-more opportunities for those network protocols to really grow significantly.
But cryptocurrencies are a great way to play this market and are really easy for investors.Bitwise, ticker and other companies have access to ETFs [? BITQ, ?] With your intermediary account. I own traditional stocks. We are still waiting for Spot Bitcoin ETFs, and are probably years old from index-based Bitcoin ETFs or crypto ETFs. In the meantime, these cryptocurrencies provide a good way for everyday investors to experience the huge growth seen in the broad crypto ecosystem.
So I think it depends on what you’re looking for-accessibility, or the slightly larger, more volatile, but bigger opportunity of the crypto asset itself.
EMILY MCCORMICK: And when considering the long-term implications of the larger institutional adoption of cryptocurrencies, the latest bit-by-bit survey of financial advisors’ attitudes towards crypto assets shows that 94% of advisors increased from 81% last year to clients. Before I found out that I received a question about cryptography from. How do you think the increased allocation of client accounts to cryptography will affect the entire space?
Matt Hogan: Oh, that’s a big story. In other words, you said that cryptocurrencies are an asset class of about $ 2 trillion and are built mainly with the support of individual investors. But we know that it is only a small part of the market. It’s probably 20% of the US wealth market. Financial advisors control another 40% of the market, and institutional investors control another 40% of the market.
We are in the early stages of financial advisors moving to cryptocurrencies, but I think they will move very quickly. The percentage assigned to client accounts is increasing by more than 50% each year and is actively increasing over time. So, looking at the size of market capitalization today, 40% of US wealth still needs to enter that market, and the potential impact on prices is very important and it’s starting to happen. .. It’s happening at an accelerating speed, and I’m very excited about what that means.
EMILY MCCORMICK: Well, let’s leave it as it is for the time being. Matt Hougan, Chief Investment Officer of Bitwise Asset Management. Thank you very much for this afternoon.