Bitwise CIO on why this bull market is stronger than it looks

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show that starts off as a stranger and pretty quickly feels like one of the gang. It's Thursday, May 15th. We are live from Consensus, sitting down with our good friend Matt Hogan, CIO of Bitwise to bring you guys up to speed on what is happening at this massive conference here in Toronto. Very exciting to see a Canadian crypto conference. Also, of course, we're going to talk macro. We're going to talk markets. try to make sense of all the madness and all the noise and see if where where Matt thinks everything is going. Before we jump in, today's episode is brought to you by Lein. Get cash without selling your Bitcoin. It's also brought to you by Coin Shift, powering top crypto treasuries with their yield bearing stable coin, CSUSDL. Matt, how you

doing? Welcome to the show. Thanks for having me. So excited to be here in person. You know, I can tell you just arrived today at the conference because your voice sounds much better than mine. I think you're right. Yeah, you've been there's been a lot of chatter nights and you know I've got two days and two nights of conference mode and it's uh so Paul I hope you can all hear me as well as you can hear Matt. That sounds right. Okay, Matt, let's start off with we've been going through a few months here of everybody kind of basically taking a pause on markets and trying to just understand macro. It was like we all turned in these macro experts, right?

Trying to make sense of Trump, trying to make sense of tariffs, right? trying to make sense of what Powell is going to do next. Where how do you frame macro now in your mind? Does it matter? Are you paying close attention to it? Are we do you think we're past? Are you worried about a recession? There's so much talk here. How how are you positioning it? Yeah. So, I I I think macro doesn't matter unless we're at the extremes. The reason we've been focused on it over the last few months is we were potentially at the extremes, right? 145% tariffs, huge shock to the economy. I think we're back in a more normal space. My base case has always been that the government has outlawed recessions. And so, one way or the other, they were going to come

through with stimulus or with a reduction of tariffs or with interest rate reductions to keep things on a pretty steady path. I think that's where we are now. I think the crypto market will be driven by crypto specific factors for the next few months barring a massive macro shock which I I think we're not going to see. I think we're on a pretty normalized path now. And and when you look at the business cycle obviously there's this big this big growth scare right is that the end? Is it a growth scare? Like do you see it going beyond that? Uh again unemployment like um essentially not. I I do think history has suggested that when pushed against the wall, governments come through with stimulus. And so even if

the economy slows down a little bit, which I I'm not sure it will. I mean, maybe a point on that. Tariffs are a negative shock to the economy to be sure, but trade is not all of the economy, and it's offset by things like the rise of AI and the rise of biotech and the rise of crypto. So, I'm not sure it's so negative. Maybe it's slightly negative, but again, I think we can trust the government not to let us hit the wall. So, I'm not that worried about a growth pullback. It may get a little funky, but I don't think it's going to get bad enough to slow down the crypto train, which is like it's really nice as an investor to to to hear that and to feel that because I think it when you get into these difficult times of so

many external factors impacting markets and you feel blindsided, which I think a lot of us did feel blindsided. we are all so bullish heading into the year, right? And and Trump's delivered on a lot, you know, political views aside for crypto, he's delivered on a lot of the things that he said he would do and he's let gotten us the setup that we all wanted. So, in your view, base case, are we still in a bull cycle? You think we ended? Oh, we're we're in a huge bull cycle. I think what's happened over the last few months, you just mentioned we had all these positive crypto developments. We had positive regulatory developments. We have institutional uh investors moving into the space. Crypto is sort of at a fundamental basis in its best point ever. That's been suppressed

by the macro craziness, but I don't think it's been forgotten. And so once we remove the macro craziness, I think there's a coiled spring element. So we still think Bitcoin's going to end the year above 200,000. I actually feel stronger about that today than I did when we made that forecast in December. um you look at the fundamental data, there's a lot of buying from institutions, from governments, from corporations. I just don't think they're going to be able to keep crypto down this year. Yeah. You said, uh I remember one of your memos uh few months ago, back in March, I think that for you the people didn't really pay enough attention to the signal that was made when the US said, "Hey, we're gonna

we're going to really seriously consider Bitcoin. you're going to start a strategic reserve 200,000 Bitcoin possibly start buying like that kind of got lost. It's so crazy. We're like the whiny teenage or the whiny kid who gets a 100 presents for Christmas and is upset they didn't get the 101st. Um that's such a shocking announcement. Like if you had gone back 5 years ago and said that would have happened, you would have said Bitcoin a million and I think we will eventually get there. I also think it's actually important like one of the last existential risks to Bitcoin was that the government would ban it or seize it and instead Bitcoin co-opted the US government and if you co-opt the US government, you're going

to co-opt a lot more governments along the way. So, I think that's a great example of a really positive news story that was just suppressed and forgotten, but it's not gone away. It will come back. It will spring us forward as people realize what a big deal it is. Okay. So, feeling good about Bitcoin. Yeah. Yeah. Clear thesis on Bitcoin. Yeah. Let's put that to the side for a second. I think you and I would agree and I think most of our listeners if you don't have a good portion of your portfolio allocated to Bitcoin, you're making a mistake. Don't make that mistake anymore, right? Riskreward is just it's such it's the best. It's too good. It's too good. ETH. Yeah. Up 50%.

Let's talk about ETH, but and I want to talk more broadly about altcoins because this is the question that keeps coming up. We've all been waiting for altcoin season. We're all thinking, is it going to happen? Is this a different cycle? Are we not going to get an altcoin season? So, let's before we talk about altcoin season, talk first about about ETH up 50%. What in your view, why is it why is it up so big in the past few weeks? Well, I think it it it realized it was in a hole and it stopped digging. Uh any turnaround usually has a few positive developments and ETH did, right? They reworked the foundation leadership and put more market forward and more proactive people in charge.

Then we had the Petra upgrade which actually went reasonably well. Not perfectly but reasonably well. And you think in what is that? Do you think investors care about the upgrades? Well, I wonder how many people actually noticed the tech. I think in cryptospecific terms, I think they wanted to see ETH ship. That's true, right? They wanted to see ETH ship. So that was the switch at the foundation. The the criticism of EET was it's a bunch of academics living in La La Land while this train that is Salana just outexecutes them time and time again. So they want to see that there was a philosophical shift. They saw that when the ETH foundation changed leadership and they said the right things, but then they want to see them deliver and that's what Pectra was. Now they were on track to deliver anyway, but it's a nice

coincidence that followed that chain. I think they'll want to see them ship another uh major upgrade by the end of this year if you want this story to continue. But I think the the 50% plus move reveals that people still had their eye on ETH and they were waiting for an excuse to buy, right? Like why would you have bought ETH? It was just going down. But you're still bullish on on the asset because there's still stable coins, there's still uh real world assets and there's still, you know, aentic AI. So people were still bullish on ETH. They were just waiting for an excuse to buy and they got that excuse the combination of the leadership change and the pect upgrade. Okay. So from here as we look forward to the rest of this cycle. Yeah.

And especially for our listeners they're not just going to hold Bitcoin. Right. Right. You know our our audience that's exactly where I'm going with it. Okay. So when you let me let me frame this. You had a great comparison in your recent memo where you compared investing in non-bitcoin ass crypto assets to investing in the internet in 2004. What can we what can history teach us here? Yeah, so we went back, you know, if you go back to 2004 and you thought the internet was going to be a big deal, you might have picked the best company in the best space, which was Google. Uh search was dominant, Google was the leader, and that would have been a great investment. You'd be up 6,900%. That's pretty good. But the

internet was a general purpose technology. You could also use it for B2B software like Salesforce or you could use it for streaming video like Netflix or you could use it for shopping like Amazon. There these other use cases. Doesn't take away from the fact that Google's an incredible business and it was an incredible investment. But actually since 2004 uh Netflix is up 100,000%. Right? It's a,000x. So Google did great. It was 69x. You also could have missed a thousandx. I think the same thing is true with blockchain. Look, Bitcoin is money. It's the king of crypto. I think Bitcoin is an incredible investment on a riskadjusted basis. But you can do more with blockchains than just make money.

You can move money. You can move assets. You can move real world assets. You can do deepen. You can do DeFi. And that means there are other investments in this space which could be the Netflix. So I think every not every investor if you're only worried about fiat debasement just buy Bitcoin. But if you're if you're interested in everything blockchain can do, you need exposure beyond Bitcoin. And I think there'll be some Netflix in the list of altcoins when we look back at 5 or 10 years. Selling your Bitcoin should be a last resort when you need cash. That's why there's Leen, the trusted platform for Bitcoin backed loans. You can unlock cash in as little as 18 hours with no monthly interest payments and no

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Put your treasury cash to work earning native yield and protocol rewards built by the team behind Coin Shift which is trusted to manage over 1 billion in business treasuries on chain including a Gitcoin and hundreds of leading institutions. see why CSUSDL is gaining traction at milkroad.com/coinshift. Okay, I got a couple questions here. one is I want to talk about well I I want to talk about as you go into these altcoins how important is is timing and paying attention to the cycles because I would assume that you still we can talk about Bitcoin but so far these cycles see you

know large bull runs and then big drops in the bear and one of the dangers of going down the risk curve in crypto and from your investment portfolio is if you're not tuned in and paying attention to the cycle, then you can roundtrip your assets and a lot of our audience has made that mistake in the past. Is that still a concern for you? You have to decide which kind of investor you are. There are two kinds of investors. One is an investor who uh doesn't have time to pay attention on a day-to-day basis and they should just buy a diversified portfolio of altcoins and hold them for 10 years. Or they should buy Bitwise index or they could buy our index. They could do it themselves. they could buy, you know, not just one, they should pick 10 and just ride them forever and be comfortable with it's

going to go up and its way down. Uh, if you're a more active investor, I think you both need to think about timing. And I actually think in this cycle more than in previous cycles, you have to think about asset selection. I think in previous altcoin cycles, it has been a rising tide that lifts. I don't think we're going to see that anymore. I think investors are more focused on fundamentals. Look at what's happened in the two largest over the last two years. Salana ripped in 2024. Why? Because its fundamentals were good. Use was up. Transaction activity was up. Execution was great. Ethereum cratered. Why? For the exact reason. Why is ETH turned the corner? Because it started to improve on the fundamental basis. So, I think there'll be an altcoin season in that

this the share of the market controlled by alts will go up, but I don't think it'll be evenly distributed. So, I think there will be an opportunity for people to pick and choose. Yeah. Which I think is a great take because it history rises, it doesn't repeat itself. And I think that there's a lot of people that are waiting for that all altcoin season. Throw a dart at the board, everything goes up. And as you said, I don't think that happens in the same way as we have in the past. So, you have to be more tuned in and choose what type of investor you are. Okay. So, when we look at, okay, where where's where's the alpha? Where's the upside? I think I I I'm I'm paying attention to three categories right now. I'm looking at L1's and I'm asking an honest question

of like is the L1 trade in the past or is that still a good trade? I I I'm I'm listening to both sides right now and I'm hearing a lot of both sides. Then I'm looking a lot at the fundamentals of DeFi apps, right? that feels like an area that is kind of misunderstood still by institutional investors, has great revenues and has a real is not is not the overvalued that the L1 chain is yet. And then I also looking a lot at public crypto companies like Coinbase, Robin Hood, if you were to consider Robin Hood a public coin crypto company and then maybe some others that are coming.

Feel free to first any other buckets that you would add to that. No, I think those are good buckets. I think those are good buckets. Talk talk us through what are your thoughts on intraven? I I love it. Great framing. I think on the L1 space, I think it's going to be driven by fundamentals. And to me, what that means is we may be waiting for the fundamentals to catch up with reality, right? When you look at these L1s on a revenue basis or a user basis, they need a lot of growth, right? They need a lot of growth. And so, look, I'm bullish long-term on the L1 space. I even think it's a little bit of a contrarian bet, but could it chop sideways for 9 months?

It absolutely could. Um, I think on the public company side, I think there's some real gems that are delivering enormous growth and trading at relatively constrained multiples. Yeah, I think it's actually interesting. I think the reason it trades at constrained multiples is that Trady investors are afraid of crypto and crypto investors would rather speculate on tokens. So they're like an absence of buyers and that means there's a value play in the corporate equity space. Um and they're really growing at enormous rates. You mentioned Robin Hood and Coinbase I think will be two of the largest financial institutions in the world in the next 10 years. So enormous and there's a there's a whole pipeline.

I think DeFi may be a little special actually. Uh I'm really optimistic about DeFi for two reasons. Uh one use is up right? right? We're not at all-time highs, but TVL is at all-time highs, and that's really notable. When you see that, it says something. The other is that I think DeFi tokens have have suffered from the regulatory suppression more than anything else over the last couple of years. Regulatory suppression kept institutions from using DeFi and it made DeFi tokconomics very difficult.

Now that we have a regulatory unlock, I think there's some step function in growth and those could be revalued upwards. They're incredible project. Like if you bring a Tradfi investor into A, they think it's magic. Uh, and I think you're going to see I think you could see, you know, 10x style usage growth and significant returns in the DeFi space. When you're when you're on the road and you're talking to various institutional investors, are they what what is their understanding of DeFi? Are they the Yeah. Zero? No. Zero. Zero. I wish I could say more than zero, but it's zero. Uh they understand Bitcoin.

They understand stable coins. They're starting to understand ETH, but they don't understand DeFi yet. I really mean this. Sometimes we sit down with investors. were like, "Show them how a works or show them how unis swap works and it blows their mind." Uh because it is really a magic experience. We sort of forget in crypto. We're so used to it. But if you're in Tradfi, which takes days to set up accounts, and you're like, "No, let me show you, right? You're earning yield." Um it's pretty magic. But they still have a long way to go. Okay. So, we the I just want to go back to the L1 trade for a second because the the thing that I'm really caught up on right now is

I don't think any of us need to be convinced in our audience that block general purpose blockchains as a way to transact value on online are the future. Yeah. For stable coins for for so many use cases. So there's a there is there is an LW that is going to win and is going to be the chain. How early is it? Do you think that it's going to be a salon or Ethereum? Are we we have so much block space, right? So much space. Too much block space. It's effectively free and it's and it's not I I think we're only getting more every every month. Basically, there's another chain that comes on. So like h how do you frame that in your mind? Would you just say, "Okay, I'm going to go invest in

the big ones and pick a basket of them and keep it safe and not try to pick the one winner." Is that is that the I mean, that's how we that's how we invest, right? We created an index fund. So, that's how we do it. That's how I do it in my own portfolio. I do think we're actually probably at a centralizing moment for the large chains right now because I think one of the big forces driving the growth of L1 is going to be institutions moving into the space. it is going to be RWA and tokenized assets and stable coins and it's a lot easier for JP Morgan to build on ETH than it is to build on the 12th largest L1. So I think Ethereum and Salana may increase their dominance of the space. Um that's not to

say anything against the others and and we love many of them and we own many of them. Uh I think they may need to look for applications outside of traditional DeFi if they're going to scale. I think that's if if you believe institutions are the next wave, they're going to bias towards Ethereum and Salana. Not one. I actually don't think one. I think Ethereum and Salana have a leadership slot. Okay, great. Great. Let's uh let's shift to risks for a second. Yeah. Uh one question that I'm sure you get asked and I get asked a lot is like, okay, great Jay, you're bullish. You believe that this cycle is going to go. There's a lot of opportunity here, but what's the risk? Where what could derail us?

what could put us off course. Uh, and I think the one risk that stands out right now is that legislation doesn't happen. Like it's almost like we've gotten it all of a sudden became this expectation that we were going to get it and get it soon. Get it by right. So, and now a I mean when they first said that I was like why are we setting that expectation? We're talking about the government here. Let's not put that on anybody. But what's going on right now on the ground? Are we are you feeling good? Is there No, I'm not. I'm not feeling good. I agree that this is a significant risk. Again, not for Bitcoin, but for the rest of the ecosystem. Look, stable coins should be a slam dunk. They should be a slam dunk.

They should be loved by Republicans because they're pro business. Beloved by progressives because they lower cost and increase access. Be loved by Washington because they are a way to sell a trillion dollars of of tea bills and extend dollar hedge. It should be the it should be 100 to zero in the Senate. And the fact that we went from it feels like it's certain it will pass to oh maybe it won't has me very nervous. I think if we don't get the stable coin bill, there's no way we get market structure. And if we don't get both of those, I think it's a significant risk to crypto and we might outside of Bitcoin that we might have a little bit of a choppy period. I think the market, it surprised me that ETH ripped the same week that stable

coin legislation ran into a wall. I think that was crypto not recognizing the importance of what's going on in I don't think most crypto people are paying attention to stable coin legislation. I don't think they understand it. I think a lot of them downplay it because they're so focused on the decentralization that they're thinking, well, who cares what they do? But the truth is we need to understand what they're doing. Can you just wait take us back for a second when you say the shift happened? What what originally happened with the Genius Act and then what happened last week? Yeah. So So it it passed out of committee with bipartisan support because again it appeals to Republicans and Democrats.

What happened last week is they tried to vote it through on the Senate. In the Senate, you need 60 votes out of a 100red to move something forward. And they didn't get there. They got like 48 or 49. And the reason was Democrats don't like the Trump administration's association with crypto. And so even if they agreed effectively with the policy initiatives, they shut it down and insisted on more. Yeah. It's like uh politics. It's politics against what's actually good for the world. And it's extraordinarily frustrating. Now, there is a new hope that they've changed some of the bill. They've made it harder on Tether. Maybe that will get through. I really hope it does because I think it's important to get this legislation done.

Most of our advances on the crypto side have taken place from the White House, right, which can switch. Those aren't encoded in law. That's an executive order that can be reversed by the next administration. We need legislative progress. And I do think if we don't get it, I think it I think it could be choppy for a while. What's the next milestone or the next catalyst that you're watching on that? I mean, people people say they're they're trying to bring it up for a vote again in the next 10 days. I do think it's one of those things that it doesn't age well, right? If we don't get this soon, the likelihood of getting it goes down and then, you know, the US has midterm congressional elections in a year and four months. Well, they start campaigning for that stuff in about a

month or two. So, if we don't get this through in the next few weeks, I think the chances go down. I'm still hopeful. If I had to bet, I'm still at more than 50%. But I was at 90 plus percent. Wow. And uh you just can't ever trust DC. Unfortunately. Unfortunately, it's true. It's true. But it really does matter. And I would say for the people who don't think it matters, think back to the launch of ETFs. ETFs needed regulatory approval. Plenty of people say we don't need ETFs. ETFs came in, you know, they bought $40 billion of Bitcoin and they're one of the reasons price is up.

this this real world stuff does have an impact. Fantastic. Matt, I think we'll have to keep a close eye on that. I know we're getting you back on the show in a few weeks along with uh Ryan, the Bitwise boys and really appreciate you joining us today. Thanks for sitting down. Thanks for having me. Great to see you. Thanks for listening in everybody. As you know, none of today was financial advice. Investing is risky. You should only invest where you're prepared to lose. Matt and I and the rest of the team are only here for entertainmentformational purposes only. We appreciate you listening in. We hope to see you at Consensus or the next conference. Until then, have a great day everybody. Thanks for tuning in. We'll see you back again tomorrow. Thanks for tuning in y'all. Appreciate your time and listening all the way to the end.

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