Why Crypto Is the Next Alternative Asset Class with Hunter Horsley

Transcript

Welcome back to the rollup. I'm Robbie. >> I'm [music] Andy. Rob and I met at the University of Florida in 2017 where we first found out about digital assets. >> We learned a lot along the way and we're bringing you face to face with the leaders of our industry. >> Sit back, relax, and enjoy today's episode. >> Stoked to have Hunter on. Good to see you buddy. >> Good to meet you, man. >> Energy. >> Nice to see you. >> Good to see you. Good to meet you. Welcome to the show. >> Oh, thank you. >> How's How's Nearcon treating you? >> Trying to get on the show for years. >> Yeah. time. Pleasure. >> This guy, huh? >> Is this how all the institutions are? You come in all bowled up, like chested out or >> I'm fired up, man. I'm very fired up.

Yeah, it's very exciting time. >> Matt on last week. >> Fantastic. Yeah, that's right. That's right. >> Incredible episode. >> Yes. Yes. He's a lot of fun. He's the A team. I'm the B team. So, uh I'm sorry to be having such close succession with him [laughter] >> but Matt's Matt's fantastic. And yeah, it seemed like you guys had fun. >> Absolutely. Yeah, I mean we we were talking about a lot of the things we're talking about here which is more on the DeFi, the tokenization side of things, the institutional side. Maybe we're at Neircon. We'll talk more about the AI trade, the energy trade. All of this is happening kind of in confluence with one another. >> AI is Apple intelligence, right? [laughter] >> Right. Right. Right. Right.

>> Are you in San Francisco? Yeah. Yeah. We started Bitwise in San Francisco and then I completely lost control of the situation and so now we're 200 people and New York's the largest office and then London >> and San Francisco uh after that. So, but I'm still in San Francisco. Matt's in the Bay Area, Hong, our CTO is in the Bay Area. So, some of us out here. Yeah. >> Very cool. >> Um well, let's uh let's go a little bit off of the tokenization conversation, a little bit more of the AI conversation and just curious as far as how Bitwise is reacting to some of the things that are happening out there. We saw the Catrini article talk about 38% downside in the S&P in 2028. Um, obviously all of this capex is getting deployed now. When you guys are looking at this kind of on

the, you know, on the digital asset side and the tokenization side and looking at AI and agentic payments and all these things, what is your reaction? How do you know like what's hype and you kind of want to stay patient on versus like this is something that we want to aggressively get into because this is really fundamental to the thesis. >> Sure. Yeah. I I uh uh I heard a quote last week from uh an investor I really admire and uh he said uh when you see a freight train, figure out how to get on it and make sure you're not in front of it. And I think AI is is one of the freight trains of this moment. There there are a few others, but I think the right mindset for people to have right now is um this freight train's not stopping. Uh maybe we don't know

everything about the sequence of events to come, but how can we participate in it? I think that's the mindset of investors. I think because it's changing so rapidly and and not perfectly clear, what you see from a lot of investors is um taking risk off and saying let's let's let this unfold a little bit. So they're selling Salesforce, they're selling CrowdStrike, they're selling uh a lot of the names that you've seen um sell off over the last uh two months. So Bill Wise manages $15 billion. We serve banks, wealth management firms, large hedge funds, family offices, a broad cross-section of investors and being a partner to them and navigating the opportunities in crypto. And I think the theme across the board is this is a huge element of what they're trying to process right now. They're also trying

to process Kevin Worsh's Fed governor and what that means for rates and monetary policy, geopolitics, and a host of things, but this is one of the biggest. So um so I think it's a moment of uh uncertainty for investors but not uncertainty in in um uh in a pessimistic way in a very optimistic way but um uh you know if I said um uh if I said uh all of the all of the houses in San Francisco are about to be repainted. Uh which one do you want to buy today?

You'd say well maybe I'm going to wait a minute and see what color they get painted. Right? So, uh I think I think that's sort of the mindset which is there's a lot of optimism. Um but in this precise moment, um people are unsure exactly um the implications for everything. >> Hunter, are you using AID a lot in your personal workflows? >> I I'm I'm like I'm like the unimpressive version. I still use it like Google search. >> Okay, cool. Um at Bitwise of course the engineering team um is you know like tech leads uh managing an army of um >> uh of across codeex and and um cloud code. Um uh the biggest the biggest aperture we

found I think so far but Hong our CTO is thinking a lot about this um and a number of um people on the engineering team is um [snorts] um if you are operating a company um there are certain things you might want to automate. So imagine uh imagine you have a team that spends three hours every week on something like uh recording certain records. Um they they might say like I wish I could automate this. It would save me time.

It'd be more accurate, more reliable. Historically, one of the challenges is great, everyone would like to automate it, but if it's going to take uh an engineer a month to build the internal tool that automates that, think about how many how many weeks of three hours saved it will take to break even on a month of engineering time. With uh with the capability of AI, if you can build internal tools in three days, the break even on building an internal tool gets way tighter. So, uh, we've built a number of internal tools, uh, now that have had, um, you know, single or double-digit number of hours a week that they're saving. And I think that has been really powerful and uniquely enabled, um, by AI.

>> Um, curious how personal experience has been as as a CEO and as a founder just kind of implementing inside your company for yourself as well. I want to talk crypto. Um uh IBIT is Black Rockck's biggest most profitable product. The biggest rise of ETF or of any ETF in history now the most profitable product. Uh Bitwise has obviously gotten its toes wet ac across you know you've got this sick index ETF product. You've got all the majors other products. Uh what has been the last year and a half two years of getting into into crypto into digital assets? How much has it made an impact on your bottom line and like what's the pri uh priority look like for 2026 2027

you know if is it going to be a big focus how much talk kind of about like your broad outlook here >> sure um uh so maybe maybe I'll start at a very high level um there one of the things that makes crypto captivating and also extremely confusing is [snorts] that uh there are a lot of different communities that look at it different ways and talk about different things and you know sometimes like totally talk past each other. So you know there's a financial services community that sees a new payment rail something akin to the electronification of markets. Um there's a socopolitical community that views it as a return of sovereignty and censorship resistance. There's a technology community that sees applications and users and um uh to

provide one lens uh for Bitwise's view on the space. Uh we think that um let me tell a very brief story. Um uh an investor in Bitwise is uh Henry Kravis who started a firm called KKR. Um I was uh with him uh having lunch and so the opportunity to ask some fun questions and I asked him to tell me about the story of his first fund raise. It was in 1971 and it was a $25 million fund and he said they called it a bootstrap acquisition fund. And I said why' they call it a bootstrap acquisition fund?

I've never heard of that. And he said because I hadn't come up with the phrase private equity yet. And I kind of laughed and then I realized, you know, the big bang or God created earth, but a mere mortal had to create private equity and it probably was uh Henry Kravis. And so went on a journey from something small that nobody really knew what to call. It matured into leverage buyout, which was cavalier and risky and not for everyone, but certainly an important asset class, and eventually matured into what we know as private equity today, which has a role in a huge cross-section of portfolios. Uh in the 80s, Milin took untouchable non-investment grade bonds, turned them into junk bonds, um which people thought were cavalier and risky and not for everyone, but certainly important. And then they've matured into

high yield bonds, which now have a role in every portfolio. So, and there's other examples. There's there's alternative non-bank lending becoming credit in the 90s. Um so, the premise of Bitwise is that uh uh there are many ways to look at crypto, but one is the emergence of a new alternative asset class, and that is not a new thing. That's happened multiple times in the last 50 years. I just described a few examples to you. And that's [snorts] what's happening here. And crypto, like every alternative asset class before it, will have to go from something that's a bit of a backwater that no one's heard of and small, then it'll become something cavalier and risky and not for everyone, and then hopefully it'll earn the opportunity to be mature and have a role in every portfolio.

>> Uh, so that's the premise of Bitwise. Uh and just as KKR built on the back of pioneering private equity or Apollo or Aries on credit, um the aspiration for Bitwise is what this asset class needs uh is very different than what you need um for being a real estate investment manager. >> Yeah. >> Um so we'll purpose build for this. We'll try to play a constructive role for our clients, investors, and for the ecosystem itself. uh and hopefully um earn the opportunity to be one of uh people's favorite firms to uh invest with, partner with um and rely on for what they're trying to do in the space.

>> That was very long-winded, but that's that's sort of how how we view things. So, today we have four business lines. We have ETFs in the US. >> Yeah. >> Um BTB, our Bitcoin ETF, uh is one of the largest. BATW, our crypto index ETF, top 10 is the largest in the world. >> Yeah, that one's great. Um we have an equity ETF of crypto companies like Bullish and uh Coinbase and Galaxy and uh Bitco uh that's BITQ. So US ETFs. Then we have ETPs in Europe. There we have a near staking ETP in Europe. Uh that's the second business line. The third is Alpha. Um a fast growing solution there is for people who hold say hundred million or $25 million of Bitcoin. They want to generate yield. we can um run an

option strategy where they keep the bitcoin in their custodian >> and we can generate four to 10% yield on top without them having to lend it out or change the counterparty risk. And then the fourth part of the business is onchain solutions uh where we steward a few billion dollars of client assets through staking and recently vault curation. The way those all interrelate is my view uh from an investor perspective, the biggest obstacle to engaging with the space is that people are just busy. >> They're busy. They got a million things going on. Like why haven't you guys invested more in AI? Because you're busy. It's not because you're opposed to investing more in AI. You just got a lot of things going on. And figuring out clean opportunities and how to how to get at them is hard. So, uh our role is

to simplify that. And we have a we have a bank client who started out with the Bitcoin ETF then started uh investing in the Ethereum and Salana ETFs and now wants to use a vault on chain. >> Um so people go on journeys, individuals do, the three of us do, institutions do and our job is to help support them. Um and uh so two years ago the ETFs I think were a huge unlock uh to your original question. um and are a powerful first step for investors in the space. And today we we furnish a broad set of things that they might want to do and u grateful for the opportunity to get to play that role for them.

>> Go anywhere onchain instantly with relay.link. Relay is closing in on 10 billion transferred. Go to relay.link to bridge your assets. Now >> Hunter, I had to put you on the spot, but it was all the institutional folks coming on to any big, you know, crypto podcast saying that the four-ear cycle was over. Yeah. >> Here we are in >> Yeah. >> February. >> Yeah. >> Four year cycle feels on. >> Yeah. What happened? >> Right. It does, doesn't it? >> What happened? >> Yeah. Yeah. It's so interesting. I mean, I think our view was that the four-year cycle was sort of a deprecated uh mental model that the market had changed so much that it wouldn't be predictive.

>> Um, >> which perhaps is still correct, right? It's, you know, >> Yeah. >> Time will tell. >> Time will tell. Yeah. I mean, I think I think what may have happened here is that um it just has taken on a self-fulfilling life of its own. Yeah. >> I mean, certainly in the fall of last year, there were a lot of people asking us, do you think the four-year cycles will play out, >> right? >> And our view was no because the circumstances are different. We could get into that, right? Um but um but maybe it's now just such an instinct for people that uh that people sort of reflexively made it a reality by worrying that it would be a reality so they made it a reality and and that type of thing can happen in markets. I will say that um um so uh

you know like uh I had a colleague who was chatting with a a billion dollar wealth manager uh today and um uh I asked you know what was what was the vibe what was his mood like and he's like he's a little anxious and I said is because the the price of crypto is down he's like no because the because uh because all the stocks are selling off >> um and I think something that sometimes needs to be reintroduced to the perspective of people who are very involved with crypto is that for most investors, this is like 2% of their money, >> right? Yeah.

>> Yeah. You probably have like 2% of your money sitting in some wallet that you've forgotten about. >> Um, so what they're mood is often related to is what's happening with 80% of their money. Correct. >> And what's happening with 80% of their money is Salesforce is down 30% since year the beginning of the year. Microsoft is now 25% less valuable in two months as a company. >> Yeah, I saw that. >> Um Palanter is down 40%. Uh people are wondering what Kevin Borch means for the Fed. People are wondering about the development of uh with tariffs in the Supreme Court.

>> Um of course every week there's a new AI announcement that seems to >> to rerate uh whole industries like like security last week. So, so you know, so, so, so the way this relates to the four-year cycle is, um, you know, if everything is down 30% this year and Bitcoin's down 30% this year, is that a Bitcoin cycle? >> Yeah, exactly. >> Um, or is that a liquid market >> cycle? Um, so I I think it's an instructive and important uh mental model. It's definitely here to stay in people's minds. I don't know if it has as much causal uh power as it did in the past, but whatever the case, the market's down so far. Uh it may not.

We're also early in the year. I mean, if you guys think back to last year, >> Bitcoin sold down, I think, from 103,000 to 72,000 at the end of April. And then in Q2 was up dramatically. Um 2026 is young. Uh and uh and we may well end the year higher and print a down year in year three and an up year in year four. And then once again, we'd be back to saying the four year cycle is this. I just I think it's an interesting thing for us to keep track of, but I don't know if it's uh if it's the map to to guide the travels. Havachi is fast and private per trading secured by ZK [music] with Celestia underneath. Go to habachi.xyz to start trading today.

Looking for yield that stands out? Infinify gives you just that. Deposit stable coins and earn far more than the current savings rate. Infinify is a battle tested, reliable defy platform [music] that is ready to go. Head to infinifi.xyz. >> Yeah, I think uh I think investors uh were I don't know. I just thought it was funny like the so many institutional folks were saying that it was over and like you had like the typical anonymous crypto Twitter account guy on on Reddit with the date timed perfectly. >> Yes. Yes. Yeah. Yeah. Oh my gosh. What the heck? How is that possible?

>> I know. It's weird, right? >> Yeah. Maybe maybe I'm an idiot. Uh >> come on now. >> I mean the point of the question timed it perfectly. No, I was just uh I was just curious kind of like because I'm sure people are calling you guys or like asking you guys like, "Hey, like what's going on?" But I suppose you say it's more like macro driven than it is kind of specifically market driven. >> Yeah. Microsoft is worth 30% less in two months. >> Yeah. What happened? >> Like why is Microsoft such a worthless company now? Yeah. >> You know, like so then Bitcoin, which is this much less consensus thing, is is down. So it's all a matter of perspective. I will say that I think one of the elements of 2026 uh and crypto that is so interesting is that everything has changed.

>> Yeah. >> I think that we've been in the space for eight years and um let let me mention another story. We have we have an an investor in Bitwise named Keith Boy who was part of the PayPal mafia. >> Yeah. >> And I asked him oh boy um well I I asked him uh uh he invested in Stripe but he didn't invest in one of the first few rounds and he's one of the most accomplished early stage investors in the world. I mean, he he could invest in the first round of almost anything. And and if I recall correctly, uh he said something like um I knew enough I knew too much and got in my own way. Meaning his experience from PayPal gave him uh understanding that caused him to see sort of different patterns and

possibilities for Stripe than maybe people who are approaching it with a fresher mind. Um, and then of course he ultimately invested very early in Stripe, but not first. So, what am I trying to get at? I think that for people who've been in crypto for a long time, I think there's a lot of intuitions and mental models that need to get dumped now. >> Yeah. >> Um, I think things have almost completely changed in the last six months and are going to be very different over the next two years. and included in them to your point about you know the person um on uh on Reddit or wherever predicting uh the price I think that there's like almost a completely bifurcated set of communities now there's sort of crypto natives and uh sort of institutions and corporates >> and depending on your information flow

depending on [snorts] who you talk to the most you could get very different reads on things >> the important so I would say this audience it's like a miracle >> yeah It's all happening. >> Yeah. >> Um% the the sentimenting gap is insane right now. >> Is absolutely insane. >> Never seen anything like it. >> And the thing that people have to remember though is is um this audience controls all the assets. >> They own all the assets. >> So if they're bummed out and decide to sell, they have way more to sell than this audience. You know, you mentioned you mentioned IBIT, which is which is a remarkable historically fast growing Bitcoin. It's $60 billion. There's there's a trillion dollars of Bitcoin.

>> Yeah. >> There's another $940 billion owned by this audience. And if this audience is bearish and they dump, you know, 10%, that's I bit and a half worth of selling. It's as if IBIT went to zero and more. >> And that audience, the the natives moves quicker. >> They move quicker. >> Sentiment driven. They they're not as kind of like slow. >> Exactly. Exactly. So, so I think I think it's both that these are two different cohorts now who are focused on different things. Um, >> this audience does not share very publicly still what they're doing. Yeah. Um but this audience uh controls most of the supply. So if they stop selling there's very little supply available to this audience to buy. But if they are selling then the buying from this audience at least right now is not substantial enough to offset that.

>> Yeah. And you mentioned that right now this audience is is what 2%. Uh last question for you is is that the right is that the appropriate you know metric and balance for them for their portfolio set? Should it be more? Should it be less and why? >> You know we we have one client who's at 20%. I I think that the uh the academic analysis if you look at our white papers spit out something like two and a half percent. I think that where we're going to land is three 3 to 10%. Um I'll tell you that uh for our wealth management so we serve the largest banks in America.

Um we serve multiple wealth management firms that manage over a trillion dollars. Um a 3% allocation is like almost not worth their time. Mhm. >> So 5 to 10% is like a small allocation. >> Yeah. >> So I just think that the practical nature of everyone being busy uh is that people are going to um trend towards larger allocations than most people expect. >> And then of course a third of people will never allocate to the space and >> that's fine. I mean people another thing that crypto people have to keep in mind is that um investors can't even agree right now if you want to own Apple stock >> and it's like the biggest company in the world

>> Bitcoin or whatever >> you know so so like they're not all going to agree on crypto and I don't think the end of the end of the story is that every single >> investor is going to own it but a lot more are going to own it and I think they're going to own it at larger size. >> Awesome >> Hunter thanks for joining us today. We had a good uh you know overall day here. >> Oh, incredible. Incredible. Yeah, near's crushing it, >> sir. Absolutely. Cheers, man. >> See you next time.