- Matt Hougan is the chief funding officer of San Francisco-based Bitwise Asset Administration, whose $185 million Bitwise 10 Crypto Index Fund (BITW) began buying and selling over-the-counter on December 9.
- In an interview with Enterprise Insider, Hougan breaks down the components supporting bitcoin’s current surge above $20,000 for the primary time and explains why BITW trades at a major premium to the cryptocurrency.
- He additionally shares different cryptos value taking a look at and one other digital foreign money that would turn out to be “the asset of the yr in 2021.”
- Visit Business Insider’s homepage for more stories.
Bitcoin was as soon as derided by critical buyers as a bubble or a Ponzi scheme. However this yr, it has turn out to be an irresistible funding for a lot of of them.
Simply this Wednesday, bitcoin topped $20,000 for the primary time and proceeded to climb above $23,000 on Friday amid rising optimism about its makes use of.
“These of us who’ve been within the crypto trade for a variety of years have anticipated this second,” mentioned Matt Hougan, an ETF veteran-turned chief funding officer of cryptocurrency-focused Bitwise Asset Administration.
“The core thesis supporting crypto and Bitcoin is that this can be a once-in-a-generation model technological breakthrough that is penetrating a number of multi-trillion-dollar markets,” he added. “The market alternative is giant, however it’s nice validation to see us get away to new all-time highs.”
Bitcoin’s 212% rally this yr is pushed by all varieties of new buyers who had by no means invested in bitcoin however are actually leaping on the bandwagon, Hougan mentioned.
Most notably, high-profile hedge fund managers corresponding to Paul Tudor Jones and Stanley Druckenmiller have allotted to bitcoin. Firms like MicroStrategy and Square have invested in bitcoin on their treasury sheets. Even insurance coverage agency MassMutual scooped up $100 million of the digital token final week.
“Crypto was constructed on a retail investor base. And it went from zero to $20,000 largely on the again of retail funding and retail perception within the asset,” he mentioned. “Now we’re seeing this mainstream adoption by skilled and institutional buyers who management vastly extra property than retail buyers. That is pushed us to new all-time highs and will push us considerably increased if these tendencies keep in place.”
A crypto fund that seized investor curiosity
Coincidentally, precisely per week earlier than bitcoin surpassed $20,000, the $185 million Bitwise 10 Crypto Index Fund began buying and selling over-the-counter below the ticker image “BITW.”
The fund, which tracks an index of the ten largest cryptocurrencies as weighted by market cap, noticed shares commerce greater than $67 million of their first three days on OTCQX Finest Market, making it essentially the most extremely traded crypto fund launch in historical past, in keeping with Bitwise.
The numerous investor curiosity drove shares of the fund as much as $71.50 as of noon Friday whereas their web asset worth was $20.24, signaling a shocking 253% premium. The premium was as high as 369% on Wednesday, in keeping with Bloomberg.
Hougan defined that it had so much to do with the fund’s construction, which has extra in frequent with a closed-end fund than it does with an ETF in that there is not any fast creation of recent shares.
“That is a course of that takes a bunch of time due to the regulatory construction that it exists,” he mentioned, “so it may possibly commerce at very giant premiums and people premiums could be risky, and it might, in fact, probably commerce to a reduction.”
He continued: “What we’re seeing within the excessive premium is that there’s extra demand from buyers to allocate to crypto in conventional brokerage accounts than there are shares of BITW accessible at present. New shares are being created, however these shares must season for a yr earlier than they are often offered onto the general public market.”
Having spent 15 years within the ETF trade, Hougan mentioned he would like to see buyers entry cryptos through ETFs. Whereas the Securities and Alternate Fee has yet to approve a bitcoin or crypto ETF, that day could come sooner slightly than later.
“The market is admittedly mature. It is far more institutional than it was up to now and I feel that raises the probability that we’ll see a Bitcoin ETF ahead of later,” he mentioned.
Ethereum and different cryptos
Bitcoin has surged into the stratosphere this yr, however it’s under no circumstances the best-performing cryptocurrency.
Ethereum, which makes up 12.35% of BITW, has gone up 396%. Ripple’s XRP and Litecoin, that are 5.01% and 1.37% of the fund, have additionally risen by 202% and 159% this yr respectively.
“It is a disruptive new expertise, a disruptive new trade, and we do not know the way it will play out. You possibly can backpedal to different disruptive areas of the market and it isn’t at all times clear who will win,” he mentioned. “The index fund is designed in order that no matter occurs in crypto, buyers may have publicity to essentially the most worthwhile asset.”
Hougan is bullish about bitcoin as a digital gold, non-sovereign retailer of worth, and probably a non-sovereign foreign money. However he additionally thinks that ethereum — the second-largest crypto — might be “the asset of the yr in 2021.”
“Ethereum is extra versatile than Bitcoin. Bitcoin can solely be programmed to do sure issues and ethereum could be programmed to do many issues,” he mentioned. “The market that ethereum is tackling, which is the decentralized finance market, is rising in a short time.”
One other extremely promising growth for ethereum is the CME Group’s decision to launch ethereum futures beginning February 8, 2021, in Hougan’s view.
“That is a sign from a well-established monetary establishment that there is extra to crypto than Bitcoin,” he mentioned.
Regardless of his constructive outlook for ethereum, Hougan mentioned he nonetheless prefers a diversified method to investing in cryptos.
“I am an enormous fan of ethereum however all my crypto cash is invested in our index fund,” he mentioned. “Simply because I research this 24/7/365, I’m very bullish on crypto as an asset class. I do not know precisely how it’ll play out, so why not take an index method.”
