Institutional demand for Bitcoin ETFs is just getting started: Bitwise’s Matt Hougan

The crypto landscape is changing rapidly, and Bitcoin and Ethereum ETFs are leading the way. Scott Melker, host of The Wolf of All Streets Podcast, sat down with Matt Hougan, CIO at Bitwise, to explore the implications of these developments and what surprises we may be expecting in the ETF and institutional space going forward.

The discussion highlighted the transformative potential of crypto assets as they gain momentum among traditional finance giants.

Melker opened the discussion by acknowledging the unexpected pace at which Ethereum ETFs have followed Bitcoin ETFs. Hougan emphasized the broader implications for the crypto market, highlighting imminent changes that could unlock significant institutional flows into both assets. On Wednesday, for example, major U.S. bank Morgan Stanley finally began allowing wealth advisors to start selling Bitcoin ETFs.

“If you look at most assets in the world, institutions own at least half of them. For that to happen, [institutions add] “We’re a trillion dollars into this trade,” Hougan said. “We’re a few percentage points into this trade. This is a multi-year trade. It’s not going to happen overnight, but a very small percentage can buy these things. That’s going to change in the second half of the year, and I think you’ll start to see that in flows as we get into October, November and December.”

The discussion shifted to the current accessibility of crypto assets for institutions and retail investors. Hougan estimated that only about 10-20% of institutions currently have access to purchase these assets through their preferred brokers. This percentage is expected to increase as the approval process at traditional financial institutions, while slow compared to the crypto world, is moving faster than usual due to high demand.

Melker and Hougan also examined the allocation strategies of financial advisors. Most advisors recommend a 60/40 portfolio, typically excluding physical gold. However, Hougan noted that some advisors have begun to include bitcoin in their stock portfolios, viewing it as a risky asset similar to stocks. Interestingly, ethereum is gaining momentum as a tech asset, and some advisors see it as a must-have for a diversified tech portfolio.

The conversation focused on the future of crypto ETFs, with Hougan expressing optimism about the potential of index-based ETFs. Known for creating the first crypto index fund, Bitwise sees it as the ultimate solution for investors looking to bet on the overall growth of public blockchains.

Hougan closed by assessing current market conditions, describing them as the most constructive setup he has seen for crypto. He highlighted the influx of funds into ETFs, changing attitudes in Washington, and increasing institutional interest as key factors contributing to a favorable environment for crypto.