By Kathy Chu, TruthDAO
When Bitwise Asset Management published research in 2019 showing that 95% of bitcoin trades were fake, the finding rocked the industry and led crypto exchanges to change how they verified trading activity.
Fast forward three years. The bitcoin industry has matured — many analysts say fake trades still happen but much less frequently — and institutional investors are pouring into crypto.
Matt Hougan, chief investment officer at Bitwise, believes the time is ripe for a spot bitcoin exchange-traded fund, which would make it easier for investors to get exposure to a volatile cryptocurrency subject to wild swings in price. Hougan is hoping the U.S. Securities and Exchange Commission will agree when it weighs in on the firm’s application for a bitcoin ETF in July.
Barriers remain. This week, the Commodity Futures Trading Commission (CFTC) sued crypto exchange Gemini, saying Gemini’s employees misled the agency’s staff in 2017 about how susceptible the price of a bitcoin futures contract is to manipulation. Gemini, in a statement, said that it’s looking forward to proving in court that it’s a “pioneer and proponent of thoughtful regulation.”
The lawsuit could deal a blow to the industry’s efforts to get approval of a spot bitcoin ETF, according to Hougan.
“All those little narrative cracks in the credibility of crypto as an institutional asset class make it less likely that the SEC will stick its neck out and say we're ready” to approve this type of fund, he said.
During a June 2 interview on TruthDAO's "Crypto DeFined,"available on Fireside, Hougan spoke about why institutional investors are increasingly diversifying into crypto and why fake trading hurts the industry.
Here are Hougan’s top 5 takeaways (edited for clarity):
Ethereum may be the crypto asset of 2022 for institutions. “The biggest meta theme in crypto right now is the entry of institutional investors into the space… Once the macro market normalizes, I think that ethereum will rebound first and probably highest among the crypto assets because it does have this institutional interest that’s building in the market.”
Crypto one day will be ubiquitous in investment portfolios. “Crypto has been on a 13-year journey from being a very obscure thing only owned by a few people, to being a central, traditional asset that’s going to be in most portfolios.”
A bitcoin ETF could lead a boon in crypto investing. A spot bitcoin ETF, if approved, “will bring the costs down and it will bring a huge class of new investors into the market. I continue to think it’s one of the potential catalysts for the next bull market in crypto.”
Institutions are now driving prices in the bitcoin world. “Institutional investors are the tail wagging the bitcoin dog. They’re now the ones dictating prices in the market. We see the bitcoin market as mature, as institutional, as efficient, as well developed as most other commodities markets.”
Fake crypto trades undermine confidence in the industry. “It's really important for those of us who are long-term investors in crypto that we get the markets to clean up as fast as we can, so highlighting the flaws in that market is the fastest way to do it.”
You can watch a replay of the full interview here.