Crypto Analyzer

The Impact of Washington’s Shifting Attitude Toward Crypto, According to Bitwise CIO

Bitwise CIO Matt Hougan recently highlighted the significance of Washington’s evolving stance on cryptocurrencies, suggesting that the market may be undervaluing the potential impact of these changes. In a memo issued on June 4, Hougan expressed his belief that the US political landscape surrounding crypto has undergone a notable shift in a positive direction in recent weeks.

Hougan pointed out that if the market had fully priced in the implications of Washington’s changing attitude, crypto would likely have already reached a new all-time high. He further emphasized that the shifting tides in Washington have the potential to unlock significant “alpha,” referring to the ability of an investment strategy to outperform the market.

Political Developments

Historically, the stance on crypto has been somewhat divided along party lines, with Republicans generally more supportive while Democrats have shown reluctance. Hougan referenced examples such as Senator Elizabeth Warren’s previous anti-crypto stance to illustrate Democratic opposition.

However, efforts by crypto advocates to build political influence have led to notable legislative actions. One such action was the repeal of SAB 121, a SEC rule that limits large banks from holding crypto. This repeal, which saw bipartisan support in both the House and Senate, marked the first positive legislative step for crypto in US history.

Another significant milestone was the passage of FIT21, a comprehensive crypto bill that received bipartisan support in the House. This bill would assign primary oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC), signaling further progress for the industry.

Despite these advancements, regulatory challenges persist, as evidenced by President Joe Biden’s recent veto of the repeal of SAB 121. However, Hougan views these developments as a pivotal moment for crypto, stating, “Crypto still has a long way to go, politically speaking. But the winds have started to change.”

End of Regulatory Uncertainty

Hougan highlighted that the market has yet to fully appreciate the implications of these political shifts. Regulatory uncertainty has long been a primary concern for financial advisors and institutions, with 64% of US financial advisors citing it as the main barrier to greater crypto exposure in portfolios according to a Bitwise survey.

If this regulatory barrier is lifted, Hougan predicts a significant inflow of funds from the estimated $20 trillion managed by these advisors into crypto. Moreover, the acceptance of crypto by Wall Street could lead to major market growth, as institutions have been cautious due to regulatory concerns.

Despite the current market indifference to these changes, Hougan sees an opportunity for investors who recognize the potential of this new era for crypto. He suggested that until the market fully acknowledges these shifts, there may be untapped alpha waiting to be exploited by savvy investors.

As Washington’s stance on crypto continues to evolve, the market may soon witness a new era of opportunities and growth in the crypto space, reshaping the way digital assets are perceived and valued by investors and institutions alike.