Crypto Investors Embrace Wall Street Strategies

Institutional Investors Embrace New Approaches in the Crypto Market

Bitwise CEO Hunter Horsley states that institutional investors are now adopting a stock-like investment strategy rather than being focused on market capitalization. He expressed that the crypto market has matured and taken on a more complex structure, emphasizing that Bitcoin can serve both as a store of value and a payment network, but these roles cannot happen simultaneously.

Horsley also added that a potential Bitcoin bear market could be less severe than previous cycles. The crypto market has undergone significant transformations over the last decade, driven by the adoption of international investment firms and individual investors. However, most crypto investors still focus on market capitalization, valuing assets by multiplying total supply by the current price.

Bitwise manages over $15 billion in assets, and Horsley noted that institutional investors are increasingly willing to invest in assets beyond Bitcoin. Recently, new exchange-traded funds (ETFs) aimed at alternative digital assets have been launched, including the humor-themed cryptocurrency DOGE.

Horsley acknowledged that it is challenging for institutional investors to invest in assets beyond Bitcoin, but he mentioned that they are guiding their portfolios through fundamental-based selections. He pointed out that understanding the more complex structures of smart contract blockchains like Ethereum and Solana is particularly difficult.

Strategy Shifts and Market Dynamics

The stock-like investment strategy towards cryptocurrencies overlaps with today’s macroeconomic environment. In 2020, with near-zero interest rates and low inflation, less prominent alternative currencies gained rapid value. However, today, U.S. interest rates are around 4%, and inflation remains high. In this environment, only crypto assets with strong fundamentals are likely to succeed.

Many experts suggest that the stock selection strategy will still hold valid during this period. Economist Mohamed El-Erian and market historian Russel Napier propose intelligent configurations and dynamic asset allocations to investors.

The Future of Bitcoin and Its Role as a Store of Value

Debates continue in the crypto world regarding whether Bitcoin serves as a store of value or a payment network. Horsley mentioned that on-chain activities have decreased, causing concern among miners, and stated that Bitcoin could be used as a payment method once it is accepted as a store of value. He also highlighted the difficulties in using it as a payment method before the issues of adoption and value are clarified.

Lastly, Horsley referred to Bitcoin's historical cycles, noting that previous bear markets were triggered by unexpected counterparty events. He added that as the crypto ecosystem matures, such shocks may become less frequent; therefore, if a bear market occurs, it may not be as severe as in past periods.