In a recent memo, Bitwise CIO Matt Hougan highlighted the shifting political landscape in the United States regarding cryptocurrencies. He noted that the market is currently underestimating the significance of Washington’s evolving attitude toward crypto. According to Hougan, if the impact of these changes had been priced in, the market would have already hit a new all-time high. Historically, crypto has been a partisan issue, with Republicans generally being more supportive while Democrats have shown resistance.
Hougan pointed out that crypto advocates have been strategically building political influence, leading to significant legislative actions. For instance, on May 8, a group of House Democrats voted alongside Republicans to repeal SAB 121, a controversial SEC rule that restricts large banks from holding crypto. This marked the first positive legislative action on crypto in US history. Additionally, on May 20, a comprehensive crypto bill known as FIT21 was passed in the House with bipartisan support. This bill would assign primary oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC). Furthermore, the SEC, led by Democrat-appointed chair Gary Gensler, approved filings to list spot Ethereum ETFs, surprising many in the industry.
Despite these advancements, crypto still faces ongoing political challenges. President Joe Biden recently vetoed the repeal of SAB 121, highlighting the complex regulatory environment surrounding cryptocurrencies. However, Hougan sees these developments as a turning point in the industry. He believes that once the regulatory uncertainty is addressed, a significant portion of the estimated $20 trillion managed by US financial advisors could flow into crypto. This could have a substantial impact on Wall Street, as major financial institutions have been hesitant to fully embrace crypto due to regulatory concerns.
Hougan argues that the broader market has yet to recognize the implications of these political shifts. Regulatory uncertainty has long been a primary concern for financial advisors and Wall Street institutions. A recent Bitwise survey revealed that 64% of US financial advisors cite regulatory uncertainty as the main barrier to greater crypto exposure in their portfolios. However, once this barrier is lifted, Hougan believes that the market could see a significant influx of capital into the crypto space. He also suggests that if Wall Street were to accept crypto as a mainstream asset, the market could potentially reach new heights.
While the broader market may currently be indifferent to the changes in Washington’s attitude toward cryptocurrencies, Hougan sees this as an opportunity for savvy investors. He believes that the market will soon wake up to the fact that we are entering a new era for crypto. As political winds continue to shift in favor of cryptocurrencies, there is significant potential for growth and adoption in the industry. Investors and financial institutions alike should take note of these developments and position themselves accordingly for the future.
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