Bitwise CIO Matt Hougan believes that the current market sentiment is overlooking the significance of the shift in Washington’s attitude towards cryptocurrencies. In a June 4 memo, he highlighted how the US political landscape regarding crypto has been changing towards a more positive stance in recent weeks. Hougan emphasized that if the impact of these changes had been fully priced in, the market would have already seen a new all-time high. Historically, the issue of crypto has been a partisan one, with Republicans generally in favor and Democrats showing resistance. However, recent developments have shown a shift in this trend, with significant legislative actions taken.
The recent actions taken by both House Democrats and Republicans signal a turning point for cryptocurrencies in the US. On May 8, 21 House Democrats voted alongside Republicans to repeal SAB 121, a controversial SEC rule restricting large banks from holding crypto. This was followed by the Senate, where 10 Democrats, including Senate Majority Leader Chuck Schumer, joined the GOP in supporting the repeal. These actions marked the first positive legislative steps towards crypto in US history. Subsequent momentum came on May 20 when 71 Democrats and 208 Republicans in the House passed FIT21, a comprehensive crypto bill assigning primary oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC). Furthermore, the SEC, under the leadership of Democrat-appointed chair Gary Gensler, approved filings to list spot Ethereum ETFs, surprising many in the industry.
Despite these positive steps, crypto still faces political challenges. President Joe Biden’s recent veto of the repeal of SAB 121 underscores the complex regulatory environment surrounding cryptocurrencies. However, Hougan sees these developments as a significant turning point for the industry. He believes that while crypto still has a long way to go politically, the tides are changing in its favor. The broader market, however, has yet to fully acknowledge the implications of these political shifts.
Market Recognition
Hougan argues that regulatory uncertainty has long been a major concern for financial advisors and institutions on Wall Street. A recent Bitwise survey showed that 64% of US financial advisors see regulatory uncertainty as the main barrier to greater crypto exposure in their portfolios. Once this barrier is removed, Hougan believes that a substantial portion of the estimated $20 trillion managed by these advisors could potentially flow into the crypto market. The impact on Wall Street could also be significant, as major financial institutions have been hesitant to fully embrace crypto due to regulatory concerns. Hougan suggests that if Wall Street were to accept crypto as a mainstream asset, it could lead to new heights for the market.
While the broader market has been largely indifferent to these political changes, Hougan sees this as an opportunity for savvy investors. He believes that the market will eventually recognize that we are entering a new era for cryptocurrencies. The potential for increased adoption and acceptance of crypto by both political and financial institutions could pave the way for significant growth in the market. Despite the ongoing political challenges, the evolving stance of Washington towards cryptocurrencies could have a profound impact on the future of the industry.
