Matt Hougan: If the AI Trade Breaks, Bitcoin Is a Generational Buy

It's very hard to plan when your range of outcomes spans from everyone dying to everyone being infinitely wealthy. What happens if the AI trade breaks?

I have every expectation, in fact, almost a hundred percent confidence that we'd see the government step in and bail out the AI sector as part important to national security. We can't let China win the race.

We can't have a slowdown in the US. We have to inject money into that sector, and then Bitcoin soars into the multiple hundreds of thousands of dollars.

So if there is a moment where we have this sharp sort of violent reaction where AI revenues roll over and Bitcoin falls with other risk assets, to me, that will be like a generational buying opportunity.

It's the most complex macro environment that I've operated in in thirty years of working in the financial industry, getting to the end stage of sort of Western democracy debt accumulation, where the interest payments have become too big to bear, and we're facing real limits.

Welcome to another episode of Fifty One Insights.

Today, my guest has spent his career explaining new investments to Wall Street, first as a CEO of Inside ETFs and now as Chief Investment Officer of Bitwise, one of the largest crypto index and ETF managers.

His weekly memo is required reading for allocators, and twelve months ago, Matt, I remember you predicted Bitcoin would break its four-year cycle and hit a new high in twenty twenty-six.

Instead, it fell by half and then staged its best quarter in nine years. He still thinks it reaches seven figures, and today we talk about where crypto and the global markets go from here.

Matt Hougan, welcome back to the show. Oh, it's amazing to be back. Thank you for having me. It's good to see you. Yeah, it's great to see you too, Matt.

Um, first thing I wanna talk with you about is what's actually happening in the markets right now. It seems like money is getting more expensive almost everywhere at once.

The Fed, the ECB, the Bank of England, and soon the Bank of Japan all raising rates. The last time that happened together was twenty twenty-two, and crypto had a terrible year.

And then on top of that, we see oil above hundred dollars because of the Iran war. We see the US government, uh, borrowing costs increasing. What is actually going on here? Yeah, it's very complex.

You have, I think, four big forces in the world right now, and it's hard to think about any one of them in isolation. You have to think of them together.

So the one that you mentioned, I think is governments getting to the end of this experiment of overexpanding debt, right?

Whether you look at the US or you look at Japan or you look at France or you look at other major Western economies, they're all well north of a hundred percent debt, debt to GDP, and I think the bond market has collectively said, "Enough is enough.

We're not going to finance this at four or three or two percent rates. We're gonna insist on five or six or seven percent around the world."

And so I do think one big factor in the world is we're getting to the end stage of sort of Western democracy debt accumulation, where the interest payments have become too big to bear, and we're facing real limits.

Okay, so that's, that's one force. Uh, at the same time, we have the situation going on in AI, right, where depending on who you talk to, literally anything is possible.

It could be that AI is driving it, driving us to super abundance and infinite wealth. It could literally be that AI is going to destroy all of humanity.

It's very hard to plan when your range of outcomes spans from everyone dying to everyone being infinitely wealthy. But you have that force as well.

You mentioned what's going on in the energy markets, which is a persistent upward spike in inflation.

And then the fourth thing is crypto-specific, right, where Bitcoin really has made the leap across the chasm into mainstream portfolios.

So this is a complex mix: money getting more expensive, AI introducing uncertainty, steady upward movement in inflation from geopolitical ventures, and Bitcoin entering the mainstream.

And the challenge for investors is which matters the most, right? You're right that money getting more expensive in isolation is challenging for Bitcoin, but Bitcoin entering the mainstream is very good for Bitcoin.

So you sort of have these two forces pulling on either sides of the ledger.

Where I net out, and we can dig into why, is that most of these four things, no matter what happens with each of them, eventually leads to much higher prices of Bitcoin.

The path to seven-figure Bitcoin varies depending on which of these forces really impacts the market, but it is-- it's the most complex macro environment that I've operated in in thirty years of working in the financial industry.

Uh, what do you think is the strongest force right now of the ones you mentioned? Yeah. I think vis-à-vis the price of Bitcoin, actually the strongest force is Bitcoin entering the mainstream.

Morgan Stanley launching Bitcoin ETFs, Wells Fargo putting it into portfolios, et cetera.

I think if, if Bitcoin can truly become a piece of most portfolios, the net flows into that space overwhelms all of the rest of it.

I think AI is so uncertain that it's not the strongest force right now because we don't know if it's up, down, or sideways.

I do think this sort of bond revolt is maybe the second most important force, and that's one worth diving into for sure. And then you also mentioned we're facing the real limits of, of Western monetary systems.

What do you mean by that specifically, and what happens if we reach that limit? Well, yeah, this, this is why I sort of think all roads lead to higher priced Bitcoin. It's just the path that we get there.

So if we play through that example, what I mean by that is here in the US, interest payments on our debt Are the largest line item in our budget at this point, right?

Such that there is actually now a debate on whether the Fed increasing interest rates is restrictive to the economy or stimulative to the economy, because it injects more money into the wealthy people who are the ones who buy assets.

It may be asset price inflating to raise interest rates, right? That's not the way it's supposed to work. Raising interest rates is supposed to slow economic growth. It's supposed to crush the price of assets.

But if by raising interest rates, you're injecting a lot of money into wealthy people who have nothing to do with it except for buy assets, you're not going to get that negative asset effect.

What I mean that we're getting to the end of it is just the size of the debt has gotten to be so large that you have this sort of a perverse effect, uh, regardless of what we do with interest rates on whether it's stimulative or restrictive, you know, sort of the Lynn Alden, nothing, uh, stops this train.

So I, I think that's an important complicating factor that the old rules no longer quite apply. We've reached this sort of pro-cyclical ending. So you ask yourself what happens. There are only two pathways.

Either Western governments enter austerity, like Argentina style, and you're seeing efforts at that in France right now, although there's obviously a reaction against that. So that's one pathway.

I think that's extraordinarily unlikely. Or you inflate your way out of that debt, which strikes me as extraordinarily likely. Um, and in that case, you know, Bitcoin goes up substantially, right?

So I think what we're going to see is financial repression from most major Western economies. It's the easier way to deal with this debt crisis, and that's just gonna be massively good for Bitcoin.

It will eventually be massively good for gold and other stores of value as well. One, one part of that equation is also the bond prices. What's happening with bonds? Yeah.

I mean, it's, it's on the corporate side or on the, on the government side, I guess you can- On the government side. Yeah, on the government side. I mean, it's, it's the system sort of vomiting.

It doesn't want to own this debt at the prices, uh, that are required. So it's, it's pushing the prices up. There's also just an oversupply.

At the end of the day, there's a supply-demand dynamic, and there's just massive supply because we have so much debt.

So that means that the age of like, you know, zero percent interest rates, we're not going to see that again, at least not anytime in the near future, absent massive fiscal repression by the governments to sort of enforce that on the markets.

I think that was an anomaly. Um, I think we're in a, an era of like higher rates than most people are used to.

Um, sort of rates from the nineties are back in the twenty-twenties, and we've been living through this, this, this sort of aberration. I don't see why it would reverse in the future.

I don't see forces that would cause it to reverse. So look, I think the, I think interest rates are gonna be higher on government debt for a while.

And do you think the Fed will be forced to lower interest rates again because debt just becomes unsustainably expensive? I think there's an element of it. That's the thing.

Like, the, the, the Fed is in a pinch where it can't really do either side of this spectrum, right?

If it hikes interest rates up another percentage or a percentage and a half to really crack down on the persistent three percent inflation and get it under its two percent target on a long run rate basis, you have a massive spike in government debt and deficits, and you have massive more borrowing costs and massively more supply.

It's just very hard to do.

I actually suspect it just sort of stumbles along in this period of indecision, sort of like what we're seeing now, where the Fed says, "We're probably not gonna raise rates at the next meeting, but maybe we will in December."

It's, it's in this perilous position.

So m- uh, I'd actually expect it just sort of sits on its hands, and then we're gonna see Treasury and other assets, other, other actors come in and repress the long end of the curve.

That would be my base case of what happens. And then, Matt, you said another part of that equation is AI, and you said that the number one fear is AI labs' revenue rolling over. What happens if the AI trade breaks? Yeah.

Does Bitcoin trade like digital gold, or is it just a leveraged NASDAQ? Yeah. So this is, this is the most-- I think what happens is initially, if there's a sharp break, right?

If there's a panic about Oracle debt or there's a report of AI revenue really rolling over and declining in a meaningful way, so we have a sharp moment, I think Bitcoin sells off.

I think all risk assets sell off in that market because the market is very narrow right now, and in a panic moment, you see everything liquid sell off, and Bit- Bitcoin is liquid, it would sell off as well.

But then I have every expectation, in fact, almost a hundred percent confidence, that we'd see the government step in and bail out the AI sector as part, important to national security. We can't let China win the race.

We can't have a slowdown in the US. We have to inject money into that sector, and then Bitcoin soars into the multiple hundreds of thousands of dollars.

So if there is a moment where we have this sharp, sort of violent reaction where AI revenues roll over and Bitcoin falls with other risk assets, to me, that will be like a generational buying opportunity because you know what is going to happen.

Governments outlawed recessions in two thousand and eight broadly, but specifically, they would outlaw the AI industrial complex collapsing because it is a national security concern.

So there is, there's, like, no world that I can imagine where the government didn't come in in some way and bail that out.

And in that world, Bitcoin becomes extremely valuable and is a necessary part of people's portfolios. Do you have a, a thesis or a prediction on if and when this is gonna happen?

Yeah, I, I, I don't think it's gonna happen yet. I don't see anything in the data that suggests that AI revenue is rolling over. Uh, I see adoption increasing. I see, you know, token usage broadly increasing.

You're getting some competition from lower-cost models and lower-cost tokens, but the e- the, the, the revenue at the top is scaling as well.

You really need the revenues to roll over, and I just don't think we're there yet. There's some concerning factors in the market. You see companies delaying their IPOs. You have, like, reasons to be a little bit wary.

But if I had to guess, this is more like nineteen ninety-seven than nineteen ninety-nine, if we're making an analogy to the internet boom.

In any massive build-out, and this is certainly a massive infrastructure build-out, you always overshoot.

Uh, I don't think there's anything about this that repeals the laws of cyclical build-outs overshooting, and so there will be a moment when this rolls over, but it sure doesn't feel like now.

Like, even the penetration of AI into corporate, let alone personal use cases, is in its infancy, right? And, and personal use cases, we just got things like Muse. I think we're early in that ramp cycle.

So I'm pretty sanguine on the outlook for, for AI for the next... Yeah, I mean, it's hard to forecast far ahead, but for the next year or two, it's easy to see just that continuing to build.

I don't think we've reached the, the, the peak bubble moment. My Uber drivers aren't talking to me about private shares in, uh, startup AI companies. Uh, we haven't reached that level of silliness.

So, um, I think we have a ways to go. Yeah. Let's, uh, take a step back and look at crypto again. I remember when you joined our podcast last time, you talked about the four-year cycle breaking.

Now, twenty twenty-six is the year where this four-year cycle should start again. We should have reached the bottom already. What's the current state? Where are we at in this cycle?

What's your prediction and thoughts here? Yeah. I think we've started a new cycle. I don't know if it will be four years, but I think we've started a new cycle. It's maybe worth addressing what I got wrong previously.

Uh, I think what I got wrong was I was spending all my time talking to institutional investors in twenty twenty-five, and they were just strictly bullish, and they had no interest in selling.

They were just accumulating your pos-- their positions. And you saw that in our institutional survey, right? In that case, despite the market falling fifty percent, no one was selling. Everyone was still buying.

They had a ten-year thesis on Bitcoin. That actually came through in that institutional survey, and I think is very right.

What I neglected was that there was a large quadrant of the Bitcoin market and the crypto market held by retail investors who were still under the sway of this four-year cycle.

And indeed, you know, after ten ten last year, I think many of them took some chips off the table 'cause they didn't wanna live through a drawdown.

But looking at the way the market has performed over the last few months, it sure looks like we hit a bottom in late June, and we're starting to see accumulation through ETFs.

We're starting to see accumulation through corporations. We're starting to see long-term wallet holders building their position. You have sort of every indication that we've entered a new bull market cycle for Bitcoin.

How long will it last? Uh, I think it's hard to say, but they don't tend to last three months. They tend to last three years.

So I think your bias should be we're extraordinarily early in this, uh, in this bull market cycle, and that's certainly what, what I think I see in the data. Yeah.

And, and your, your thesis and your argument definitely makes sense if you look at the Bitcoin price, which came down at much, much less than many people expected, right? Yeah, that's exactly right.

We, we went down fifty percent, not seventy-five or eighty percent. I do think we'll... You know, there was all this existential panic, as there always is in the market in March and April and February. Bitcoin is over.

Bitcoin is dead. This is the worst bear market of all time. That all struck me as completely silly at the time.

I think, you know, we, we can already look back and sort of see it, but in a year we'll look back and see the twenty twenty-five pullback as just a classic phase of Bitcoin maturing, right?

We used to have seventy-five percent pullbacks. Now we have fifty percent pullbacks. Maybe next time we'll have thirty-five percent pullbacks.

That's, like, exactly the script you would have written in two thousand and nine, sitting next to Satoshi, about what you hoped would happen for this new asset. It would be extraordinarily volatile and low-priced.

Over time, the price would go up and the volatility would compress. Over time, it would get adopted by more and more institutional investors until it's owned by all the central banks around the world.

It sure feels like we're sort of checking every box in that journey. So I think it was a great cycle in the sense that we had this shallower pullback.

I think we have a long way to run on the upside now that we've entered a new bull market. Yeah. Very interesting.

Um, Matt, one of the things we published about one and a half months ago was there won't be another cycle, which was basically the argument that a lot of what has happened in crypto over the last ten years have been projects that were funded by VCs who could sell their tokens early through crypto exchanges and basically fund projects that don't have a, a real value proposition in the actual market.

So we see a lot of these zombie chains, as we will call them, and these chains don't, don't actually accrue value for investors.

And I know that you also said that the top twenty tokens now differ by a hundred and twenty percent in a single month and zombie chains will fall out.

How do you look at the market right now when you think about crypto and you spoke about Bitcoin? There are a lot of hundreds of, of other chains, a lot of top layer one chains.

By now, also a lot of crypto companies who are listed on, on the Nasdaq who don't have tokens anymore. How do you look at that market and, and how do you assess what's important and what's not?

Yeah, I mean, first we should say this is the best the market's ever looked. Yet you and I have been in this space for a long time.

I can remember pulling up the list of, like, the top twenty tokens, and you get your Bitcoin and your Ethereum, and then you're like, "There are some projects on here that I just think are vaporware and going to zero," and yet they're in the top ten, right?

I mean, we had, uh, yeah, just some, some ridiculous projects, EOS, et cetera, right? There was, there was a, a, a, a long list of ridiculous projects.

Now, when I look at the top ten or top twenty, it's like, wow, there are a lot of exciting things here. Uh, there's Bitcoin being digital gold. There's Ethereum and Solana battling it out for L1 status.

Uh, there's Hyperliquid. You get Chainlink on there. You get Uniswap. These are extraordinarily different projects, right?

It looks more like the S&P 500, where you have energy companies and tech companies and AI companies and entertainment companies.

You know, here you have gold and base layer and applications and this and that, and you can actually go down the chain to, like, forty or fifty or a hundred, and yes, there's some junk down there, but there are also some very exciting projects.

Maybe they'll succeed, maybe they won't succeed, but they are interesting projects. So I think the most important thing to me is this, this segment looks healthier and more robust than it has ever been.

And I also agree that we've cleaned out a lot of the sort of VC zombie slop, uh, that tried to take short-term advantage of retail and traders from hype. We, we see a lot less of that.

If you go, of course, down to, like, asset a hundred and fifty, you can get some of that, but in the larger assets, that's largely gone.

And then you mentioned on the, the public equity side, that space has matured as well. You know, we've been running a pure-play public equity ETF since twenty twenty-one.

In twenty twenty-one, it was hard to find twenty pure-play companies in the crypto space, and mostly what you found were Bitcoin miners.

It was, like, eighteen Bitcoin miners and then Coinbase, and that was, like, the universe. Now, it's Coinbase and Securitize and Figure and Galaxy and, and, and they're each running very different businesses, right?

Like, Coinbase and Securitize are way different sides of the spectrum. So the space is just much more interesting than it's ever been. There are more high-quality projects.

I think there'll be more differentiation in the returns of those projects than there were in the past.

Um, and maybe for that reason, there won't be, to your words, uh, another cycle, because cycles really happen when everything ebbs and flows at the same exact time.

But if you think about, like, the trajectory of de-gen crypto asset trading, which might power the, the earnings of something like Coinbase, and then you think about the trajectory of tokenization, those are on two completely different timelines.

And so you're unlikely to get the same sort of momentum-driven cyclical market. You're probably gonna get a more mixed up-and-down market. It's a lot more exciting as an investor.

Yeah, and, and as an investor, how would you think about allocating to public equities versus tokens?

And maybe if you focus on tokens, what are some of these interesting projects that you're mentioning that really excite you right now about the future of, you know, token value investing? Yeah.

So, so I'm like a, a, a Jack Bogle classic index investor, which means I would start with how the market looks.

And depending on how you count, whether you're counting private companies along with public companies, the, the market cap breakdown is something like eighty percent crypto assets, twenty percent equities.

So I think a good starting point if you're gonna own crypto, quote-unquote, is to have exposure to both, more exposure to crypto assets than crypto equities, but definitely some exposure to crypto equities, because you don't know who will win, and you wanna have exposure to both.

If you're more optimistic on equities, you might up-weight that twenty percent, maybe get it up to fifty. If you're less optimistic, you might down-weight it to ten.

But I think anyone who's just picking one or the other has a lot more certainty about where the value will accrue than I do. I don't know for sure where the value will accrue.

Uh, when you get down into the, the sort of token space, I think the things you want to look for are projects that have some element of staying power. I think you have to look quite skeptically on brand-new projects.

There are a million ideas that have gone up and down. Like, we're, we're speaking today, uh, I think Blur, the NFT platform, just announced that it was shutting down, right? A good example of one and done.

So you want a project that has some element of staying power. You want a project with a highly engaged community. You want a project that has some element of product market fit, which you can see in terms of revenue.

And then you want a project that has either an existing token economic format or a plan for a token economic format that returns value to the holders of that token.

I think the days of, like, just investing in governance assets are over. You want it to be on a pathway to, to return value.

But if you can get those things, if you can get sticking power, an element of product market fit with growth ramping, a highly engaged community, and reasonable token economics, I think you can find a lot of high-quality projects, uh, using that metric.

Yeah. And, and one of the things you were mentioning is revenue.

And I feel like, especially during this cycle, a lot of people have sto- started to talk about revenue, revenue tokens, projects that generate actual return for investors.

And Hyperliquid is one of the good examples for that.

Can you just explain us a little bit, what, what do you understand under a revenue token, a-and how do these projects look like, and what do they do differently than previous projects that we've seen? Yeah.

Yeah, I, I think Hyperliquid is the canary in the coal mine. It was the first project where activity on the chain At a major scale went back to token holders. So what do I mean?

If you think about what is Hyperliquid, at the core, of course, it's a broad layer one, but at the core, it's a derivatives exchange.

When people trade derivatives on Hyperliquid, ninety-nine percent of that revenue goes to buying back the HYPE token.

So the more usage on the chain, the more buy pressure is there is on the token, the more the token price goes up.

And this, when it sort of emerged onto the scene, was different than the paradigm we saw from the start of DeFi summer in twenty twenty until, like, twenty twenty-four.

During that period, you had projects like Uniswap, where none of the value of people trading on Uniswap went back to the token holder. They hadn't, hadn't thrown the fee switch.

In other words, if you were trading on Uniswap, it benefited the people who were supplying liquidity into Uniswap. They were aggregating those fees.

But UNI's token, the only value was sort of governance and then maybe a hope that someday you would collect revenue.

But Hyperliquid showed that if you turn that hope into reality, if you in fact collected revenue, the market will reward you with a higher price, which would attract more attention, and it became one of the fastest-growing financial startups of all time, and I still think today one of the more attractive crypto assets.

Other projects learned from that, right? Hyperliquid, I mean, Uniswap turned on a fee switch and started generating revenue. Other projects started turning on a fee switch.

It's maybe worth noting why this happened, Marc, which is, uh, under the previous SEC in the US, the previous financial regulator led by Gary Gensler, if you generated revenue and returned it to token holders, you basically went to jail, right?

Uh, Gensler considered that turning you into a security. You became an illegal securities offering. That's very bad in the US. You actually have personal liability as an entrepreneur for that.

And so none of those projects were willing to grasp revenue. Under the new SEC and under recent legal rulings, that's reversed. It's now clear that you can generate revenue and return it to token holders.

So this is the way the world should always have worked. And if you have a project that isn't returning revenue to token holders and doesn't have a plan to in the future, you should run for the hills. That's just a scam.

Now, it doesn't have to be returning revenue today. It could plan to in the future. That's fine with me. But it needs to have a mechanism to do so in the future that you can see.

I think that's what's going to be rewarded in this market. Yeah. So clear words. If it doesn't gen-generate revenue, run for the hills.

Uh, Matt, Bitwise also launched a NEAR ETF on September twenty-ninth, and you've been NEAR's loudest advocate since. Uh, can you just explain us what excites you about NEAR, and why did you launch that ETF? Yeah.

What I love about NEAR, uh, is... Look, I get asked all the time what small cap asset, what asset with a market cap of less than ten billion dollars could grow up to be hundred billion dollar plus, right?

People want to own Bitcoin and Ethereum and the most established crypto assets, but they also wanna own something that could have that massive pop.

And often the project I point to is NEAR, because NEAR is a sub ten billion dollar asset that has this unique feature. The first is just as a crypto project, it's hugely successful, right?

It's a highly performant blockchain. It has this application called Intense, which makes it easy to access assets across any chain. It abstracts away all the complexity.

The revenue on Intense is growing really dramatically.

And if it all it were, were a blockchain with this interesting product in Intense and a few more interesting products, and that was it, I think it would be worth about what it's worth today. So it's not like vaporware.

It's got an existing product with product market fit. But it has a design and a goal and an ambition to be the central blockchain on which AI agents conduct finance in the future.

And it's building toward that goal with a series of stepping stones.

Uh, you know, first, a, a highly performant blockchain, then this ability to do Intense, then the ability to del-deliver private inference, and you can start to see it piecing together a world where it becomes one of the most important blockchains that exists.

And so as an investor, I love when you can buy an asset that already justifies its valuation with its existing product set, but which is building a new product set that could ten x, twenty x, or fifty x the valuation.

Uh, we're sort of famous for having a price target on NEAR that's very aggressive. It implies something like a potential of a forty or fifty x. But at that point, it's only about as big as Ethereum is today.

So if it really does become the primary platform for agentic finance, I think it has that outcome. So look, I love NEAR. It's been around. It has sticking power. It has revenue.

It has all those things we talked about, and it has an enormous ambition. I don't know. That's a pretty good mix. And so that's very, very interesting.

Why would you say NEAR is better positioned for the agentic future than a chain like Solana or Ethereum? Look, I, I own Solana and I own Ethereum.

The thing about these markets is you're going after an addressable market that is really, really large, and my view is just own the field. So I think Ethereum is well-positioned for that.

I think Solana is well-positioned for that. The unique thing about NEAR is it has a real shot on that goal, right? Its product architecture fits that goal.

It has a founder who, uh, was on the original paper that, that sort of sparked, uh, the LLM boom, right? Attention is all you need. So it has enormous AI credibility.

And the difference between NEAR and Ethereum is that Ethereum is fifty times bigger than NEAR from a market cap perspective.

So it's, it's not that I would rate NEAR necessarily it hasing a better shot Like a better percentage probability of being that platform. It's just that if it is that platform, the return is so much larger, right?

So scaled for market cap, it's more attractive at making that bet, uh, because Ethereum is, as I said, like fifty times larger. But, but I love Ethereum too. I would own them all.

It just gives you that sort of moonshot potential with, in my view, limited downside because it already has product market fit on intends.

And limited downside plus moonshot potential is like a pretty beautiful asset to own as part of a portfolio mix. Not a hundred percent, but as part of a portfolio mix.

That's part of why we brought NRR, our NEAR ETF to market. Makes sense.

One of the big topics in recent weeks has also been quantum risk or quantum security, and it's definitely one of the top things on investors' agendas right now.

It has been a big topic at Token twenty forty-nine in Singapore. That just happened. Justin Drake, one of the Ethereum co-founders, posted about it. He said, "We're entering bunker mode."

I think Illia, the founder of NEAR, mentioned that NEAR is already quantum-proof. How do you think about the whole quantum risk around crypto assets?

Yeah, it's a quantum risk and just the pure math risk, um, you know, traditional math hacking some of those problems as well as AI gets better at it.

I think it's important and challenging and something that crypto has to deal with, and the projects that don't deal with it well will suffer.

It is one of those things that goes from a challenge to a moat if you can cross it.

So I do think there's a world where crypto, because of its nature, like because of where it comes from, it's literally in the name crypt, actually advances to quantum-resistant security ahead of traditional systems who may not be tackling it with the same level of importance and security.

And so I think there's a chance that if we get through this challenging period, we end up with a moat versus traditional systems where we look more secure.

But right now, it's a huge risk, and I suspect that this is a story that's going to persist and be a challenge for crypto, uh, and a concern and therefore a limiting factor on institutional investment.

To be clear, institutions will allocate less because this risk exists. I think that's probably gonna be true for the next six to twelve months, and crypto needs to tackle it aggressively.

On the other side of that, I think it becomes a moat, and it's positive. But for the near term, it's, uh, it's certainly a risk.

I also think this persistent series of like hardware wallet hacks, and, uh, I think that's not over either.

I think that is also a risk, and I think people who think we've heard the last of those stories, I just don't understand that framing. There are probably a dozen more of those stories.

So I do think this is one of the, uh, challenges that crypto will go through, um, over the next six to twelve months. I have every confidence we'll get through it, and then it will be a positive for us.

But it is a, it is a headwind and a headline headwind for us at the moment. Yeah. And, and particularly those, those wallet hacks, I think are a headwind for DeFi as well because- Yeah...

if DeFi wants to grow up, hacks like that puts it in a very bad light. It's a very bad light. And again, I wanna emphasize this, we haven't heard the last of them, right?

Uh, the, the-- people have been treating each one as an isolated incident, but it doesn't take a genius to like string them together and then imagine that there are other projects that haven't surfaced yet where they have challenges as well.

So I do think it's something that people need to deal with. I think it's, it's going to be a persistent challenge for us for a period of time. I think we'll get through it, but, you know, it's, it's nothing easy.

Matt, we're almost at the end of the show. Before we jump into a quick lightning round, last question. When you joined Bitwise in twenty eighteen, a Bitcoin ETF sounded crazy.

What do you believe today that sounds just as crazy? Oh, wow, that's a great question. Look, I, I, I think all finance will happen on chain. I actually mean all of it.

I mean all, all, all, all payments, all trading, all derivatives. I think it's all moving on chain. Maybe that doesn't sound as crazy to people 'cause people have been saying that a lot.

But I, I really think people underestimate the scale at which that is happening. Uh, it's just an inherently and more efficient system. I think we will-- I think we'll get there pretty soon.

Maybe, maybe another one on Bitcoin specifically. People have forgotten this. I think central banks will own Bitcoin, you know, in the next five or ten years.

And I know that sounds crazy too, but we meet with central banks, and they're continuing to study it. They're following the same pattern that, I don't know, family offices did. They're just moving slower.

I think they'll end up owning, owning Bitcoin as well. So there are two for you. Yeah. Very interesting. Matt, let's do a quick lightning round. Short questions, short answers.

The first one is, a new Bitcoin all-time high before the end of twenty twenty-six, yes or no? Oh, probably not. Probably not. The Fed's next move, hike or cut? Sit and then one more hike, and then cut.

So sit, one more hike, and then we're in a rate cutting regime. Uh, then Democrats take the Senate, bullish, bearish, or irrelevant for crypto? Irrelevant except for meme coins.

There'll be a million hearings on meme coins and Trump coin and Melania coin. There'll be a lot of negative headlines on meme coins and a lot of, uh, demonification, if that's a word.

A lot of demonizing meme coins in the mainstream media. But outside of meme coins, it won't matter one bit. Mm-hmm. The next one, gold or Bitcoin over the next twelve months?

Over the next twelve months, Bitcoin for sure. Gold faces this unique challenge of what persistent high energy rates mean central banks are selling gold.

Uh, and I think that's an important reason that gold rallied so much, whereas Bitcoin doesn't face that, and it has these positive secular trends of mass wealth adoption.

So Bitcoin over gold for the next twelve months for sure. And the last one, what's one book, idea or conversation that has shaped how you see the world? Oh my goodness. One book, idea or conversation. Oof.

You know, I mentioned this sort of Jack Bogle approach to owning the market, uh, and the eighty/twenty, uh, between crypto assets and crypto equity. I think that applies to crypto broadly.

Crypto is, you know, a three trillion dollar market. If you have zero, you're short the market. You need to be at one or two percent of your portfolio just to be neutral.

Uh, a lot of that sort of indoctrination actually came from knowing and being able to talk to, uh, John Bogle, the founder of Vanguard, early in my career.

So maybe that, just because it came up in this podcast, that's obviously stuck with me.

It's been a big part of how I allocate to the market, is respecting what the market tells you as a base case for where to start and then, and then, you know, overweight or underweight between then.

So, um, a lot of, a lot of Bogle's writings. Crypto doesn't think much about Jack Bogle. He's sort of ant-antitetical.

But a lot of that has shaped how I think about the market, and I think it actually, uh, makes a strong argument that every investor should have a little bit of crypto, and I like anything that makes that argument publicly.

That's great. Matt, thank you for coming on the show. It's always very, very insightful to have you on. Thank you for your time and, uh, all the best. Thanks for having me. Let's do it again. Absolutely.

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