In a recent memo, Bitwise CIO Matt Hougan highlighted the shifting attitudes in Washington towards cryptocurrencies. He pointed out that the US political landscape has taken a more positive stance towards crypto in recent weeks, which has not been fully reflected in the market. According to Hougan, if the impact of these changes had been priced in, the market would already be at a new all-time high. This shift in Washington’s perspective could potentially unlock substantial “alpha.”
Traditionally, crypto has been a divisive issue, with Republicans generally more supportive of it, while Democrats have shown resistance. Senator Elizabeth Warren’s announcement of plans to “build an anti-crypto army” last March exemplifies the Democratic opposition. However, crypto advocates have strategically built political influence, leading to significant legislative actions. For instance, on May 8, 21 House Democrats joined Republicans in repealing SAB 121, a controversial SEC rule restricting large banks from holding crypto. This bipartisan support marked a significant milestone for crypto in US history.
Further momentum came on May 20 when a comprehensive crypto bill, FIT21, was passed with support from both Democrats and Republicans in the House. This bill would assign primary oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC). Additionally, the SEC, under Democrat-appointed chair Gary Gensler, approved filings to list spot Ethereum ETFs, a move that caught many by surprise. Despite these positive developments, crypto still faces ongoing political challenges. President Joe Biden recently vetoed the repeal of SAB 121, underscoring the complex regulatory environment surrounding crypto.
Hougan believes that the broader market has yet to fully grasp the implications of these political shifts. Regulatory uncertainty has long been a primary concern for financial advisors and institutions on Wall Street. A recent Bitwise survey found that 64% of US financial advisors cite regulatory uncertainty as the main barrier to greater crypto exposure in their portfolios. Hougan argues that once this barrier is lifted, a significant portion of the estimated $20 trillion managed by these advisors could flow into crypto, potentially driving the market to new heights. Similarly, major financial institutions have been hesitant to fully embrace crypto due to regulatory concerns. If Wall Street were to accept crypto as a mainstream asset, the market could see a significant surge in investment.
Despite these political and regulatory advancements, the broader market has remained largely indifferent to these changes. According to Hougan, this presents an opportunity for savvy investors who recognize the new era for crypto. As the political winds continue to shift in favor of cryptocurrencies, there is a potential for substantial growth and performance in the market that has yet to be fully realized.
The evolving attitude towards cryptocurrencies in Washington is a crucial turning point for the market. The recent legislative actions and regulatory developments indicate a growing acceptance of crypto within the political landscape. As these changes continue to unfold, there is a significant opportunity for investors to capitalize on the shifting tides and potential growth in the crypto market.
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