E128: Bitwise Founder: Why 2025 Is Crypto's Greatest Year Ever

0:00There's over a trillion dollars of Bitcoin. People don't want to sell it, but they need cash to do things. The banks and financial institutions are hungry to have new products and services that are digital in nature. And you're going to see in 2025, suddenly banks will be a huge catalyst of Bitcoin. I think that you're going to see. Hunter Horsley is the CEO of Bitwise. The largest crypto index fund manager in the US. He's leading the charge in bringing Wall Street into Web3. We've been in the space for seven years. Bitwise has over 10 ,000 conversations a year. When I look at the trajectory of the last seven years, what is the current moment?

0:32In 2025, to me, feels like the end of the beginning. And I am stunned. 2025 is the best year there has ever been in crypto. Bitwise raised$70 million. Why? Public blockchains are a compelling computing platform. Public blockchains are allowing beautiful new things to sprout up and be invented. And they have liquid assets. That means there's an opportunity for investors to own those liquid assets, digital assets. That's what Bitwise is here to do. And I think that there's so much to do right now. How much of your liquid net worth is in Bitcoin? A lot, a lot. Do you own them in cold storage or not?

1:03I own every Bitwise fund, which is a lot of different funds. We have a Bitcoin ETF, a 3M ETF, we have the index fund, we have some alpha solutions. I also own some spot assets. I have a lot of exposure that way, and it's a great way to have exposure. So you worked before for Facebook, now you work for Bitcoin. Bitcoin is worth more than Facebook, about$2 trillion. But there are only 40 engineers working for Bitcoin, and they collectively get paid about$8 million a year, you told me. So that's 200 ,000 per person per year. What's the risk with this?

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2:49Yeah, I'm thinking about Luca because, I mean, he's the one who put us in touch. Yeah. The level of energy that you must have to run these, I mean, NFTs plus tokens that have crazy volatility. Yeah. It's tough. Like, I mean, it's not tough. It's extremely tough. One of the things I feel that many people who join this cycle have, especially entrepreneurs, was crypto is easy. I just need to raise a lot of money and then launch my token and I make a lot of money. But the game is so hard. It's probably harder than a normal business, right? Yeah, I think it's very hard. You know, people talk about this all the time in the context of public companies where, you know, management will have to navigate that every day there's a public share price that's bouncing around.

3:36And do they want employees to interpret their work through the context of the share price, which might be outside of their control, right? So two days ago, the NASDAQ is down 3 % and maybe Meta stock is down 4%. Do you want everyone at Meta to think that their work is not as valuable or they're as meaningful or as worthwhile? No. So you have to, you know, I think a challenge for all foundations and labs and developers of decentralized protocols in the space have to figure out what is my North Star that is not the token price, because the token price will be an unreliable dance partner. But, you know, that exists with public companies as well.

4:22But they're much later in the stage, right? This token product is, it's like a startup that has a public stock, which means that by definition, the stock or the token will be much more volatile. Yes. And then you have this online community where you have all these people who are just angry because they're not building. Yes. They're not building. They're just like shit talking and they don't understand what it takes to build. Yes. Totally. I'm thinking about, I mean, Luca specifically, right? Because he, because I mean, we know him pretty well, but also, yeah, it's so volatile and brutal. And there's not that many people in the space who have like really good values, right?

5:02and and and you just even if you have the right values you get just get put in the same bucket when your token or your nfc goes down right yep yep yep everything in this space is dialed up you know the the feedback loop is dialed up the pressure is dialed up the volatility is dialed up um but again it's not a dynamic that only exists in this space there's there's public companies where they're building great products and services they're growing revenue but their their share price isn't going up and they say why is that we're doing all this great work customers love us why is the share price not going up um and vice versa so uh in in digital assets it's dialed up the you know the token price moves a lot more the feedback is a lot louder a lot more aggressive uh but it's not it's not this is not the only the only industry where that dynamic exists.

5:54You're the founder CEO of Bitwise? That's what I heard. This volatility also affects you and probably affected you a lot in the past. I have a bunch of friends who are trying to build something similar to Bitwise, right? But they're struggling just to raise the money. And it's extremely hard because usually people will come at the wrong time, as always. So they all come invest more at the wrong time. And then when actually would be the right time to invest, they're not interested. How did you navigate that to build what you've been able to build, which is more than$10 billion in asset today? Well, I think that one thing that's kind of obvious, but people don't often think about that much in the space is how important staying power and stamina and endurance are.

6:48and accepting that digital assets, people's interest in digital assets, is a story that is bigger than any one project or company. And that means it doesn't revolve around you or your objectives. And then the question that results from that is, are you willing to stick with it and stick through it? Um, and sometimes the answer is no for companies or teams where they just don't have the patience or they can't hold it together. Um, but I think conversely, um, it's a really, um, it's sort of a, a hard but simple thing that if you just consistently do what you set out to do, that can also really be an advantage.

7:34Um, we have a shareholder who, um, who sometimes jokes, he says, uh, Hunter, my, my favorite thing about you as an entrepreneur is that every time I see you over the last seven years, you're doing the same thing as you were the last time I saw you. Uh, and so, you know, I think at bitwise and for what we do, um, people want to rely on us to be a partner over a long period of time. And so it's, it's essential that we just continue to reliably do what we're supposed to do through thick and thin, through exciting moments and boring moments. And I'm really proud that the organization has been able to do that.

8:09But somehow it's not obvious to people and it's also not easy. Yeah, that's the big part in crypto because there is all these metas, narratives and people always need to get excited by something and they really seem to not understand that building a business, building a brand, building a podcast is just consistency. It's kind of boring, right? Or, you know, content creators. It's just like, are you there when it's good? Are you there when it's bad? Are you there? Can people rely on you? And then probably other people who do the same will realize, oh, this is one of us. But the mindset of people in crypto, or I would say when I could talk about people in crypto, I'm talking about Twitter and all these people.

8:54It's not like that. It's true. It's true. These things can happen very fast. And I think because things can happen very fast, people expect that they will happen very fast. And that is, of course, just not always true. I was talking yesterday with the co-founder of a small startup that I advise. And he's struggling. He's like, markets are hard. Can't we raise money? It's so difficult. After, I think he said something like after two years, one year and a half, I would like to start to see some results. So I told him what I thought. What would you tell him? an entrepreneur who started in crypto a year, a year and a half ago, and realizes it's much harder than he thought.

9:46Gosh, advice for entrepreneurs is a very tricky sport because ultimately the answer is that every entrepreneur should do what they want to do. And that results in some people sticking with things and some people not. And if somebody doesn't want to stick with it, you could advise them to stick with it but that doesn't work if that's not their instinct i mean so what i would say to him is do you want to you know do you want to call it here and move on to something else that's that's exciting to you and if the answer that to that is yes so that's what's speaking to him you should do that and he's like no i love what i'm doing or i love the product we're building or i'm fascinated by it or i love the clients we're serving then you should just keep going and stop thinking so much um there's a there's a paul graham quote uh that i can't cite verbatim but it's something like uh the leading uh cause of death for startups is suicide um and i think it it speaks to this phenomenon which is um people wondering is it not working um should it be going faster do i want to be doing this and so on and so forth and there is a way in which that's productive to make sure that you're actually building something valuable but at the same time there's a way in which it's unproductive and if you think this thing should exist or you just love working on this thing, then just keep going.

11:07So ultimately, entrepreneurs are sort of defined by the fact that they're going to do ultimately what they want to do. So advice is suggesting what they should do, which is sort of at odds with the definition of an entrepreneur. But if he wants to keep going, then my advice to him would be stop thinking about it so much and just keep going. Dear When Shift Happens family, the following message is probably the single most important thing you should take away from today's podcast. If you're serious about your crypto investing journey, please take some time to learn how to self-custody your assets to make sure that nobody can take your coins away, ever.

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12:19And now back to the episode. One of the things I told him was surround yourself with people who are optimistic and honestly add you in my mind not in terms of a if you go to SF you're going to be able to have a hunter as a friend but you know I call you Mr. Optimistic you're always optimistic like and I mean perpetual optimism is a force multiplier but it's very hard to be always optimistic how do you stay optimistic all the time oh gosh well that's a fascinating that's a fascinating question um i i think that part of it is what you choose to focus on um and i am sort of in a fortunate position at bitwise in that we have thousands of clients across the country we've been watching we've been in the space for seven years and if you're looking at seven years of data points and you are not just having one or two conversations bootwise has over 10 000 conversations a year then um when i look at across what is the trajectory of the last seven years what is the current moment and across these 10 000 conversations sure any one of them may not be what you want it to be i am stunned that 2025 is the best year there has ever been in crypto um uh and if if that statement doesn't resonate with you then i think it's worth sort of taking stock of what am i looking at or what am i focused on or what is the metric that causes me to believe that that's not the case and why might hunter believe that that is the case and what is the different set of things he's looking at but uh from my vantage point 2025 there's a quote that my colleague president here, Teddy Vassaro, says it's a Winston Churchill quote.

14:15It's not the end, it's not the beginning of the end, but it is the end of the beginning. And 2025 to me feels like the end of the beginning and a new chapter commencing and gosh, I've just never been more excited for this space. Let's focus on the KPI. On the correct KPIs, right? What do people focus on if they want to stay optimistic and happy in this industry? You said it's the best year ever, 2025. Victor Hugo wrote, there's one thing stronger than all the armies in the world, and that is an idea whose time has come. You borrowed Victor Hugo's coat and adapted it to our favorite topic, Bitcoin.

15:07Bitcoin is an idea whose time has come. Why? Oh my gosh. Yeah, I actually don't even remember who the original source of that quote was. Sometimes it almost feels like the world is reorganizing itself to create the best environment for Bitcoin. So what are some of the elements of Bitcoin? Bitcoin is a digital asset. So it's better when the world is online. Bitcoin is a digital asset. So as people, younger generations who have more and more experience with digital assets age and come into wealth, they're more interested in that digital asset. Bitcoin is a non-sovereign store of value. So the less that people trust governments or a government trusts another government, the more useful it is.

16:05Bitcoin is an asset with a scarce supply. So the more people are concerned about inflation and currency debasement and the fiscal and monetary policies of governments, the more differentiated that feature of Bitcoin becomes. Bitcoin is not an inherently political topic, at least in the United States. And I think we've seen this year that there are Democrats and Republicans who've realized that this is something that matters to their constituents and could be a real blessing to the country. um and uh and so for that non-political nature to um start being perceived um by politicians in washington is an amazing boon so all of those things are moving in the right direction and they're all sort of have been dialing and dialing and dialing and this year you have this tapestry of all of those forces um that uh makes me feel like bitcoin's time has come all of the circumstances um that allow bitcoin to be seen in its best light and its most useful nature um are sort of conspiring around it and it's not that bitcoin has changed it's that the world around bitcoin has changed and it's changed in such a way for a lot of people to appreciate its brilliance and merits so that's what uh that's what makes me uh think of it and there's there's actually like another five more in the weeds set of things you know i'll give you i'll more that's kind of in the weeds.

17:33In the US, banks have really struggled for the last 10 years. Through regulation and fines and a whole host of constraints, they have not been able to innovate. And so they're slowly getting picked apart. You have fintech companies that are taking some of their services. Think of SoFi or Robinhood. You have payments companies that are taking another set of their services. Think of Adyen and Stripe and PayPal. And then you have private credit firms. Think of Apollo or Aries that are taking a whole nother host of their services around credit markets. And so over the last 10 years, the banks have just been pieces, piece after piece is getting pulled away from them.

18:20But banks, like every other organization, wants to serve its customers and wants to grow. So not to be too long-winded on Bitcoin is a great idea whose time has come, but as another example of that, the banks and financial institutions are hungry to have new products and services that are digital in nature that can be an innovation area for their firms and i think that you're going to see in 2025 suddenly banks will be a huge catalyst and proponent of bitcoin and digital assets um how i think that i think people are going to be blown away i think that you're going to see the premise is companies exist to serve customers and when customers want something they can only resist serving that for so long and i think that The dam is broken.

19:16They can't resist it any longer. And in the new administration, the constraints that were preventing banks from serving customers around digital assets are falling away. So how are banks going to start serving the space? You're going to see lending against Bitcoin, where you can borrow against your Bitcoin, which is a huge feature. This is over a trillion. There's over a trillion dollars of Bitcoin. People don't want to sell it, but they need cash to do things. So you're going to see banks stepping in to offer that. You're going to see banks facilitating derivatives and trading. You're going to see banks offering to hold your digital assets for you with the comfort of the regulatory apparatus and the history of a bank.

19:54You're going to see banks facilitating payments. You'll see banks embracing stablecoins and holding or accepting and transferring stablecoins through. I think that there are so many of the services of this space that are very native to what people expect from a bank. And I think this year you'll see at least three major banks start to offer services. And then on the wealth management side of banks, they're also going to start to allow their clients to invest in digital assets. And we're already seeing that. We serve a few banks who are doing it. So I think that the view of a few years ago is that banks were sort of at odds with this space.

20:33And we're unhappy to see its success. And I think a difference in 2025 is that I think banks are joining the team and are going to be a force that compels the space even further. In early 2024, we had the first Bitcoin ETF. I remember. Yeah, that was fun. in early in early 2025 we had the first Bitcoin American president what are we getting in early 2026 I may have said this to you before Kevin but you know my view is that the space usually has one primary storyline and to rewind to recent memory the you know everyone remembers the 2022 storylines, which I don't even want to conjure into this conversation, but people remember what the major storyline of the space was in 2022.

21:29In 2020, towards the end of 2023, and into the beginning of 2024, the storyline became maybe a Bitcoin ETF is finally going to happen. And then into 2024, it became how big can it get? Who's doing it? And then it transitioned to the presidential election in the US. What are the views? Who's going to be the nominee from each party? What are the views of Biden and Trump on Bitcoin? And then Trump goes to Bitcoin Nashville, I want to say the Bitcoin conference in Nashville, and people are blown away. He's speaking at this conference. He says things, there's applause. This is the storyline now. What are the presidential candidates, Trump, Biden, and then Harris?

22:09What are their views? Who's going to win the election? And then after the election, and you saw the market really respond to the election result, the question was, okay, what are the things, there's a president, there's a White House, there's a Senate and a House of Representatives that are all constructive on Bitcoin and crypto. What are all of the amazing things that are going to result from that? Will there be a strategic Bitcoin reserve? Will there be stablecoin legislation? And that has become the storyline. I think that starting soon, maybe three months, maybe six months, a major storyline will be oh my gosh there are all of these giant crypto companies that are going public and if people can rewind and remember in 2021 april of 2021 when coinbase went public that was a that was a huge deal a huge deal for the industry a huge deal for investors a huge deal for the public seeing that there was a giant company in this what they otherwise viewed as a backwater cottage industry.

23:11And today there are over a dozen companies that are major multi billion dollar companies, but they're not public, they're private. And so the public is just not familiar with the fact that this is a huge industry with tons of talented people working in it, big businesses that provide skilled services. And so I think, I think that a major storyline that will kick off in three months or six months is going to be people realizing how big this industry is and how many giant companies exist as they start to go public. Why does that matter that much? What's the difference once we have four, five, six, seven IPOs, private crypto companies listed on the US stock exchange?

23:57I think it matters in two ways. I think the big... all right zoom way way out uh most people in crypto one of the metrics metrics of success one of the things they want to see is more people doing things in crypto it could be investing it could be owning a pudgy penguin it could be using a defy application they just want to see the world embracing this space and doing things they want to see adoption um so if you you know if somebody somebody listening to this conversation thinks of uh the family members that they'll see at the next family gathering and they think about all the people in amongst the family who are not doing something in crypto uh you can imagine what's holding them back they just don't think it's that important or maybe they have a concern yeah but that's still the case for many many many most people are just I don't need to why would I focus on this it's the one here yeah he doesn't care actually most of the guys who helped film this month yeah so we're insufferable and I appreciate you putting up with the insufferableness so we still love you so my so my one of the ways in which I think it's important is it causes people to say wait a minute This is serious.

25:20This is a big deal. It's another lens through which people can perceive that something is a big deal. I remember when Facebook went public, I was in a taxi having a conversation with the driver and he said something along the lines of, isn't that just a startup that loses money? You know, his friends were on Facebook, but he didn't think it was a big deal. And I think that there's just a way in which public companies are one of the main things people look at to understand what's important in this world, what's valuable in this world. And so I think it will do a lot to create a sense of familiarity and a sense of importance around the space at large.

26:02Okay, I have to challenge that. I mean, obviously I agree with that. The problem we've seen in the past is the big problem in crypto is because all these markets, they are trading 24-7, especially the tokens, right? People join when there is a lot of mindshare. Sure. It's usually the wrong time, right? If you look at two examples, Coinbase IPO, Mark Bitcoin top, we're not traders here, but people who don't understand crypto and who will join at a certain moment, oh, Coinbase IPO, I'm going to buy Coinbase stock. I trust stocks more than this Bitcoin thing. Stock down 90%, whatever. Trump launching a meme coin.

26:51For me, like the big problem, we talked about that last time. The problem is, I think you were saying something like Bitcoin or crypto is the most popular asset that is still unpopular. Yeah. For some reason, every time people join it's near some of these big events probably let's say later this year a bunch of ipos could mark the local top for maybe a few years i don't know and the people who join yeah they the only thing that matters to them most people in the beginning is am i making money on this shit or not yeah and i really feel like the coinbase ipo or um or or the trump lounge yeah every time we have a big event like that sure it ends up hurting the new people because it's kind of the wrong moment now if you get hurt you're gonna think that it's shit and later this year we might have a bunch of ipos people like oh that's awesome and then it might mark a top for a few months or a few years and then you have these people who get burned and then kind of like, this is not for me this shit.

28:00Yeah. How do we get out of this? Yeah, well, so I think that one thing you have to acknowledge is that there's a difference between the launch of something and a moment of excitement where there's substance and the launch of something and a moment of excitement where there's not substance. You know, the dot-com bubble in technology is famous for a lot of companies launching and a ton of excitement, but it was short on substance. And that didn't mean that technology companies weren't going to be an incredibly important investment category for individuals or set of companies for consumers. um so you know i think you could disambiguate uh a company that's been around uh let's let's take circle for instance circle going public having invented a category along with tether um being at huge scale in terms of revenue usefulness in the world doing more volume i think now than mastercard uh per year um you could separate that from a coin with the name of the president on it and say, okay, sure, maybe both of those things could have moments where they're really exciting to people, but the underlying substance is different.

29:12So their durability over time will be different. So I, I sort of, um, you just have to, to march into the future, uh, confidently. And, um, and, uh, I think when there's substance there, of course, nobody can control what a market does week to week or month to month. But, uh, what you can control is, is this something with substance? And I think what makes the IPOs so potentially exciting is that these are companies with huge amounts of substance. I had a conversation with someone the other day and I pointed out to him that Coinbase is now worth more than Bank of New York, Mellon or State Street.

29:49And they're like, wow, that's incredible. And so I'm just saying that public markets companies being public it is a familiar measuring stick that people use to understand what is important and valuable in the world and i think having more companies out in the broad daylight like that will be really good for the space for the space's credibility um and then the other thing other thing i would just say is um um yeah uh the only the only way to generally have a good experience with investing in almost everything is to have a long-term time horizon so you know you can be a professional trader and there are some really talented firms and um you know bitwise has has people here who professionally trade and then you can you can try to time you know um the daily market or the weekly market but for the vast majority of people when you're looking at investing in an asset you're you're going to be much happier with your experience if your time horizon is not one week or one month and i i know that that's an annoying comment um sorry guys do here we do annoying annoying comments yeah we're here to do annoying comments um that's why we have to do because people don't people don't understand or people don't want to understand yeah so i mean i i think somebody who bought coinbase in 2021 if they looked at what the company was then the financials the performance i'm not sure i think that the stock is now up from from 2021 i think it's at 400 and now it's probably like two something so if you bought the it went down to 40 something like that 30 or 40 uh i think it listed at 400 something like that so it's still yeah yeah all right the audience will have to do the homework on this but whatever the case i think people would say wow that company is really uh executed has grown massively has done very well um and so uh you know i think that as an investor that's that's uh you look at the things that are that are in the control of management and the organizations you're investing in which private crypto company would you invest in if it was going public this year and if you're not invested already um gosh i'm I'm, uh, there are so many large crypto companies.

32:13I mean, just to, to rattle it off, there's, there's circle, there's Kraken, there's Gemini, there's BitGo, there's Anchorage, there's Chainalysis, there's Fireblocks. Um, and I'm sure I'm, I'm now egregiously, there's BitGo. Um, you know, if, if, if, if I was making an equity investment, it would depend on, on, you know, the price and the financials, but, um, really talented people at each of those firms really skilled and useful businesses. Uh, so I'd look at, I would look at all of them. We also, uh, as it happens, run a large ETF called the Bitwise Crypto Industry Innovators ETF, the ticker is BITQ, and it's a portfolio of the largest crypto companies.

32:58Um, so I own shares of that fund and you know the other thing i might do is just rely on that fund to invest in those companies on my behalf so i don't have to do analysis on all them um but i'm very optimistic about um about a lot of the businesses in this space you mentioned companies

33:21so i talk about corporates you tweeted people want to save in bitcoin instead of cash increasingly corporations do too they have five trillion dollars in cash what's happening on the corporate side this is so you know this this space kevin just like always finds new ways to captivate all of us i think um and almost every year there's some new phenomenon that you see and you didn't maybe anticipate, but you feel, wow, that makes sense.

34:01So corporations are entities that have rights like people do, and they're entities that want to survive like people do, and they're entities that generate income and then want to transport that income over time like people do, and they have$5 trillion in cash and treasuries. And over the last four or five years in the US, the value of that cash has dropped 25%. And they're not happy about that in the same way that people are not happy about that. And I think that Michael Saylor has really paved a road to open up the possibility for corporations to consider what people have already considered in mass, which is that the price I pay for saving in Bitcoin is higher volatility, higher uncertainty, what it'll be worth next week.