E169: Bitwise Founder: Why Every Major Bank Is Racing Into Crypto Right Now

27:31But that 20 years ago, gold was 3 trillion. Yeah. Yeah. It's all, it's all, it's the, the, the TAM to, to use company building speak, the total addressable market for crypto assets and Bitcoin is growing at the same time as Bitcoin's share of it is growing. So it's share is growing and the pie is growing. And by the way, the backdrop that we, you know, encounter all the time with our clients is some of the old tools that people used. It could be stocks, it could be bonds, it could be treasuries. People are starting to question whether the tools that they used for the last 20 years are the tools they want to use for the next decade.

28:12And in the investment world, that would be described, for instance, as the shift towards alternatives. Those are alternatives to public equities and fixed income. But what's endemic in that is people are in general right now, open-minded and questioning where they're parking all these dollars. I will also say that as interest rates come down, dollars that are currently sitting in fixed income that like the yield will say, okay, the yield's going away. I should move my car to a new parking spot. Where should I park it to store it for the future? So there's a lot that's in flux. The size of the opportunity is just so massive that it almost makes a conversation about 80 ,000 versus 100 ,000 feel silly.

29:01And then really the question is, is this asset going to be a valid, enduring, available, legal option on the table for these$400 trillion? And that's why I'm bullish. Absolutely. And never more than now. And the trajectory of it is that it's here to stay as a valid option. You wrote when the first e-commerce companies launched, the e-commerce total addressable market was small, but it grew and grew and hasn't stopped a structural tailwind to those businesses. This is something people often get wrong about markets in innovation sectors. They look at the snapshot in time and forget that the total addressable market will grow.

29:46The total addressable market for crypto is dollars looking for a home. And it's a one way train. There you go. That's what I think. And I think when you view it from this high level, you can see why people who are financial professionals or investment professionals say this thing could be 10 times larger. Even in that scenario, it's very small in terms of where people are parking their dollars. Yeah. Well, your colleague and CEO of Bitwise, Matt Hogan, thinks it's reasonable for Bitcoin to trade in the multiple million dollars. he gives a$6.5 million number. Wow. That's great news. Maybe we should just wrap up here.

30:32I think we're done. We're done. We just wait for a couple of years to chill out the beach. Where should we hang?

30:40And Avishal actually from Electric Capital was saying 5 to 10 million. Because we're talking about how we're not able to think exponentially and how even in tech, right, This exponential growth for the successful ones, which are few ones, are much bigger than we think because we can't think about large numbers with our brains. That's right. And also how the compounding is actually coming later on. It's not at the beginning, it's later on. Yes. I think Warren Buffett, I don't have the particulars, but I believe that he made the vast majority of his money in the last decade or two of his career.

31:18The numbers are, I think, first million dollar by 36-year-old. and now he's worth I don't know how many hundreds of billions of dollars right so yes and that's compounding at work yeah uh and I think your point about people just sometimes can't imagine large numbers uh we rang the bell uh for the bitwise solana staking etf and you were there and that was a real pleasure at the new york stock exchange the new york stock exchange started I want to say in 17 maybe the 1780s or something like that um from that time until 2020, there was never in history a company worth a trillion dollars. It's been five years, 200 years.

32:00It's been five years since then. And we have companies worth$4 trillion now.

32:08So the extent, and this is something that I think is familiar to people in tech, but if you are on the right side of a growing market. It is such an unbelievable tailwind. And I also just want to now sort of step aside and again revisit the frame for crypto. Every structural tailwind is aligned to crypto's benefit. It's actually unbelievable to me. So if it's all right with you, Kevin, I'd love to actually just step through some of these. Okay, so number one, An element of crypto is people losing trust in institutions, governments losing trust in each other. That over the last five years has increased.

32:53Another element that is conducive to crypto is the global money supply. There's$400 trillion of assets. The more money there is, the more might want to invest in crypto. That is the right trend. Another trend in the favor of crypto is young people getting older. There's a survey from Schwab that asks millennials, Gen X, and baby boomers their preferences by asset class. Maybe not surprising to people, but for Gen X and millennials, it's in the top two out of 10. For baby boomers, it's close to the bottom. With every year that passes, those individuals start to control institutions. And actually, I'm going to stitch on an anecdote just to give you an example of something I think people really have not factored in or thought through.

33:48I got a call from the CFO of a company that had just raised$2 billion of cash. And he wanted to talk about putting Bitcoin on the balance sheet. Figma, the company that went public this summer, had put Bitcoin on their balance sheet about 4 % through the Bitwise Bitcoin ETF. So he called us up and wanted to talk about putting Bitcoin on his balance sheet. They just raised all this cash. I imagined we would have a conversation about the role of Bitcoin, what other companies are doing, how to size it, expected volatility. That was not the conversation. He just wanted to know how he could buy it.

34:31It was already intuitive to him, and he already had conviction, that of course, if he has$2 billion that he needs to transport over time, he wants some of it in Bitcoin. That is an example of a structural tailwind that I think people are underestimating, which is, I think the oldest Gen X is now 50 or thereabouts. over time, these two generations, which have an intuitive conviction in the merits of this asset class, are going to be promoted to run organizations. When they are put in the position to make the decision about doing the right thing, it's not going to be a melee about explain Bitcoin mining to me.

35:12Tell me why this isn't too volatile. And I think things will accelerate. And then the fourth thing I'm just going to add is I mentioned before, but alternatives. It's already a trend in the professional investing world to reconsider. This is just a prevailing trend to reconsider how you're allocating your dollars and your assets and to move more and more of them into alternatives. So all four of these things are running on their own every six months that pass and are conducive to the success of crypto, irrespective of anything else. And so I just think that there's such unbelievable reasons to be bullish about this asset class.

35:57You wrote people overestimated how much Bitcoin would be used beyond the store of value the last 10 years. People are underestimating how much it will be used over the next 10 years. Yep. Can you explain? Sure. I think what I was attempting to get at there, Well, I'll start by saying you may have seen that Guare rolled out the ability for their 4 million merchants to accept payments with Bitcoin. I think a longstanding, you know, it's called a peer-to-peer electronic payment system. A longstanding vision for Bitcoin is that it could be used for payments and as a medium of exchange. I think that, and many people have wondered why hasn't this happened?

36:43There's been work on Lightning Network, David Marcus's company. There's been all sorts of attempts. I think what sometimes people miss with new technology companies, et cetera, is that you don't go from zero to final form in two moments. There's a sequence. A house is built by first digging a hole in the ground. and then you put in a basement, and then you put in the first floor, and then you put in the second floor. Similarly, for new technology or new business, there's a sequence. Bitcoin as a new technology, in order for somebody to want to accept it as payment, they first need to agree that it has value.

37:31So the sequence that I think will, in hindsight, have unfolded is there will have been 15 or 20 years where the world debated whether Bitcoin has value. and then once everyone agrees that it has value and we're getting closer and closer to that, then they'll start to be willing to accept it as a payment. But of course, if the world doesn't agree on it's having value, it's going to be very hard for somebody to want to accept it as a payment. So I think that people maybe overestimated its payment use case in the last 10 years, but have since then sort of stopped expecting that to happen. And I think over the next 10 years, it will be a ripe time wherein its value is recognized and it can start to be used for payments.

38:23We had a conversation around the coffee in Singapore that you mentioned before and something that you came up with was something I hadn't really thought about too much but I think you think about it a lot, which is that, and I think most people don't realize it either, which is that crypto is creating a new wealthy elite class or new wealthy elite that is thinking differently and voting with their money differently. Do you want to elaborate on that? Sure. And how this could basically affect or change everything in our world. there's so much that's exciting about about crypto um and this is one of the most exciting dimensions to me uh again i want to zoom way out and um and introduce to the the thought space of this conversation that the only thing that has been consistently true in this world is that it constantly changes.

39:26In 300 years ago, whenever the pilgrims first came to America, it was a class of poor rejects. 300 years later, it is the richest, most powerful nation in the world. That's a change. We can, of course, talk about some of the other storylines in America, the industrial revolution. We could talk about electricity, so many things. But I just one establishes a premise that it's not the case that God created the universe or the Big Bang created the universe, and we finally arrived at the permanent, non-changing destination. That is absolutely unlikely to be the case. What is much more likely to be the case is that we're in the middle of a perpetual cycle of change and journey.

40:21And so if you accept that assertion, then things will look different in 20 years. And there's a question about how will they look different. Of course, we can talk about crypto being adopted as an asset class and as a technology. And I believe that that will be an important change. As a byproduct of that, the owners of crypto will be endowed with substantial resources. And this will be a class in the same way that in maybe a prominent example for Americans would be that the the building of the railroads in sort of the 1860s through the turn of the century created a class of wealth. If, you know, we're in the Bay Area right now, the Stanford University is named after one of the founders of the Central Pacific Railroad, who made his fortune creating the first railroad that connected California to the East Coast.

41:20uh on knob hill where the fairmont is um there are a bunch of mansions the crocker mansion was there crocker was also the founder of a railroad uh hopkins um huntington these are people who made fortunes from railroads for instance people know carnegie people know vanderbilt that was a class who participated in a moment of opportunity that was created by what was possible then, railroads. And they had certain views about the world and they did certain things with those resources. Crypto will introduce a new class of people with resources to affect their views on the world. I think it is so unbelievably exciting because it is going to allow people with different values or different backgrounds or different communities to be in a position to express themselves.

42:15I think you saw little revealings of this, first with NFTs. So for instance, if people know Damien Hirst, one of the most expensive modern artists, he has a piece that was sold for maybe$20,$30 million, which is the corpse of a shark in formaldehyde in a glass case. And that's modern art. And he sold that to somebody for$20 or$30 million. People don't think that's ridiculous. Then the crypto class that we're discussing shows up and buys a punk or an ape or a pudgy penguin for$20 ,000. and in my mind that is the same thing which is a different community who is expressing themselves through art in this case.

43:17But that of course sort of was surprising to the world that there was this abundance of resources but a very different view on what was worth deploying them towards in that case, NFTs. I think in the 2024 elections in the US, here again, you saw this crop up, wherein the crypto industry in America was so enraged by the treatment under the prior administration that a pretty disparate group of actors decided to come together and do something about it and put together more money than any other industry in America and was extremely efficacious in, I believe, Fairshake identified 34 congressional candidates that they wanted to see win, who had constructive views on fostering the development of crypto in America.

44:06And I believe all 34 won or something along those lines. Dave McCormick in Pennsylvania taking the seat from Bob Casey, who had been in that seat, the Senate seat for 20 years, I want to say. Bernie Moreno in Ohio. So that was another moment where I think the world saw a lens into the fact that the crypto community has resources and has views just like every other community. Wall Street has views on how the world should be. The tech community has views on how the world should be. Real estate, you know, people who made fortunes on real estate, people who made fortunes on oil, have views on how they want the world to be.

44:41And they put their money behind those views. And that might be endowing a university, that might be buying a shark in formaldehyde, that might be supporting a certain political candidate. And I think it's incredibly exciting that there's a new community around the table, which is the crypto community. And I think that'll be one of the most fascinating elements of this space over the next 10 years. Yeah, probably still way underestimated. and it's still probably a small, the crypto wealth is still very small compared to what it's going to be in the future based on what we talked about before. Right, exactly.

45:16So it's about$4 trillion today. And you already see some brands sensing this. I want to say that, oh, I'm out of my depth, but that who's the creator of Birkin Bags? Forgive me for not remembering this. These are very expensive handbags. Hermes. Hermes.

45:37Hunter Horsley:Yeah. I believe Hermes undertook a token project, an NFT project. Why? Because they serve people with lots of disposable wealth. And they're sensing that there's a new pocket of people who develop wealth in crypto who have different preferences and proclivities. And so I think that this is, again, a second order effect. This doesn't have to do with moving capital markets on chain. This doesn't have to do with institutional adoption. This just has to do with who controls resources. But I think you'll see more and more manifestations of this dynamic. Quick one. I want to thank our partners who help us make this show possible.

46:21Thank you, Trezor. My favorite cold wallet to store my crypto and make sure I sleep well at night. If you want to order a Trezor wallet and sleep well at night too, You can use my promo code WSH10 to get a 10 % discount. Big thanks to my friends at Bitwise Asset Management for backing today's conversation. Bitwise is a global crypto asset manager with$11 billion in clients' assets and more than 70 crypto solutions. And that includes ETFs, index funds, SMAs, custom option strategies, staking, vaults, and more. However you want to invest in crypto, the experts at Bitwise have you covered. Tell me what's on your mind these days that you think is relevant for an audience of 25 to 50 year old investors who aren't necessarily super crypto savvy.

47:11Well, I think for an audience like that, the most important thing is to remember to like and subscribe to when shift happens. Only 69 % of you will... After this is going to be 68.

47:29um gosh uh i actually that's very important it is thank you for doing this yeah yeah um our best supporter of um i i i think i i would have a few messages the the first thing is is what we've talked about before um which is that um uh i would really convey you know uh adopt a perspective or find access to information that helps you see why this is the most incredible moment in crypto. And if it doesn't feel like that, think about what parts of the story you may not be seen or the people around you or where you're getting information that may not be seen. But the first thing I can say is, hey, good news.

48:12Oh my God, it's happening. And it's going to change the world. And the people in the space are going to be a part of that. A second thing that I think is new in this chapter. Let me again sort of make a comparison. When new technologies go mainstream, things change. So for instance, Steve Jobs and Steve Wozniak met each other in the Bay Area at a thing called the Homebrew Computing Club. And this is a place where people who cared about computers would build their own computers. They would solder them themselves. You could ask them about L2 cache. You could ask them about CPU gigahertz. You could ask them about RAM speed.

48:58And they would be fascinated with all those things. They probably have opinions on how much L2 cache your CPU needed. Okay. Fast forward to today, personal computers are no longer a hobby. They're a mainstream phenomenon, of course. And if you ask most people you know to tell you about their CPU, they're just going to say, I got one of the good ones or one of the fast ones. They won't be able to tell you how many cores it has. They may not be able to tell you who the manufacturer is. They may not be able to tell you the gigahertz speed, if it's overclocked, because part of going mainstream is simplifying and abstracting and a group of people who want the thing but don't care as much about all the details.

49:36crypto is moving from early adopters only to now inviting and onboarding mainstream investors that i think is also a cultural change for the industry and for for potentially some people who watch the show because the incremental investor may for instance not be on twitter uh or they may not know asset number 17 on coin market cap. In fact, this is sort of mind boggling. Many of them don't know beyond Bitcoin how the market caps compare beyond Bitcoin, which is remarkable.

50:16And part of being a mainstream investor is defined as this is not your primary focus. so the the mainstream investor who's engaging with the space now this is not their primary focus what's the implication of that for this group a month is really fast a quarter is fast and a year is a reasonable time frame i think in crypto we're used to an hour is fast very fast a day is pretty fast a week is a is a meaningful time frame and nobody can remember what happened four weeks ago. I would say a couple of days ago. A couple of days ago. Exactly. So I think that one of the other cultural developments is that there's now sort of a mismatch with the tempo that the early adopter communities are used to seeing progress on.

51:02And now so much of the mainstream investor segment that's coming on board to take the space further just moves at a different pace. And so it's not as intuitive, the progress. Those I think would be the two things. and uh and then the third thing i would say which you know we always talk about but um i would just say um be optimistic for things to work out not just for the things that that you have conviction on and passionate about but for the space at large because like it or not um the space is is tied together and if crypto does well it is if all of crypto does well it's the best thing for the the blockchain or the crypto asset that you care the most about.

51:50It's much better that all of crypto is doing well. And I think that that mindset is the most productive one for the stage we're in now. Yeah, that's why this podcast is about talking to everyone. Yep. Not focused on specific blockchains. It's actually easier probably to start a podcast as specific on blockchain. You get the sponsorship, all that stuff. you get kind of like, oh, this is the person to listen to. But that's not what we do here. We want to hear, to listen to everyone, even though some are harder to talk to or to interest, as we talked about, off the record. Right, right, right. Some people just don't want to make it happen, right?

52:36So we don't insist too much. Thank you so much, Hunter, for doing this. Thank you for being one of our earliest and most amazing supporter in our mission to make crypto look more credible and less weird to the outside world. I've said it to you before, and I'll just want to say again, thank you, because I think that there are so many incredible people and teams and visions and journeys and stories in this space. and I think when shift happens is building sort of the library of Alexandria of the emergence of what I think 50 years from now people look back and say you know how did that happen or I never even heard that story you know it's as if you could you could watch a 90-minute interview with with Carnegie about his journey to building a shipping empire so I'm grateful to you because I see it as a full-time person, the incredible efforts, the incredible people, the wild journeys.

53:38But the fact that you take the time to go be with people and collect these stories and then present them for people, I think is so extraordinary. We've talked with Raul Parra actually multiple times about how crypto is at this moment where music was in the 70s, right, for example. And so you're able to talk to the future megastars. but there's probably not a place where all these stories are kind of collected together from 1970s or 80s or like big new trends and uh and that's what we're doing here people will forever be able to go back and see your conversation with ben from bybit and that moment in time yeah that's just captured now yeah even as memories fade and i think that's as an example extraordinary and that's that's also why we try to do most i mean this one is very timely right ben from bybit just after the hack but in general we try to make them timeless so someone can come back a year later for example when we had jeff from hyperliquid at tg moment the podcast is pretty timeless they can go now a year later or a year and a half later whatever uh and look and say oh shit i wish i had watched that at that moment right yeah but still understand the person and be like okay now the thing is kind of maybe more de-risked i trust the guy because for us is that do i trust the guy or the girl or the person who is behind the project because if you trust the person we live in a personal brand world and leadership world and if you trust the person more you're more likely to trust what they're building or what they're doing right totally totally the idea i i would actually just one other thing which is which is uh you know i think that is sort of endless pursuit in crypto is to understand what's going on and what to expect people just always wondering about those things uh the challenge is that it it's very hard to get all the information to construct an accurate mental model from twitter i do think that if somebody was just trying to do research and study the space and understand where it's going if they just sat down and watched 20 hours of when shift happens interviews they could import a lot of information that that you're able to garner from guests.

55:47So anyways, count me as a fan. It's more basic kind of conviction rather than, oh, what's the latest thing? What's the latest feature? What's the latest thing? Most of crypto news or most of the news in general is actually very timely, right? Which is how you get the clicks. Yes, yes. Right? But like if you want to build a fundamental idea or conviction on the space, you need to listen to the basics and basic stories and be like, price is not moving, but look what's happening, right? And then you listen to this over and over again every week, every Thursday, and then at some point it becomes second nature.

56:26And you know why you're investing every month and you DCA, dollar cost averaging into Bitcoin and why that's the right thing to do. And think about also, I would say, you know, most, you interview extraordinary people. You know, I shared with you a story about management at a very large bank saying they're going from zero to 500 miles an hour. You know, I work 78 hours a week. Our conversation here is a synthesis of every piece of information that I've seen since we last spoke. And I think most of the people you interview are very interested in getting the future right. and so they're sort of presenting this synthesis of you know tens of thousands of hours of information into 60 minutes with the interpretive lens of how how can we make sure that we're seeing it clearly so that we can navigate our organizations or activities so i just think that there's a you know i i i consume all of your shows because i think it's extremely dense and valuable and rare information well hopefully you'll consume this one too i won't watch this one Thank you so much, Hunter, for doing this.

57:32Total pleasure. As you probably know by now, I host some of the biggest names in Bitcoin and crypto on my podcast. But a lot of the best stuff never makes it on air. The Shift newsletter is where I share that raw behind the scene alpha, the insights, stories, and lessons straight from my guests that you won't hear anywhere else. If you want the real insight take on Bitcoin and crypto, join my newsletter, The Shift, in the description down below. Thank you.