How Billion-Dollar Funds Actually Invest In Crypto | Bitwise CEO Hunter Horsley

Scott Melker (0:00)

The biggest institutions on the planet are not scared of the Bitcoin bear market, and they believe that we're likely going into a new bull cycle now. According to a Bitwise survey of the 15 largest institutions on the planet, none of them reduced their exposure during the bear market, and many of them actually increased it. I spoke today with Hunter Horsley, the CEO of Bitwise, about that very phenomenon.

Hunter Horsley (0:23)

It's not just sort of one idiosyncratic case, but then to see a uniform response, which is, kept the asset, want to keep the asset, maybe want to even increase their exposure to the asset.

Scott Melker (0:33)

Why one big green candle is the best marketing for Bitcoin?

Hunter Horsley (0:36)

As the market is demonstrating, yet again, for the hundredth time that it's not dead and not going to zero after 16, 17 years, I think that the positive price performance is very helpful.

Scott Melker (0:46)

But of course, about the future of ETFs, indexes and the kind of products that both retail and institutions will be looking to as the bull market commences. If you want to know where the institutionalization of Bitcoin and crypto is headed, this is the conversation for you.

Today's video is sponsored by 21 shares. A few years ago, getting crypto exposure meant exchanges, wallets and seed phrases.

Today, it can be as simple as logging into the brokerage account you already have. That shift didn't happen on its own. 21 shares launched the first crypto ETP in basket form back in 2018, before crypto ETFs were even on the table in the United States. And they've operated through every market cycle since. Now they run over 70 exchange traded products globally, accessible through many brokerage accounts. Their research is used by asset managers, private banks and hedge funds, and it's all free on their site. Numerous posts a month, including a monthly flows report. Follow at 21 shares and at 21 shares underscore US on X for crypto education and market commentary. Not financial advice, investing carries risk. Products might not be available depending on where you are. Talk to a financial advisor. I think it's fair to say that we've jumped the ship as far as institutionalization of crypto, that these products have become exceptionally popular. I saw some news this week that the SEC now is finally giving some guidance likely on RIAs and their ability to custody crypto assets.

To now, my understanding is that most of them, if they were offering it, were doing it through ETFs. So products like your own, this could broaden that dramatically. So I mean, it's generally, how much of a problem has it been that RIAs haven't had a custody solution? Has that kept a lot of them out? And do you think that this would change things dramatically?

Hunter Horsley (2:57)

You know, I was doing a, we had an event earlier this week with about 80 large wealth firms in Napa. And I had Mike Cagney from Figure come and speak. And he was sharing his outlook and view on how transformative it is to bring capital markets and credit on chain and the opportunities that exist therein. And one of the CEOs of the wealth firm, you know, raised his hand and said, how can I participate in this with my clients? And the honest answer is, you basically can't.

Because in the US, wealth management looks after $40 trillion, but fully relies on a stack of infrastructure that is just not integrated with being able to operate on chains. So when I think about this new rule from the SEC, I don't think it necessarily hugely changes the journey of including crypto in portfolios, which ETFs are enabling and I think really excellent for. But I do think it starts to clear the road to more novel circumstances, where a wealth manager may want to enable their client to park their stable coins with them, and even a step further, as crazy as it may seem today, may want to be able to help that client participate in a vault or own a tokenized asset.

And so I think it's more relevant and enabling for that story line, which is emerging right now, and would then the sort of conventional story line of advisors putting Bitcoin or Ethereum or Solana in a client's investment portfolio.

Scott Melker (5:04)

Right. So we have this have and have not situation right now. Bitcoin, Ethereum, Solana, Hyperliquid Near for you guys, right? Obviously, XRP and a few other novel Doge, etc. So there are a few that people can get access to through ETF. So to your point, RAs aren't going to really be inclined to figure out ways to custody Bitcoin for someone, right? Like Bitwise, BIT, it's totally sufficient for them to give Bitcoin exposure to their clients through the ETF wrapper.