Inflection Point Cross-Post: Crypto Is Forcing Traditional Finance To Upgrade

Matt Hogan reported conducting more sales calls in a single day than at any prior point since joining Bitwise, speaking with eight advisor teams and more than 40 individual advisors, none of whom expressed fear about the pullback and all of whom asked whether the bottom was in. All eight teams expressed interest specifically in stablecoins and tokenization rather than Bitcoin, leading Hogan to predict that stablecoin and tokenization-related plays may lead the market out of its current phase and that Bitcoin dominance could fall in an early bull market. Advisors were weighing two approaches: buying a basket of related tokens including ETH, SOL, LINK, and Hyperliquid, or investing in crypto-linked companies such as Figure and Circle. Figure Finance was cited as a concrete example, having reduced home equity loan issuance costs from roughly three thousand dollars to a couple hundred dollars, cut loan production costs by 93 percent, and reduced median funding time from 42 days to 10 days, though not all of those gains are purely attributable to blockchain.

The entire blockchain architecture being discussed for reinventing finance outside of Bitcoin is valued at roughly half a trillion dollars, which Hogan characterized as small given that many of the largest private companies in the world are financial services firms including Stripe, Revolut, Tether, and Kraken. SoFi launched a stablecoin and was described as the first national retail bank to do so, though Anchorage was noted as technically the first bank to launch one. Anchorage reportedly has 20 large financial or technology companies in its pipeline to issue stablecoins, and adoption was characterized as being in the first inning and reaching escape velocity.

A structural distinction was drawn between stablecoins and tokenized deposits. Stablecoins run on 100 percent reserve and travel more smoothly throughout the broader system, while tokenized deposits run on fractional reserve banking and may work well only within a bank's walled garden. Stablecoins carry no public backstop in a crisis whereas tokenized deposits carry FDIC protection. Hogan challenged the framing that stablecoins are therefore riskier, arguing that stablecoin collateral consists of short-term treasuries while bank guarantees are contingent government backstops, and that tokenized deposits carry a velocity risk similar to SVB-style bank runs but at much faster speed in crypto ecosystems. He also argued that banks are incentivized to spread fear about stablecoins to protect their deposit base and the money creation power that fractional reserve banking provides them.

A consortium of the largest American banks announced creation of their own tokenized deposit network, likely using private rather than public blockchain rails. The speakers drew a meaningful distinction between building on public blockchains such as Ethereum or Solana, which would be net accretive to the broader crypto market, versus forking blockchain technology into a private walled garden, which would not be. The prediction was made that if traditional finance only takes baby steps toward crypto innovation it will not ultimately win against the true global network, consistent with the classic innovator's dilemma. Traditional finance moves including the bank exchange network, Nasdaq and NYSE pursuing 24-7 trading, and CME developing perpetuals were characterized as reactions to crypto pressure, with financial services described as the least technology-disrupted industry in the world and JP Morgan cited as an example of an industry whose largest firm was founded in the 1870s.

The CFTC allowed Kalshi to list Bitcoin perpetuals in the US and clearly stated that the specific instrument is a futures contract rather than a swap, which was identified as a significant legal shift given that prior CFTC enforcement actions had characterized perpetuals as swaps over roughly the past three to five years. The futures classification matters because swaps are bilateral institutional instruments requiring ISDA agreements and are not suited for retail, while futures are more easily distributed broadly. Coinbase is using its FCM status to intermediate certain Deribit perpetuals for US clients under Regulation 30 of the Commodity Exchange Act, described as the first time US persons can interact with offshore perpetuals without the activity being characterized as participating in unregistered swaps. Because Coinbase acquired Deribit rather than creating a separate US entity, it can access Deribit's existing deep liquidity pool without fragmenting it. Kraken is pursuing a different path by listing a perps contract through a designated contract market. Michael argued that the Regulation 30 FCM pathway appears to be the best available option for Hyperliquid to extend access to US clients, but noted that allowing a decentralized protocol to access US liquidity via that pathway would likely require a new CFTC rule rather than an existing option.

Strategy sold 32 Bitcoin worth approximately 2.5 million dollars in what was interpreted as a market test, and Bitcoin price dropped from approximately 73,000 dollars to 71,000 dollars in direct response before falling further into the low 60s and at points below 60,000 dollars. Speakers disagreed on how much of the broader drop was attributable to the sale versus concurrent macro factors including a positive jobs surprise, a 4 percent Nasdaq decline, Blackstone gating its leading private credit fund, and the SpaceX IPO drawing capital from an overlapping investor base. A concern raised was that if Strategy begins regularly selling Bitcoin, the market may reframe it from a leveraged accumulation vehicle to a Bitcoin hedge fund, which is a different underwriting exercise for investors.