Bitwise: Why Institutions Are Buying Ethereum For The Long Haul (Majors vs. Apps)

Bitwise's Matt Hougan argues that Bitcoin has stopped reacting to a series of negative catalysts including Michael Saylor selling, the ByBit hack, and the CLARITY Act failing, and interprets this as a sign the market has reached a bottom. Bitcoin was net positive over July and August despite those headwinds, and the current drawdown of approximately 55 percent from all-time highs is shallower than the 70 to 80 percent drawdowns seen in prior cycles, suggesting market cycles are compressing in both upside and downside. Matt predicts Bitcoin could return to 100,000 dollars within a handful of months, and both he and Ryan expect the next cycle to be a slower, more institutional, fundamentals-driven bull market rather than a retail-driven euphoric rally, making dollar cost averaging more appropriate than trying to time the bottom.

Matt says Bitwise's average client allocated to crypto after approximately eight meetings, and if those meetings occur quarterly that represents roughly a two-year educational process. Bitcoin ETFs were approved in January 2024, meaning institutional investors are now approaching the end of that learning curve. Inflows since July 1st have been primarily into Bitcoin and Ethereum ETFs. Several major wealth management platforms have already approved Bitwise's Solana staking ETF BESOL despite the market being down 50 percent, which Matt interprets as evidence that institutional allocators are making decade-long decisions rather than reacting to short-term price movements. Institutional investors with zero prior crypto exposure tend to view price pullbacks as buying opportunities rather than losses.

Morgan Stanley, Wells Fargo, UBS, and Merrill Lynch collectively control approximately twenty trillion dollars in wealth management assets. Wells Fargo has already added crypto to model portfolios on a small scale, and similar moves are expected at other major platforms within six months. Model allocations of one to two percent across twenty trillion dollars would represent a substantial volume of inflows. Uniswap's market cap of approximately 2.5 billion dollars is cited as too small to absorb significant institutional capital, which is why Bitcoin and Ethereum are expected to be the primary beneficiaries of that wave.

A bifurcated bull market is expected over the next six to twelve months in which institutional capital drives Bitcoin and Ethereum higher while crypto-native capital concentrates on revenue-generating applications like Hyperliquid, Uniswap, Aave, and Morpho. Protocols like Hyperliquid generating nearly one billion dollars in revenue and revenue-sharing mechanisms at Aave, Uniswap, and Morpho have not yet fully reached institutional awareness. Matt argues that Bitcoin is trading differently from other crypto assets because they have different fundamental drivers, with Bitcoin's correlation to gold increasing while Ethereum, Solana, Hyperliquid, and Uniswap trade more like technology and software companies. He predicts increasing divergence in returns across crypto assets over the next decade, though he clarifies this does not mean one goes up while the other goes down.

On long-term price targets, both Ryan and Matt are over on Bitcoin reaching 180,000 dollars by 2030 and over on Ethereum reaching 8,000 dollars by 2030. Both are under on Hyperliquid reaching 500 dollars by 2030, though Ryan says he is uncomfortable with that call and thinks it could exceed that level at some point before 2030. Matt expects Hyperliquid to follow the same pattern of large run-ups followed by significant pullbacks seen previously in Solana and Ethereum, and notes that Hyperliquid's buyback mechanism could substantially reduce total market capitalization even at high prices, making the price target harder to evaluate in isolation. On the Ethereum versus Solana question, Matt describes a market split where ETH is positioned on a monetary basis while Solana is positioned on a revenue-driven basis, calls the outcome indeterminate over the next several years, and says his preferred strategy is to own both.

Matt said red crypto rules are expected within approximately one week and are designed to allow new projects to raise capital without triggering SEC registration, describing them as a regulatory bypass road relative to the CLARITY Act. He cautioned that the first release will only be a proposal subject to a comment period and that Washington moves slower than crypto, but added that people are dramatically underestimating the entrepreneurial energy that regulatory clarity could unleash. Ryan also noted that crypto is now embedded in the S&P 500 benchmark through Coinbase and Strategy, meaning financial advisors who avoid crypto are effectively short crypto relative to their benchmark, and framed accelerating macro deficits and a US government announcement of 600 billion dollars in borrowed capital needed in Q4 as long-term tailwinds for both Bitcoin and gold. Current crypto assets total roughly 300 billion dollars against 670 trillion dollars of global assets, a gap of approximately 2,000 times, which both hosts cite as the scale of the long-term opportunity.