Matt Hougan has made a career shift from ETFs to cryptocurrencies. He jumped from the traditional fund market to a cryptocurrency index-fund manager, a market he described to Bloomberg as a “generationally significant opportunity with interesting challenges.”
He joins San Francisco-based Bitwise Asset Management as vice president of R&D. He made a splash with his call that cryptocurrencies are on their way to being a multi-trillion dollar market, though he admits to Bloomberg cryptos remain an “early-stage technology” that could be a bumpy road at times.
“The pathway to $1 trillion eventually is fairly certain. How we get there is going to be volatility and uncomfortable. I think we’ll get there pretty soon, though. I wouldn’t be surprised if we ended the year with a cumulated market cap of over $1 trillion. But I wouldn’t be surprised if there were a significant drawdown again before we got there”, Hougan told Bloomberg.
For instance, Hougan suggests the cryptocurrency markets could suffer a 50% drop before attaining a $1 trillion combined market cap. And as the leading digital coins have proven so far in 2018, volatility is the name of the game. “I think for investors the important thing to realize it’s an extremely volatile, high-risk asset. That’s why you have the high potential returns”, he said.
To the naysayers, who could never imagine bitcoin competing with gold or functioning in payments/money transfer, he politely suggests they’re shortsighted and forgetting that “tech increases at an exponential rate.”
Risk & Reward
Bitwise’s newest hire offered some perspective on an otherwise dreary day when the leading cryptocurrencies were all trading in the red. First, he outlined the risks that cryptocurrency investors are exposing themselves too, which can be summed up accordingly:
- network scaling
- bad actors
But he didn’t leave it there, pointing next to the potential rewards for being an early investor in cryptocurrencies.
“You will be compensated with high potential returns for taking those risks now”, he said, pointing to three-to-10 years ahead when cryptocurrencies will be a “more established asset class”, at which time volatility will be more akin to what’s normal in the equity and bond markets, with higher upside potential.
Hougan is no stranger to emerging technologies, having joined the ETF space when it was still a nascent technology before the funds basically made their way into just about every retirement plan in America.
Meanwhile, the Bitwise Hold 10 Private Index Fund, the industry’s maiden cryptocurrency index fund, holds the top 10 digital coins by value. The reason, Hougan suggested, is because the leaderboard can shift. “The first mover isn’t always the winner”, he told Bloomberg, adding:
“The large caps have the largest chance of success but nothing is guaranteed. Investors would be foolish to bet on a single cryptocurrency – you want to diversify your exposure”, advised Hougan.
In his new role, Hougan will be focused on classification and analysis of cryptocurrencies. Bitwise’s decision to court ETF veteran Hougan suggests that a bitcoin ETF could be on the horizon.