The cryptocurrency space could be on the verge of a massive influx of capital from the $20 trillion financial advisory industry in the United States, once regulators clear up the lingering legal uncertainties, according to Matt Hougan, chief investment officer at crypto asset manager Bitwise.
In a post published on June 4, Hougan asserted that regulatory uncertainty has been the primary reason why financial advisors haven’t increased their exposure to cryptocurrencies over the past five years. However, he believes that the U.S. is finally moving toward regulatory clarity, which could open the doors to the country’s vast financial advisory industry.
“Imagine, then, how much of that $20 trillion will go into crypto when the biggest barrier gets lifted,” Hougan wrote, envisioning a scenario where Wall Street fully embraces cryptocurrencies as a “normal part of the market.”
Positive Regulatory Shifts
Hougan pointed to recent developments in Washington, D.C., as indicators of a “shift” towards greater regulatory clarity. He cited the bipartisan effort to repeal Staff Accounting Bulletin 121 and the House’s passage of the Financial Innovation and Technology for the 21st Century Act (FIT21), which has been widely celebrated by the crypto industry.
Additionally, the Securities and Exchange Commission’s approval of spot Ether (ETH) exchange-traded funds (ETFs) on May 23, after months of speculation, further fueled optimism within the industry.
While acknowledging President Joe Biden’s veto of the SAB 121 repeal as a “minor setback,” Hougan remained undeterred, stating, “We’ve been sailing upwind for a decade in crypto.“
Untapped Alpha Potential
Hougan expressed his belief that the crypto market holds significant “alpha” potential, largely untapped by those outside the “crypto bubble.” He noted that many industry insiders are failing to grasp the magnitude of the regulatory developments unfolding in Washington, D.C.
“If people understood the ramifications of the shift in [Washington D.C.], the crypto market would be at new all-time highs,” Hougan argued, suggesting that the market has yet to fully price in the potential impact of regulatory clarity.
Despite the positive momentum, Hougan acknowledged that no policies have changed in Washington yet, as the repeal of SAB 121 was vetoed, and FIT21’s passage through the Senate remains uncertain before the November elections. “The tide has changed, but the water hasn’t come in yet. Wake me up when the action happens,” he quipped.
