Author: Matt Hougan, Chief Investment Officer at Bitwise; Translated by: 0xjs@Golden Finance
Today, the pace of development in the cryptocurrency space is astonishing. Ideas that seemed absurd a month ago now lie somewhere between possible and probable.
Just in the past week:
* Senator Cynthia Lummis (Republican from Wyoming) has called attention to the 'cavalry' of cryptocurrency supporters arriving in Washington and shared a proposal to allow the U.S. government to sell part of its gold reserves to buy one million Bitcoins.
* Attorneys General from 18 states have filed a lawsuit against the U.S. Securities and Exchange Commission, accusing it of 'serious overreach in regulating the cryptocurrency industry.'
* BlackRock has expanded its tokenized money market fund BUIDL to five new blockchains: Aptos, Arbitrum, Avalanche, Optimism, and Polygon. Notably, the U.S. Securities and Exchange Commission had previously labeled one of the assets related to these blockchains as 'securities.'
We will wait and see what happens next week.
For the past four years, the entire industry has faced legal disputes, regulatory uncertainty, limited access to basic banking services, and hostilities from Washington. All of this has been swept away, replaced by a White House, Congress, and regulatory bodies that support cryptocurrency.
(In some ways, the shift in sentiment is almost surreal. For example, Elon Musk is creating a new government agency, which is actually named after a meme coin: the Department of Efficiency, abbreviated as DOGE.)
All of this suggests that anything is possible in the cryptocurrency space over the next four years.
What does this mean for investors?
As an investor, it is easy to feel optimistic about cryptocurrencies. However, it is much more difficult to know exactly which assets are worth being optimistic about.
Aside from Bitcoin (which is the leading currency asset in the cryptocurrency space and should be the foundational asset for most cryptocurrency allocations), the future prospects are unclear. For instance, there is great anticipation for programmable blockchains like Ethereum and Solana, but there is a general divide on how things will actually unfold:
* Will Ethereum maintain its current position as the most valuable programmable blockchain, or will it be surpassed by newer/faster/cheaper blockchains like Solana?
* If Ethereum remains dominant, will ETH tokens or Layer 2 networks like Arbitrum and Optimism that help Ethereum scale gain more value?
* What about promising newcomers like Aptos and Sui? Will they surpass Ethereum and Solana?
* If regulations become clearer, how much value will crypto-based applications like Uniswap gain?
Ask ten cryptocurrency experts these questions, and you will get ten different sets of answers.
You can see the impact of this uncertainty in the recent returns of various crypto assets. How many people expected XRP to rise 77% last week?
As an investor, you face two choices. You can try to pick winners, researching dozens of different blockchains and their unique token economics and fundamental drivers. Or you can bet on the entire field by purchasing a diversified index fund that holds leading assets weighted by market capitalization.
The first fund launched by Bitwise in 2017 was the world's first cryptocurrency index fund. We envisioned it as the 'S&P 500 of the cryptocurrency space,' a simple way for investors to gain diversified exposure to the field. The idea at the time—just as it is now—was that buying the entire track was a wise decision.
Sometimes you don’t know at first which will prevail, AltaVista or Google, but you know that internet search will change the world. Indices allow you to participate in the development and prosperity of new fields without having to analyze details or make specific bets.
For bold, comprehensive, and diverse innovations like cryptocurrency, as well as innovations that suddenly enter a new era of possibilities, this strategy seems more relevant than ever.
