Matt Hougan, the recently hired Vice President of Research & Development for Bitwise, has come from a different career to work full time on cryptocurrencies. He was the leader of an Exchange Traded Fund before becoming a cryptocurrency index-fund manager. Now he has opened up a bit about why he decided to move from stable and decades old traditional finance industry to relatively more volatile and new cryptocurrency markets. And the reason is truly mind-blowing: because he expects cryptocurrencies to grow up to $1 trillion in market cap.
Yes. Speaking recently to Bloomberg he said that while cryptocurrencies are still an early-stage technology that can be bumpy roads at times, he believes that they can pretty soon reach the $1 trillion market cap. How soon? Maybe by the end of this year, he said.
“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.”
Elaborating further he told Bloomberg that it shouldn’t be surprising if crypto markets suffer a 50% drop before they reach the $1 trillion mark. And as we’ve seen in recent spikes and crashes of cryptocurrencies, volatility is the name of the game. He added:
“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.”
There’re Huge Rewards, Because There Are Huge Risks
Moving further on the subject he laid out all the risks and rewards of cryptocurrencies. First of all he summarized the risks to which crypto investors are exposed, which include regulatory risks, risks of technological change, scaling related challenges and the risks of bad actors being active in these markets. Due to all these risks the chances of losing money in crypto markets are higher than those in any other market. However, with greater risks also come greater rewards. So Hougan then went on to explain the rewards part of cryptocurrencies:
“You will be compensated with high potential returns for taking those risks now.”
He said this while pointing towards a 3-10 years window when cryptocurrencies will become a more established asset class. By that time people who’re now taking these risks in crypto markets will be rewarded with huge returns. He also predicted that by then the volatility in crypto markets will be similar to what we see in existing bond/stock markets.
Hougan’s opinions matter, because he has seen many financial markets evolve in front of his eyes. He had joined the ETF industry when it was at a nascent stage in comparison to where it is today. In his new role at Bitwise he’ll work on classification and analysis of cryptocurrencies. The decision of company to hire him also suggests that a Bitcoin ETF may be around the corner.