Doge was developed as a joke; it’s not a serious blockchain: Bitwise Asset Management CIO

Matt Hougan, Bitwise Asset Management CIO joins the Yahoo Finance Live panel to discuss rolling out the first ETF To Use ‘Crypto’ In Its Name as well as the Dogecoin outlook.

Video Transcript

ZACK GUZMAN: I want to shift back to the conversation we were having before he stepped to the podium with Bitwise Asset Management CIO Matt Hougan here. And Matt, let’s get back to what we were talking about, which is all about this new ETF tied to the picks and shovels in the crypto space. Talk to me about who this is for and why you’re launching it now.

MATT HOUGAN: Absolutely. Of course, first, should say, glad to see the progress on the pipeline. As we were talking about, we are excited to launch the first crypto equity ETF BITQ, holding a portfolio of 30 companies that are pure plays on building the infrastructure of the new crypto economy. It’s really designed for investors who are thinking about getting into crypto, but perhaps are uncomfortable holding Bitcoin, Ethereum, or other assets. These familiar companies, these companies like Coinbase, like Silvergate Bank, generate significant revenue growth, significant profits, are a way to get exposure to the exciting growth of crypto without some of those challenges of holding crypto assets directly.

ZACK GUZMAN: Yeah, and Matt, I mean, I’d be remiss if I didn’t point out that this fund also includes mining companies like Bitfarms, which is interesting on a day like today, given Musk’s focus in on mining. Well, Bitfarms comes from hydropower in Canada there. So it’s kind of a use case of clean energy in mining. So curious to get what you’ve made of the way that he’s highlighted sustainability issues around Bitcoin, your reaction to that, and whether you’ve heard issues similarly raised by the investors you work with.

MATT HOUGAN: Oh, it’s a great question. It’s something the crypto industry has been talking about for a decade. I know that Musk just got to it yesterday, but it’s been a hot topic in crypto. Look like many industries in the world today, crypto is moving from a carbon intensive past to a more carbon neutral future. You mentioned Bitfarms with the use of renewables. Renewables are actually 40% of the energy mix that powers Bitcoin miners.

And that percentage is increasing. We all want to get to a sustainable future for the crypto industry, their various pathways toward that. Some of the companies in this ETF, in our index, are at the forefront of moving us down that pathway. But look, we’re right to talk about the possible environmental consequences of crypto. I don’t think it overwhelms the positive benefits, but it’s something that is worth focusing on.

EMILY MCCORMICK: Matt, this is Emily. I wanted to ask, investors who’ve maybe been on the sidelines when it comes to crypto, what would you say to them about the benefits of investing in an ETF where you aren’t directly investing in to cryptocurrencies, but you’re exposing yourself to the fundamentals of the companies that are included, the corporate governance, and other things that are not necessarily directly tied to crypto.

MATT HOUGAN: That’s absolutely right. The beautiful thing about an ETF is you can buy it in your brokerage account. You can buy it in your Charles Schwab or your E-Trade or your Fidelity account. It trades like any other ETF like SPY, like EEM, like GLD. And you can buy it today. You know, this is just a great way to play what’s going on, the exciting growth in the crypto industry. Later tonight, we’re going to have Coinbase report its Q1 earnings. We’re going to learn that it did more revenue in Q1 than it did in all of 2020.

We’ve all seen the spectacular growth going on in crypto. We’ve all watched Bitcoin’s price go from a few thousand dollars to $50,000. But many investors are on the sideline. This is a way to buy companies. You can understand their earnings. You can value them with discounted cash flow models. And you can buy this ETF in the comfort of your brokerage account. So it is a good way for investors to get exposure to this space without the challenges and complications of custodying or holding Bitcoin directly.

ZACK GUZMAN: Yeah, and I mean, when we talk about a name like Coinbase, too, it’s one of those companies that’s extended its, I guess, exposure well beyond just Bitcoin now when we talk about all the other assets on the platform and the boom in DeFi. And you guys also have the DeFi fund you’ve set up there, which is up, what, about 30% over the last month, while the Bitcoin fund that you guys have is down by about 9%, given what we’ve seen play out with Bitcoin. But we’ve heard from a lot of investors, talking about how you got to be exposed to DeFi there. And that’s a bit harder for institutional investors to access. So talk to me about what you’re seeing there on the DeFi space, the excitement around that, and maybe the inflows you’ve seen as of late as that’s taken off.

MATT HOUGAN: Great question. DeFi is one of the most exciting, fastest growing corners of crypto. Investors not familiar with crypto can think of it like a sector of crypto. The core idea behind DeFi is to use software and automation and crypto-enabled blockchains to disrupt traditional financial services, to disrupt banks, to disrupt exchanges. And the space is exploding. The largest DeFi asset, Uniswap, the largest holding in our DeFi Index Fund, competes with Coinbase. Last month, it did $90 billion of trading volume. It’s a decentralized exchange.

DeFi is here today. The mainstream media hasn’t caught up with how present it is, how real it is, how it’s generating real revenue. We created the DeFi Index Fund to give investors an easy way to buy broad-based exposure to all of the most exciting crypto assets in the DeFi space. So just as we’re doing with BITQ, our crypto equity ETF, we’re doing with the DeFi Index Fund, which is a private fund available today to accredited investors.

EMILY MCCORMICK: And just thinking more broadly, we have been seeing thematic ETFs have a stellar past year. But things have started to cool a bit recently. We just had Bloomberg report yesterday that traders have pulled out about $1.6 billion out of thematic funds in May so far. Do you expect this kind of volatility to be a concern for the ETFs, like the one that Bitwise is rolling out?

MATT HOUGAN: Yeah, I think it’s a diverse landscape of ETFs. I think talking about thematic ETFs as a general whole probably oversells it. There are different themes that are at different stages of their growth and development. My personal view is that crypto is still in the early stages of its growth. We’re more like in inning 1 than in inning 9. Most investors are still on the sidelines. So will it be volatile? Of course, it will be volatile. These are high growth, early stage, exciting companies.

But the long-term outlook– and this is a long-term investment. I don’t think people should think of this as a short-term play. The long-term outlook for the crypto industry is strong. It’s been the best performing asset class for the last one, three, five, and 10 years. From the crypto asset perspective, the companies in this ETFs are fast-growing and very profitable, as we’ll see again tonight with Coinbase. And so, people should be careful about it. They should have the right long-term perspective. But I think there is continued growth coming in the thematic ETFs space, as long as you’re focused on the right themes.

ZACK GUZMAN: Matt, lastly, I wanted to ask about Doge because, you know, it’s not in this fund that we’re talking about here. Of course, Doge not necessarily a DeFi project either. But you called it a dangerous joke. And that got a lot of people riled up. When we talk about Doge, obviously, it’s one of those things that’s kind of just out there, Project [INAUDIBLE]. It started as a joke, though. So what has you so concerned about Doge particularly when you look at that?

MATT HOUGAN: Yeah, well, Doge is not a serious crypto technology. It’s not a serious blockchain. It was developed as a joke. It doesn’t even have its own mining network. There is limited development activity in the space. What worries me about it is that people are buying Doge, retail investors, and others are buying Doge simply because the price has gone up a lot. And the price could go down a lot as well.

I’m more focused on crypto assets and blockchains like Bitcoin, Ethereum, and other major crypto assets where there is significant development activity, where there is significant growth in use cases. There is, of course, a world where Doge becomes important, right? Elon Musk is tweeting about whether Tesla should accept Doge as payments. I just think people should approach it skeptically. Evaluate it as you would any technology. Is there real development activity going on there? And then make their decision. Don’t just buy it because the price is up because it can come back, down just as fast as it went on.

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