Bitwise CIO on six predictions for 2025

Transcript

[Music] GM good morning welcome to the milk Road show The Daily crypto show where our crypto news hits like a perfectly timed high five with no awkward misses I'm your host Jay Hamilton and today we are joined by Matt Hogan CIO of bitwise a leading crypto fund their Bitcoin ETF has crossed four billion in assets under management in less than a year since launching in today's episode Matt is going to walk us through his six predictions for 2025 including his predictions on price targets for the majors Bitcoin eth and soul we're also going to talk about what Matt expects from the Bitcoin ETF and from the eth ETF and we're going to talk about some major political and Regulatory decisions

that Matt expects to come in 2025 and what those would mean for your bags now before we jump in I don't know if you guys are subscribed to the milk Road newsletter but if you're not you're going to want to make sure you subscribe it's five minutes in your inbox every day to give you the download to stay up to date on crypto which as you guys know is so freaking hard it moves so fast so make sure you subscribe hit the link in the show notes if you're not already subscribed before we jump into today's episode and hear from that we need to take a minute to hear from our sponsors meanwhile is the world's first licensed and regulated life insurance company built for the Bitcoin economy they do everything in BTC you pay in BTC they pay claims to your family in BTC you

take out policy loans entirely in BTC when you need liquidity protect your family from life's uncertainty and a broken Financial system build intergenerational Bitcoin wealth while the cost of living skyrockets in dollar terms plus get all the tax and legal benefits of life insurance now in Bitcoin visit milkroom meanwhile to join the wait list and get early access to the world's first Bitcoin life insurance Matt welcome back to the milk Road Show I'm so excited to be here thanks for having me back okay I got to start with you put out a tweet the other day and I just want to read this because I thought it was such a great tweet and I want you to comment on it before we jump into your

predictions you said 95% of the world's largest investors have zero exposure to bitcoin but 95% of all Bitcoin is already owned that's the thing right that's the thing about this space uh you know I'd spent the past week sort of reting my thesis on the space because everyone I talked to was so bullish and when I hear everyone being bullish I like to try to poke holes at my underlying assumptions and I kept coming back to some of these fundamental numbers I like this one because it's symmetrical but I think it's approximately true and that 95% is going to have to get allocated to crypto they're going to have to they're going to have to convince the 95% of the

Bitcoin that's already owned to shake loose some Bitcoin or Shake loose some crypto and it's pretty exciting so that's where that that's where that tweet came from from reer the space and coming out the other side even more bullish than I was before so I I was just going to ask is that is that how you came out because I have the same feeling right now where I keep checking myself and same with our team it's like can we be this bullish do we need are we missing something yes yeah I did come out more bullish I think it's really important to do that I mean I went back I looked at you know how many in Bitcoin specifically how much Bitcoin are etf's going to buy how much our corporations going to buy how much our govern govern

is going to buy where is the sale process going to come from and in in broader crypto you know is the growth of throughput real are there really interesting real world games and applications being built and I just kept coming up with yes so yeah I exited even more bullish I I loved 2024 what an incredible year but I think 2025 may actually be even more exciting that's that's what we like to hear okay let's start with what's your first prediction for 2025 yeah my first prediction is that the Magnificent 3 Bitcoin eth and salana are each going to make all-time highs in 2025 I think coinbase Equity will as

well to bring in our trafi allocation to crypto you know I think Bitcoin eth and salana are all going up and going up substantially I know you before this you asked me if I would do price targets I'm willing to do price targets um okay you know started last year Bitcoin was at 40 we said it was going to go to 80 now we're in the 90s when we record this I think Bitcoin will end the year at 200,000 I think it's going to double again next year and I think if we get a US Government strategic Reserve that actually buys or is on Pace to buy a million dollar Bitcoin then I think that two could be four or five um I think it could be really substantial what do you

think the probability of the US Reserve happening in 2025 is I think the probability of the US not selling the 200,000 Bitcoin it has is very high 80 90% I think the probability of it agreeing to acquire another million is probably something like a third or a quarter which is not zero right it's not zero it's not zero at all but the reason our forecast is 200k is because that assumes that that doesn't happen right so certainly the last few weeks have taught us a lot of crazy stuff can happen I think it's you know 25% or 30% chance is pretty good considering you're talking about

something that will ultimately Drive bitcoin's price to a million dollars or more um but I don't think it's the most likely scenario right and let's be clear you're not saying that it wouldn't happen in 2026 I we're just asking that would it happen next year which to me feels it would require a lot of things to go right and exactly as they would need to go from just the political process for everything to agree that that's what they're going to do that is exactly right it would require a lot of prioritization on the political side and then not a lot of push back you're just asking for a lot so you know eventually do I think it's going to get there do I think we're going to get widespread government adoption of Bitcoin across multiple governments I absolutely do I just don't want to like you know put my

stake in the ground say it's going to be the next 12 months I think it again it could very well happen but but probably the base Cas is it doesn't okay let's go from Bitcoin everybody's favorite token of the day to ethereum the the token that just seems to continue to have a tough go what what are your thoughts on ethereum for next year yeah I think it's going to set new alltime high as well I think it'll it'll it'll pip over its previous and get to something like 5K I think they're twoo Catalyst for it the reason I think eth will stop being the Forgotten asset the first is you know I've spent a lot of time on the past few days digging

into the layer 2 space and and particularly into the sort of uh the Stark net validity proof side of that spectrum and it's getting really fast and really efficient so I really do think we're solving East throughput Challenge and then on the flip side one of my core beliefs for next year is we're going to see Wall Street come into crypto in a major way through stable coin through tokenization projects the most of that's going to come into eth so you have improving technology and then you have a series of headlines eth eth eth eth Ethan Goldman Sachs Ethan JP Morgan Ethan UBS and I think that's

going to be enough to get it out of the doldrums right you know will it outperform other sort of altcoins if you want to call them that I'm not sure but can it get back to New all-time highs I think I think absolutely right right but when you think about it like 5,000 just just getting to all-time highs is pretty bearish for eth when we're going into a a year where it feels like all the all the stars are aligning that you know if bitcoin's going to double you would you would hope that your altcoins go up even more than that yeah I think that's right I think the challenge eth has is it's moved into sort of this fundamental space where it's driven you know it's it's sort of made the transition from

being driven by memes and headlines to being driven by Fun FAL activity and that's a complex space where you have this challenge of L2 fee compression and uh and Burn Right and and once you you sort of seen tech companies go through this when they go from pre-revenue to post- revenue and there's this awkward teenage moment where they're like ah if you valuee on fundamentals it doesn't quite add up but they're not really meme driven and I think that's where eth is I think those fundamentals start to really ramp in 2026 when the projects were seeing built really start gaining traction so yeah 5,000 you can call me bearish but it is a new all-time high and they're probably is is upside but I

I think that's the challenge it's going to face next year very interesting okay let's go to the last one salana yeah so we debate this internally you know look I think it's going to have a great year I think it's probably going to outperform e i you know I think 750 could be easy you could see it get to a thousand that's certainly not within the realm of craziness I think the C for soul that we're monitoring is it's established this dominant position in sort of the crypto community space and particularly with meme coins and sort of fun items I think it's going to add to that more serious projects moving on to a more established salana ecosystem we've seen that in the past with things like render but I think you're going to see it in an accelerating basis and if

you get sort of dual thrusts like the fun casino part of crypto or the community part of crypto to and the more institutional part of crypto that's a pretty good narrative to lift it you know up to to double or triple in the year ahead when you talk to because you always have such an interesting take on what a lot of the financial advisors and a lot of those that can have control of institutional money see when you talk to them are they interested in I mean obviously I understand their interest in Bitcoin are they interested in a salana versus ethereum do they do they tend to have one that they ask more about than

another yeah you know it's really it's really interesting that you asked that I assumed that they would be interested in eth because it does have this fundamental building block we get a lot of questions that skip straight to salana really I think there's an aspect of the Institutional Investor who crosses the chasm into crypto into Bitcoin and then wants to be kind of cool and it's not that cool to be Bitcoin and eth it's like oh let's go to what's next oh this salana thing Phoenix out of the ashes of FTX but you know so we actually do get a fair number of questions about salana and I find that surprising but it is a very real thing

when when you look more long-term I'm starting to develop this thesis that uh and I think a lot of people have been feeling this for a while that that eth just might not get the pump that it that a lot of other tokens are going to get in this cycle and a lot of that is narrative based For Better or For Worse but do you think that that long term do you still believe in eth because my thesis is that maybe it skips eth but that eth still has all these fundamentals and that in the maybe it's another it's the next cycle that eth will have its moment it's just might get skipped this cycle I think that's a reasonable thesis look I mean eth is really very close to having solved the

blockchain trilemma right now the challenge is just is just the difficulty of moving across the layer 2 ecosystem but you know that's been that's been a goal for public blockchains for years and it's actually pretty close and particularly as sort of the validity proofs you know mature in the space I think it's going to do just fine long term but I agree you know it it could miss this cycle it's still substantially bigger than all the other programable l1's put together right I think people think of like eth and salana being similar but actually the relationship is a lot like Bitcoin to eth right these are like nesting Russian dolls that get

small really quick and so you could see salana pump you can see Aptos pump you could seeu pump you can see lots of these grow substantially in size and still not quite equal eth and I think that's probably what you're going to see and long term I agree I think it's going to come out the other side as one of the major public blockchains that we talk about for the next 30 Years I don't think it's going to be missed or lose out yeah interesting okay let's go to your second prediction for 2025 sure yeah second prediction is that bigcoin ETFs will attract more in flows in 2025 than they did in 2024 obviously yeah I feel really

strongly about this one so I think there is this they're such a success Bitcoin ETFs right they've pulled in we don't know the full numbers but call it 30 plus billion dollars the most ever of any ETF and I think there's this assumption that there is this pent up demand and it's now been taken care of and now we're going to see like a few billion dollars but there's no reason to assume this is true let me give you the counterfactuals the first is that in ETF land year one is always the slowest if you look at any ETF it grows the most in year one or it grows a little bit in year one and year two 3 four five and six grow substantially beyond that

that's what happened with gold what's happened with almost every ETF ever so that's a big piece of it the second counterfactual is that the Bitcoin ETFs aren't even approved on the largest wealth management platforms they have partial approval on Morgan Stanley they're not yet approved on Wells Fargo or UBS or others there's millions of dollars that can't even buy them yet and then the third is that look institutions just move slow so far many of the adopters of crypto etps have been retail and I think institutions are starting to come on board and I think they're going to accelerate substantially in 2025 so yeah we think $30 billion is down payment we think it may be more like

4050 in the year to come wow okay so good things ahead for the Bitcoin ETF I don't think that's a surprise to anybody based upon what you what you laid out and also its success so far I got to T touch on the EF though because the last time we had you on the show was all about the EF and sorry to say your predictions were not right uh but that's okay we all make we we're not always right here none of us have a crystal ball uh we certainly are not accurate with and I'll be admitting the things I do out wrong with my predictions as well this year uh but what happened why why is eth ETF been such a why has it been so flat why has it not succeeded

the way the Bitcoin ETF has yeah such a dog um I mean I I think there were two things that that I underestimated in in expecting the success of the product um the first was I underestimated the outflows from E so you know the people look at the net flows and we're now in positive net flows but for a while we are in negative net flows but they forget that eth bled you know $3.5 billion dollar in assets and that's a lot to overcome and I thought because E's discount had narrowed long before the ETF launched that much of the Arbitrage activity was already out of the space and that turned out to be wrong right so you had this flood of

assets on the downside that reduces the number if we were here and they were like three or four billion it' be the second most successful ETF launch of all time and we'd be talking about it as a success and then the second one is I thought eth was going to catch a bid right this has been a atypical sort of crypto cycle where Bitcoin has accelerated its dominance and what what non-bitcoin activity there has skipped to generation and hit soulle on down and when you put those two things together you get the result that we had longterm I'm still bullish you know we're excited about our ETF it's it's a few hundred million dollar in the scheme of most ETFs that would be a massive successful launch but yeah it's been uh it's been

much slower than I and I think you know most ETF experts sort of anticipated you recently filed for a salana ETF do you think that that gets approved in 2025 and when and what are your expectations around that yeah my legal council says I can't comment on our specific filing but I will say you know I think we've we've even before the election you and I had the conversation I think we've entered the ETF era of crypto we're going to get ETFs or etps on a wide variety of assets you have to assume that the election accelerated that dramatically we're going to get new leadership at the SEC they're going to be more accommodative it's impossible to forecast but we wouldn't have filed if

we didn't think we could win approval right you know it it takes money and time and effort so you can read through that that we're we're excited about it and I think they'll be substantial demand like we like we discussed people ask us about salana all the time it's got a very strong thesis and strong resonance out there in the investor Community ex explain something to me so I believe vanck was the first to file for the salon ETF and there is a deadline in January or February for their ETF does that impact that it has to be approved or not approved at that point is that deadline is there any date like that in the calendar that we should all be watching yeah so so the way the way these I I don't remember exactly

what happened with the vanc filing if they if they pulled it and then refiled so I'm not sure maybe they did pull it you might be right I think they may have pulled it and and I think they probably refiled I'm not sure people will have to check but yeah there's a calendar process that stretches up to 240 days from the time the 19 B4 is filed so the filing you referred to with bitwise and others you know a few days ago at the time we're recording this you can count forward 240 days the SEC has to decide by then I would note that that's that's the most time they can take they have checkpoints in between they can decide earlier and I think that ends up in something like August if I remember where it counts so August or before will

know yes or no okay okay great uh let's go to your third prediction for 2025 all right I feel like I'm the only person in crypto talking about this the Department of Labor will relax rules allowing crypto into 401K plan lands Paving the way for significant flows everyone with this new Administration coming in coming in has their pet project they want to see a regulatory 180 on maybe it's Market structure maybe it's stable coins maybe it's this maybe it's that for me it's this obscure note that the Department of Labor put out in 2022 warning 401K plans to not allow crypto into their investment portfolios

or they would face audit I think the word they used was Extreme Caution I've never seen anything like it why does it matter it matters because there's something like8 trillion doll in 401K plans which can't currently access crypto and additionally every month you know millions of Americans save money into their 401K plans I would love a portion of that to come into the crypto Market I would love it because I believe in crypto to's ability to improve the long-term returns of Diversified portfolios and I would love it because it would give a persistent bid to these assets and actually contribute to reducing the volatility of the space so will it happen I don't know but I would

love to see it happen and I think it might and I think if it does I actually think it's a pretty big deal for crypto no kidding if there's 8 trillion doll in 401ks any any estimates on your end and models that you've done on what if let's say this did move forward what percentage could we expect 1% or 3% to go to bitcoin or to go to General yes I mean the the base case that I use in this is I look in Canada where Fidelity has asset allocation ETFs and they range between 1 and 3% crypto that doesn't seem crazy right what if 1 to 3% crypto becomes the standard in 529 plans which are the college savings account in 401K

plans which are the retirement account that's probably more important than institutions deciding onesie twosies whether each one will invest right let's solve this bulk problem I think it's a big deal for what it's worth worth noting crypto's also exciting in a retirement context because it's a tax protected context right and if you're looking at an asset with strong appreciation potential you want that in a tax deferred setting so I think this could be a very big unlock if it happens maybe it's long shot I don't hear other people talking about it but I'm trying to will it into the world and into the conversation I'm with you let's manifest it Matt uh okay let's go to your fourth prediction for 2025 yeah this one's more

broadly held by people I think stable coin assets could double which would put them above 350 billion I I think they're two primary drivers of this the the one everyone talks about is that we're likely to see stablecoin legislation that allows them to exist in a regulated format in the new Congress and that will obviously be a dramatic spur to adoption we're also seeing growth in payments both globally and domestically but the other thing I think people Overlook is just you know stable coin assets rise when you're in a bull market that's just always been true so I think there's a natural bullish push behind stable coins and then an accelerant from stable coin legislation add them together I think it's yeah I

think it's $350 billion by the end of the year yeah that's looking like a pretty good number for stable coins but really just the beginning still it feels like stable coins have got a long way to go particularly when you consider every time we look at stable coins it's its main use case is still in a lot of the developing world where they're just trying to Shield their money against the crazy inflation that they might deal with in Argentina or in Turkey like there still isn't a lot of a lot of the develop is not using or interested in stable coins yet most of them still are trying to figure out what Bitcoin is do you guys think about stable coins long term I'm curious when you think more decades what do you what are your views

absolutely massive absolutely massive I mean they're an incredible killer app they're a US bank account and a US Financial quality ecosystem everywhere in the world at the push of a button right I mean that is just amazing and you can see the sort of early adopters doing it you can look into countries with high inflation r rates see the stable coin adoption there you can look into regions with difficult B2B payment networks like subsaharan Africa and you can see what yellow card is doing there right the proof is in the pudding it's not speculative use this is you know end real world use yeah it's it's it's a multi-trillion dollar space if The Regulators don't muck it up let's hope not okay your your next prediction for

2025 yeah we think there'll be another mainstream crypto applic that sort of crosses the chasm and gains more than a million monthly users I personally think it's likely to be in the gaming space I think you're seeing a lot of investment you're seeing a lot of big names right I saw a headline just a few days ago about FIFA and mythical games launching FIFA Rivals uh you see some first-person shooter stuff blockchain has gone from dial up to broadband and now we're starting to see developers build in that space games are often the first thing to break so I think there'll be some

blockchainbased game that gets really massive permanent adoption not just flash in the pan play to earn adoption but people using it as primarily a game right you you you answered my follow-up question there which was going to be so much of what these games see early on when they do well is a result of its incentives right and so maintain paining that is difficult but you're thinking that this is this is the type of thing that's more this could be longterm less this is Farmers incentive based yeah no tickling cats I'm talking about uh games that are actually fun right I mean I do think I think I think think blockchain and web 3 is just fundamentally amazing utility for games and I think it's been

gated by performance and that gate has fallen over the past few years and so now that we have highly performing blockchains like one and Layer Two networks it strikes me as inevitable that this space which for what it's worth people forget is the largest media space right like it's bigger than movies bigger than TV it's absolutely massive you mean gaming gaming think of gaming as like like my 11-year-old wasting time but it's actually this massive media Market um I think it I think it moves substantially in a blockchain direction this year yeah which which runs off of digital assets that you earn or pay for within the game that currently you do

not the game owns that you can't leave the game you have no sell cut it's literally like it's it's it's it's the playbook for what we're trying to do here with crypto written perfectly for us I think the other thing I see with gaming and I'm I'm hesitant to make a gaming projection because I've predicted that gaming was going to be every year for the past few years I've made this prediction and I keep being wrong I keep waiting for it to happen because it just seems so obvious but the thing that really stands out to me is we're we're also at the point where the the tech is really abstracted because most of these games people don't want to know that they're using crypto they don't even necessarily like the language around crypto they have a stain about that so I

think we're now at a point where you can use these games and you won't even know it's on chain you won't even know it's crypto it'll just be a different way to own and buy and sell and trade assets which you might favor because maybe there's lower fees or maybe you make more maybe it's more liquid because there's a bigger Marketplace that's offered to you that wasn't previously there yeah that's exactly right that abstraction had to happen in order to get the adoption and I do think we're there I think if people have played around with these things they're pretty cool they're pretty easy they're pretty fun and uh that's exciting okay Matt final prediction for 2025 yeah this ties back to that first prediction it's that governments corporations and ET FS will purchase more than a million Bitcoin in

2025 you know we we we talked about looking at you know why will Bitcoin go to 200,000 I talked about re underwriting my thesis in the space as I look at these three sort of drivers of massive Bitcoin demand it's just hard to see how it doesn't happen I mean Michael sailor bought 200,000 Bitcoin himself last year and he plans to accelerate that in the the New Year the reason I like this framing is that for people who are skeptical of this space I try to point them at a few simple Supply demand metrics we know next year that the Bitcoin network will produce 160,000 Bitcoin do you think ETFs which bought 400 plus th000 Bitcoin

will buy more or fewer next year I think they'll buy more do you think corporations which bought another 300 or 400,000 Bitcoin will buy more or fewer next year well not only is Sailor ramping up but every day there's a new company that announces it's adding Bitcoin to its balance she I think it's more do we think governments which were sellers of Bitcoin last year with the German government cashing out the US threatening to do we think they will be positive or negative I think they'll be positive and then you look at that you get to a million Bitcoin on one side of The Ledger and 160,000 on the other side you say where is the other 840,000 going to come from and the answer

is higher prices and so I like it because it breaks down the source of demand and uh I think it's hard to be bearish if you think about it that way yeah it's a great great take let me ask you uh a couple other questions which I I did not give to you in our brief so feel free to uh to tell me that you don't want to answer these um but two questions that keep coming up on this show and a lot of people are trying to wrap their heads around one is is this cycle going to be similar to past Cycles where Bitcoin dominance would typically Peak around this time we're around 60% I think we're slightly below 60% as of

recording uh but we might be different when this comes out but around that's are do you think that Bitcoin dominance comes down this cycle or is this cycle different because of the ETF and because of maybe the US reserve and all these other factors that maybe Bitcoin dominance actually continues at a high rate throughout the throughout the next year oh it's such a good question I will say if there's a US strategic Bitcoin Reserve buying a million Bitcoin Bitcoin dominance will continue that's just an overwhelming factor that will reverse that aspect absent that I'm a big believer in human psychology I think the driver of the sort of altcoin season is

a classic wealth effect which is crypto gets rich on bit coin and then has extra money and they look for other things I don't think we've repealed human psychology so I suspect that that will continue to happen but again if you have this exogenous event of strategic Bitcoin reserve the Bitcoin act then that's out the window right okay great answer uh and then my other question we've been in these fouryear cycles for since 2008 and our belief is that these Cycles are driven by liquidity not driven by the Bitcoin havening even though some people might say that uh the question though is are these fouryear Cycles going to continue or at some

point will we go back to the more typical business cycle which doesn't follow a predictable 4year pattern of rising and falling as it is right now any thoughts around that yeah I think I think I'm glad you mentioned the particular business cycle because I think the reason for the fouryear cycle is similar to what you said but it's just the same reason there's a business cycle which is you have a pullback and then there's a fundamental reason the the thing recovers and then eventually gets over levered and that leverage get washed out of the system and you reset do I think we'll see the Bitcoin and crypto Market get overhyped and too much leverage built into the system and have that washed out and reset I do um so I don't think we've repealed the cycle

will it be four years is a good question I think that's in Al I don't think there's a like so no I have low confidence that it will be precisely four years but do I think there'll be a 30 plus percent pullback sometime in the next couple of years absolutely a 50% plus pullback possibly right so I I think that will still happen I do think it'll be diminished I think it'll be diminished because there are many more actors in The crypto Market there's a lot of money that needs to come into this space and and and we've sort of repealed the chance of it going to zero so I think part of the reason it pulled back so far is that a lot of people were

worried well maybe it'll go to zero and so they didn't step in when the market pulled back I think that's over so I would say we'll still have a cycle whether it's four or five years I don't know and I think it'll be less pronounced than in the past but you know we haven't repealed their markets uh we're going to get that and and I want to be clear when you say we could see a 30 to 50% pullback you mean Bitcoin right you don't mean you mean Bitcoin yeah and that's an important note because uh all the other tokens that you guys are holding on to guys in gals some of those are going to go 99.9% pullback especially the meme coins so watch

yourselves don't get caught holding those bags very very very good point very good point Matt pleasure to have you back on the show thank you so much for joining us again wish you and your team a happy New Year as you celebrate into 2025 and we'll look to get you guys back get you back on at some point to review these predictions and see how we did let's see how we do thanks for having me this was fun awesome thanks for listening in everybody have a weed awesome day as always if you liked today's episode please hit subscribe and make sure you follow us if you don't miss out on the next one there's also a link in the description to our free 5 minute daily newsletter will we simplify crypto for you while making you laugh

and if you're willing to step up your crypto investing game we're going to also leave a link for milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day