The biggest institutions on the planet are not scared of the Bitcoin bear market, and they believe that we're likely going into a new bull cycle. Now, according to a Bitwise survey of the 15 largest institutions on the planet, none of them reduced their exposure during the bear market, and many of them actually increased it. I spoke today with Hunter Horsley, the CEO of Bitwise, about that very phenomenon. It's not just sort of one idiosyncratic case, but then to see a uniform response, which is kept the asset, want to keep the asset, maybe want to even increase their exposure to the asset.
Why one big green candle is the best marketing for Bitcoin. That as the market is demonstrating yet again for the hundredth time that it's not dead and not going to zero after 16, 17 years. I think that the positive price performance is very helpful. But of course, about the future of ETFs, indexes, and the kind of products that both retail and institutions will be looking to as the bull market commences. If you want to know where the institutionalization of Bitcoin and crypto is headed, this is the conversation for you.
Let's do it.
Today's video is sponsored by 21Shares. A few years ago, getting crypto exposure meant exchanges, wallets, and seed phrases. Today, it can be as simple as logging into the brokerage account you already have. That shift didn't happen on its own. 21Shares launched the first crypto ETP in basket form back in 2018, before crypto ETFs were even on the table in the United States, and they've operated through every market cycle since. Now they run over 70 exchange-traded products globally, accessible through many brokerage accounts. Their research is used by asset managers, private banks, and hedge funds, and it's all free on their site. Numerous posts a month, including a monthly flows report. Follow @21shares and @21shares_us on X for crypto education and market commentary. Not financial advice. Investing carries risk. Products might not be available depending on where you are. Talk to a financial adviser.
I think it's fair to say that we've jumped the ship as far as institutionalization of crypto, that these products have become exceptionally popular. I saw some news this week that the SEC now is finally giving some guidance, likely on RIAs and their ability to custody crypto assets. Now, my understanding is that most of them, if they were offering it, were doing it through ETFs, so products like your own, and this could broaden that dramatically. So, I mean, I guess generally, how much of a problem has it been that RIAs haven't had a custody solution? Has that kept a lot of them out, and do you think that this would change things dramatically?
You know, I was, I was doing a, we had an event earlier this week with about 80 large wealth firms in Napa, and I had Mike Cagney from Figure come and speak. And you know, he was sharing his outlook and view on how transformative it is to bring capital markets and credit on-chain and the opportunities that exist therein. And one of the CEOs of the wealth firm, you know, raised his hand and said, "How can I, how can I participate in this with my clients?" And the honest answer is you basically can't. Because in the US, wealth management looks after $40 trillion, but fully relies on a stack of infrastructure that is just not integrated with being able to operate on-chain. So when I think about this new rule from the SEC, I don't think it necessarily hugely changes the journey of including crypto in portfolios, which ETFs are enabling, and I think are really excellent for. But I do think it starts to clear the road to more novel circumstances where a wealth manager may want to enable their client to park their stablecoins with them. And even a step further, as crazy as it may seem today, may want to be able to help that client participate in a vault or own a tokenized asset. And so I think it's more relevant and enabling for that storyline which is emerging right now than the sort of conventional storyline of advisers putting Bitcoin or Ethereum or Solana in a client's investment portfolio.
Right. So we have this have and have-not situation right now. Bitcoin, Ethereum, Solana, Hyperliquid for you guys, right? Obviously XRP and a few other novel, Doge, etc. So there are a few that people can get access to through ETFs. So to your point, RIAs aren't going to really be inclined to figure out ways to custody Bitcoin for someone, right? Like Bitwise, BITW, it's totally sufficient for them to give Bitcoin exposure to their clients through the ETF wrapper.
Yeah. And actually, to the contrary, a sort of newer phenomenon this year is the opposite, which is there are, we have clients who figured out over the prior years how to set, advisers who figured out how to set their client up with a crypto custodian to own spot Bitcoin. And this year they want to swap that spot Bitcoin or Solana or what have you into the ETF to simplify life. So I would say the trend we see on that side is actually in the opposite direction, which is moving out of having the spot asset into the ETFs. So I think that's sort of the interesting state of play there. I think the ETFs serve them very well. I don't think that there's a ton of demand to invest in a $400 million market cap crypto asset, which is, you know, something interesting we could talk about more. I really think that the enabling possibilities here have to do with, you know, what we might call on-chain finance, but participating around stablecoins and vaults and unique tokenized assets, which is not part of the present for the wealth management category, but I think is likely to start to show up next year.
Okay. So in theory, you could, if you're a RIA, you could offer someone exposure to coin number 75 on CoinMarketCap and custody it for them, but that's a one-in-a-million use case. Nobody wants that. So in theory, it's not something that they're going to need to offer right now. I did find it interesting the SEC was actually proposing that some of these RIAs could custody the assets basically in their own self-custody on behalf of clients, which was a step further than I would have anticipated, right? Because it's not just saying you can use these qualified custodians, but if it's an asset that they want that doesn't have a qualified custodian, you can do it. I thought that was actually a pretty big step, whether it'll be used or not.
Yeah. Right. Right. Right. Right. Right. Yeah. Yeah. So, so again, you know, I think that it's an even bigger step when you imagine that the thing an adviser may want to help their client with is maybe not buying asset number 57 and then, you know, setting up a custody configuration, but perhaps rather is equipping their client with a non-custodial wallet where they help them secure the seed phrase, but then enable them to earn a 5% yield on their stablecoins through a vault, the same way that they might help a client earn yield on their cash. So I think it has much bigger implications for sort of the on-chain finance universe, and I think is clearing the road there. And I think we'll enable more to happen in 2027.
How much will it also enable actively managed strategies by RIAs within the vault? So maybe a product, a DeFi index that doesn't exist, or a metaverse index, as if anybody would want that in 2026, or, you know, utility coins, Hyperliquid and something else exposure, right? How much, if an RIA is actually knowledgeable in the space, would they then be able to, because of this, custody a basket of assets for a client and sort of present them something that would look like an ETF but actively managed by that RIA, that's their own sort of portfolio construction, which, by the way, I think is the next conversation, is that'll just all be done by AI, but...
Right, right, right, right, right. Yeah. Right. Exactly. Yeah. Yeah. You know, so I think that the big picture of what crypto broadly is experiencing in 2026 is that for a decade there were all of these barriers to adoption that were so specific to crypto. You know, it was too niche. You know, there were no exchanges. Then, you remember in 2019, there were no qualified custodians. Then there was, you know, concern that the government would shut it down, and sort of the crypto space has just worked through this progression of reasons that people weren't doing things in the space and progressively solved them. I think where we find ourselves in 2026 is that it has encountered sort of the final boss of reasons that people aren't doing something, which is they're just busy. That, you know, they've got a lot of other things going on. They're trying to figure out what to make of the bond market. They're trying to handle development in a client's life. They're wondering if they should take some risk off in US domestic equities or if they should keep it on. They're wondering where the AI journey is going. They're looking at their credit exposure, and oh yeah, there's some interesting stuff happening in crypto as always. And so I think increasingly, while there continue to be idiosyncratic barriers to somebody doing something, I think increasingly the barrier for crypto use cases and crypto adoption is going to be punching through the very busy world that investors face with clarity and compellingness around something that they could participate in. So I think as it pertains to actively managing portfolios of assets, I would be, I'd be, you know, I think everything will be tried. But I'd be a little bit bearish on that because that by its nature consumes more time from the wealth manager, them actively managing separate accounts. I think that about a month ago we introduced a thing we call ATPs, automated token portfolios, which we design the portfolio. It gets automatically rebalanced, but the end investor ultimately is holding all of the tokenized equities. So we have a Bitwise Mag 7X. It holds eight tokens, the Mag 7 plus SpaceX. The Bitwise strategy determines the holdings, the weightings. It then gets rebalanced on behalf of the investor. But the investor is ultimately not in a co-mingled fund or a pooled vehicle. It's just a service being delivered into their wallet. I think something like that has the potential to be the frontier of innovation around what's possible here, where it doesn't consume more time, but it is giving the benefit of sort of breaking the bulk and allowing a lot of flexibility around the investment exposure someone has and the individualization of that investment exposure. So, you know, I said a lot there, but, you know, I do think that there will be new formats that can enter the wealth space. ATPs are one version of that. I think the vaults are another. I think more broadly, the barrier to adoption these days has a lot to do with the finite amount of time that mainstream investors have.
Yeah, it sounds to me like even if the most active RIA wanted to do all of this, they would just wait for Bitwise to kind of lead the way and do it for them, and then just offer the exposure rather than trying to figure this out on their own. Right.
In most cases, right? Yeah. Yeah.
Yeah. That's, and that's how they approach almost every other asset class, right? So, you know, I think there will of course be some who want to manage portfolios themselves, but I think many of them view it as their job to find the expert managers. So something like an ATP, how does that make the jump from novel product for someone who understands crypto to a product that your average everyday advisor, average everyday investor who's just passively putting money into things, understands, is not scared of, and would actually participate in? Because that sounds dramatically better than anything on the market right now. And that's kind of the promise of using blockchain and tokenization to do these things, right?
Right. Yeah. So I think that it has to do with making it simple for people. So I think that the two things that need to get solved for a lot of people to be using ATPs are the strategies themselves have to be compelling. You know, any new investment solution in crypto land has to compete with every other investment that somebody could make on any given day. So why is a Mag 7X strategy more compelling than buying Nvidia stock today or buying QQQ regardless of format? So I think there needs to be more work done on the strategies. And then the second, which I think is hugely important, is distribution. And I think distribution, looked at another way, is if you take the premise that investors are busy, they are drowning in opportunities and things to think through, distribution is really the question of how do you make it unbelievably simple for an investor to do something. So I think that the journey that a lot of on-chain investment solutions will go on is they'll get developed as something that people can access through non-custodial wallets, a little bit harder to reach, but then ultimately, if they're going to be very successful, need to be distributed where they're just a button that appears in an app or an interface that somebody already uses. So those are the things that, you know, we're thinking about relative to ATPs, and that I would be necessary ingredients to see a billion dollars or tens of billions of dollars flowing into that new investment format.
It's interesting because it just comes back to the same old crypto question, which is UX/UI. At the end of the day, it's just like when does it become simple enough for grandma to do it, and she doesn't even know she's doing it on a blockchain, right? I kind of joked the other day that we keep talking about tokenized stocks. I was like, "We haven't made it till they're just stocks."
Right. Yeah. Yeah. Exactly. Exactly. Exactly. Yeah. Yeah. Yeah. Yeah. I think that's totally, it's totally right, and in some ways unsurprising because it's true of every other business in the world and everything else. But yeah, definitely what we see in 2026 is that is where the challenge sits today.
So I think I mentioned it before, but you just launched the NEAR ETF. I think last I had spoken to Matt Hougan, he sort of alluded to the fact that maybe the days of the single-asset ETF were going to slow dramatically and probably eventually grind to a halt, but seemingly there's still enough interest in certain assets to roll out new ones. Do I guess, do you still feel that way, or do you feel like it's going to become more indexed ETFs? Obviously there's going to be more products, but, you know, how many, I guess, how many single-asset ETFs can the market support from crypto?
Yeah. Yeah. I mean, the short answer is I don't know. Yeah. I was actually just on an internal call with a bunch of colleagues, and people are asking, you know, how does Bitwise decide what products to launch? And what came to mind was a Dwight Eisenhower quote, which you may have heard before, which is something like, "Plans are useless, but planning is indispensable." And that's sort of how I feel about this question, which is ultimately Bitwise is here to create and deliver useful things for investors. And so the question is, what do they want? And how do we know? And I think if you asked Matt and I two months ago, we would have said, you know, BHIP, the Hyperliquid ETF, has done very well, but it seems like the ETF investor doesn't have the time or space to do a lot more. But we wanted to launch a NEAR ETF. We think there's a ton of merit and interesting dimensions to NEAR, and so we brought that to market, and it's taken $50 million of assets in three days, which is a very strong result for a new ETF. So I would say that as of this particular juncture, it seems like there's more to do. But more broadly, it's something that we're always trying to wrap our arms around, and of course we spend a ton of time with investors and clients to try to understand what they want from us. So I think you'll see more from us, and hugely excited about NEAR and the response from investors to the Bitwise NEAR ETF. You know, sometimes I tweet out things like, you know, delighted to see investors have conviction in this, and that is really what I'm thinking, which is, you know, we invest a lot of time and resources in building these solutions, but you don't ultimately know completely how useful they'll be to investors. So that's how I'm feeling this week. You know, delighted that it looks like NEAR is opening up access to NEAR, and that, you know, so far this $50 million that are finding that enabling and useful.
I mean, I feel like if I had just been smart enough to buy the things that you guys decide are viable for ETFs, my portfolio would look a hell of a lot better than it does right now because I totally missed Hyperliquid. I was dismissive about it. Totally busy cash, but I do own NEAR, so I was really excited about that one. But it seems like you actually, I don't know how you make your decisions, but it seems like you really have focused in on the winners in their vertical to some degree. But I mean, Zcash is clearly carrying the privacy narrative. I think NEAR is probably the most reasonable way to invest in AI and blockchain convergence. Hyperliquid, obviously, you can understand the tokenomics for once of a project and say, burn all these tokens, right? So it seems like you're not picking winners, but you're picking like the very obvious leaders in the verticals that will probably be the biggest narratives for the coming cycle or...
Yeah. Yeah. I think, yeah, totally, totally. And I think you just touched on a few themes. I mean, you have to be blind in 2026 not to recognize that AI is going to be a dominant part of the economy in the years ahead. And so there's a very valid question that everyone has encountered, and you know, Scott, you've encountered countless times, around how do AI and public blockchains intersect. There are many examples of that today and many credible intersections. I think something like NEAR that sits at that intersection becomes all the more relevant to investors. I think in an indirect way, AI is also reminding people of the value of privacy as they contemplate even more of their personal information being online. And I think that's very constructive to Zcash. And then finally, I think in 2026 on the revenue front, you know, if you think way back to the 2000s and internet companies, the metrics that people talked about were eyeballs and page views, and those were like the metrics of success for an internet company. And if you roll the clock forward, the space matured, and now people talk about ARPU, average revenue per user, they talk about DAU and MAU, daily active, monthly active, they talk about net revenue retention, etc. So the understanding matured, and the things that people, the metrics people wanted to see matured. I think that's also happening with public blockchains. And one of the key ways it's maturing is people want to see revenue, so to speak, but they want to see the mechanism by which usage of the blockchain creates value that flows to the token. So I think that is another big theme of this year. And if you look at those themes, I think it can help explain why certain assets are doing well this year. And exactly as you said, I think NEAR is in a very strong lane relative to that.
So one thing that's lagged on the ETF side, in my opinion, or something I thought would happen faster, would be indexes. You know, in my view, it always seemed like that's how people just generally invest, right? I mean, you open an IRA or whatever, or, you know, your 401k, and you just buy some retirement-targeted fund or something, and you never think about it again. I would imagine that's how most people do it. We still don't really have... Now, I remember when you guys got one approved, and then it got like magically frozen by the SEC indefinitely or something. I don't remember the details of it, but, you know, is that the next wave? When do, or am I totally missing that that's what people want? Feels like that's what people would want. Feels like your average person would say, "I just want crypto exposure. Give it to me." And they don't want to choose.
Yeah. Yeah. I, you know, of course, Bitwise, the first thing Bitwise ever did in 2017 was introduce the first crypto index fund. At the time, it wasn't publicly traded. And I continued even just this week, an adviser of a $30 billion firm. We were chatting over dinner, and he's like, you know, what do you like best? If you could only own one thing, what would you own? And I said, BITW, the Bitwise 10 crypto index ETP or ETF, excuse me. And so I still feel that way today. I do think that, you know, if you look at Bitwise ETFs and ETPs, the Bitcoin product is the largest, followed by Solana, and then BITW, the index of crypto assets, comes after that. BITQ, the index of crypto companies, after that. So I think the evidence on the field, as you said, is that indexes have not been as popular heretofore as one could have imagined. I think it's only a matter of time is maybe the punchline. I think that the early adopter has a lot of information about the space and therefore has a lot of opinions. They may think that Morpho is awesome and Aave sucks. They may think that Aave is awesome and Morpho sucks. They may think that Ethereum is awesome and Solana sucks or the other way around. And therefore they're more inclined to express their specific views based on the information in front of them. And so I think because the space has been a lot of early adopters for many years, that's led to the more specific instruments and products being the most popular. We are definitely now stepping into the mainstream chapter. We're only in the beginning of this chapter. And I think in this chapter you'll see things like BITW, BITQ grow in popularity because, to the prior topic, the investor is busy. The investor has intellectual humility about the fact that there's a lot of things they don't know in the space, and the index helps them solve that. So I think that the story is just getting started on the index front.
Does BITW evolve? Would you change the assets that are in it? It's actively managed. Does anything fall out because something happened, or anything come in because its market cap has grown tremendously?
