The perception of cryptocurrencies in Washington is undergoing a significant transformation, according to Bitwise CIO Matt Hougan. In a recent memo, he highlighted the evolving attitude of US politicians towards crypto, noting a positive shift that has been largely overlooked by the market. Hougan believes that if the impact of this change had been properly priced in, the market would have already hit a new all-time high. This adjustment in Washington’s stance has the potential to unlock substantial “alpha,” indicating the ability of investment strategies to outperform the market. Historically, crypto has been a divisive issue along party lines, with Republicans typically in favor and Democrats displaying resistance.
Despite the partisan nature of the issue, crypto advocates have been actively working to build political influence in Washington. Recent legislative actions have shown a more favorable attitude towards cryptocurrencies among lawmakers. For example, on May 8, a bipartisan group of House Democrats joined Republicans in repealing SAB 121, a controversial SEC rule that restricted large banks from holding crypto. This was followed by the Senate, where Democrats, including Senate Majority Leader Chuck Schumer, supported the repeal. The passing of FIT21 on May 20, which assigns primary oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC), further demonstrates the shifting tides. Even the SEC, led by Democrat-appointed chair Gary Gensler, surprised many by approving filings to list spot Ethereum ETFs.
While progress has been made, crypto still faces political challenges, as evidenced by President Joe Biden’s veto of the repeal of SAB 121. The regulatory environment remains complex and uncertain. Despite these obstacles, Hougan sees these developments as a pivotal moment for the industry. He believes that the broader market has yet to fully grasp the implications of these political shifts. Regulatory uncertainty has long been a primary concern for financial advisors and Wall Street institutions, with 64% of US financial advisors citing it as the main barrier to greater crypto exposure in their portfolios. Hougan argues that once this barrier is removed, a significant portion of the estimated $20 trillion managed by these advisors could flow into crypto, potentially propelling the market to new heights.
While the broader market may be overlooking these changes, Hougan sees an opportunity for savvy investors to capitalize on the evolving landscape. He believes that as regulatory barriers are lifted and Wall Street institutions become more accepting of crypto, the market could see a surge in investments. Major financial institutions have been cautious about fully embracing crypto due to regulatory concerns. However, if they were to integrate crypto as a mainstream asset, the market could experience unprecedented growth. Hougan emphasizes that we are entering a new era for crypto, and investors who recognize and adapt to this shift stand to benefit the most.
The evolving attitude of Washington towards cryptocurrencies presents a significant opportunity for the industry. While challenges remain, the recent political developments signify a positive turning point for crypto. As regulatory uncertainty clears and institutional acceptance grows, the market could experience a surge in investments, ultimately leading to new milestones in the crypto space.
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