Crypto investors may be underestimating where the industry is heading, according to Bitwise Chief Investment Officer Matt Hougan, who has pointed to three mistakes he sees in the market right now.
In a recent post, Hougan said that investors are using today’s market size, established brands, and current activity to judge crypto’s future. Those are normally reasonable approaches, but the space is evolving so quickly that these assumptions are becoming outdated.
Investors Missing the Bigger Market
His first point is that investors are underestimating what crypto applications could eventually be used for. Uniswap, for example, was built as a platform for trading cryptocurrencies, but Hougan said it should not necessarily be valued only against the roughly $2 trillion market. As stocks, bonds, real estate, and other assets move onto blockchains, the addressable market for platforms such as Uniswap could become much larger.
The stock and bond markets are worth about $150 trillion and $350 trillion, respectively. Tapping these spaces could create an opportunity roughly 100x larger than crypto alone. Hougan said the same applies to applications such as Hyperliquid, Aave and Chainlink, which investors often view simply as crypto platforms.
The second mistake is assuming that the biggest TradFi companies will eventually take over crypto-native businesses. The exec pointed to PayPal’s stablecoin launch in 2023 as an example. Despite its global brand and position in payments, PYUSD only accounts for 1% of the stablecoin market, while Tether and Circle dominate 88%.
Fidelity faced a similar situation after launching its crypto custody service in 2019. While Fidelity has performed well in the market, Coinbase has become the largest crypto custodian in the US. The same goes for CME’s position in crypto derivatives and Bakkt, which was backed by Intercontinental Exchange, as examples of traditional finance companies that did not end up dominating their respective markets.
He said crypto-native firms have an advantage because they tend to move faster, focus entirely on crypto, and already have users and trust within the sector.
100x More Transactions?
The third mistake is using current transaction volumes to estimate how much activity blockchains will eventually handle. Tokenized stocks could trade around the clock, rather than during current market hours, with AI agents eventually monitoring portfolios and executing trades on behalf of investors. US stocks currently trade for 33 hours a week, compared with 168 hours in a 24/7 market.
While this alone does not mean volume will rise 5x, Hougan believes that the combination of round-the-clock trading and AI-driven activity could push stock transactions 10x higher. He added,
“I can imagine 50x or 100x.”
There exists a similar opportunity in payments, where activity involving AI agents could far exceed current levels. While higher volumes may bring lower fees, Hougan asserted that transaction growth of this scale is likely to more than offset that pressure.
The Bitwise CIO isn’t the only one pointing to artificial intelligence as a potential catalyst for crypto. Back in June, Binance founder CZ said that AI agents could rely on blockchain payments because TradFi systems often require human authentication and are not designed for autonomous software.
He expects agentic trading and payments to emerge within months, while AI-related activity could also add to blockchain trading volumes rather than compete with crypto.
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Source: https://cryptopotato.com/three-crypto-investing-mistakes-could-be-hiding-a-much-bigger-opportunity/
