Matt Hougan, chief investment officer of Bitwise Asset Management. Photographer: Jordan Vonderhaar/Bloomberg
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Matt Hougan is the chief investment officer for Bitwise Asset Management, a provider of cryptocurrency index funds. On January 11, Bitwise launched its spot bitcoin ETF, the Bitwise Bitcoin ETF (BITB). It currently sits fifth in the “Cointucky Derby” with over $2 billion in assets under management. On March 28th, the firm filed S-1 and 19-b4 forms with the Securities and Exchange Commission (SEC) to list a spot Ethereum ETF.
A veteran of the crypto investment space, Hougan and I discuss his reaction to BITB’s and the other spot ETFs’ lightning-fast start and whether they will continue post-halving. We also touch on several other topics, such as how institutions think about an Ethereum ETF, what is happening in the world of NFTs, and which under-the-radar projects are catching his eye.
Forbes: Bitwise’s Bitcoin ETF has over $2 billion in assets under management. Are you seeing any interesting flows or trends?
Matt Hougan: The flows have vastly exceeded my expectations. I spent 15 years in the ETF industry as CEO of ETF.com. I watched 5,000 ETFs launch. These [spot bitcoin ETFs] are the fastest growing ETFs of all time by a large fraction. I believe the fastest growing ETF prior to these was the Nasdaq 100 ETF (QQQM), which went from zero to $5 billion in one year. These ETFs have pulled in net $10-plus billion in under two months, and that’s incorporating the outflows from GBTC. So they far exceeded my expectations as a class, and I’ve been very pleased that Bitwise has gotten escape velocity.
Compared to BlackRock we are a small asset manager; we manage more than $3 billion, which is a lot in crypto, but very small in the traditional world. But it’s been nice to see that we’ve pulled in billions of dollars—that there are investors who want to allocate to an ETF that’s run by crypto specialists, that donates money to core developers, that is crypto native. That clearly may not be the dominant way people are allocating, but it’s a lane that a substantial number of people are allocating.
In terms of who is allocating, with ETFs it’s hard to know exactly. They buy the ETF through their brokerage account or they trade it online, and as an issuer you don’t know the same way you would with a mutual fund until the 13F reports come out at the end of the quarter or you send tax forms. I can tell you anecdotally the groups that we know are buying it: retail investors; independent financial advisors—what many people call RIAs (registered investment advisors), which are distinct from a Morgan Stanley advisor, which are called wirehouse advisors; so people who run their own shop and can make their own decisions are buying it; hedge funds; venture capital funds; family offices; and we at Bitwise had our first corporate begin allocating to BITB last week.
What’s surprising in that mix? Probably a few things among the advisors who are buying it—they’re buying it in a larger allocation than I expected. Historically they used to buy a 1% sleeve and 2½% of the portfolio appears to be the more common allocation. I’ve certainly been surprised by the adoption from hedge funds and VCs and corporates—that was not a group I expected to come in as fast, but it’s happening.
Forbes: Do you have any sense of the percentage breakdown between RIAs and individual retail investors versus the more algo type trader?
Hougan: It’s really hard to say at this point. I do know that every day we have advisors who manage hundreds of millions of dollars buying our funds because we have a distribution team that talks to them and they tell them that they bought our funds. I was recently at a dinner with a bunch of advisors and 7 of the 10 people had bought our funds.
Forbes: What are these conversations like?
Hougan: There are things that the conversations are no longer like, which I find interesting. There’s no longer much discussion about whether it is a Ponzi scheme or for criminal use. There’s no longer much discussion of environmental impact or whether the government ban bitcoin or tether. Many of the classic items have disappeared. What remains is how do you differentiate from BlackRock? How does BITB differ from IBIT (iShares’ bitcoin ETF)—that’s usually the fund people pick. Some advisors still are wrestling with why bitcoin has fundamental value.
