Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiled by 0xjs@Jinse Finance
Nowadays, the crypto field is developing at an astonishing pace. An idea that seemed absurd a month ago is now between possible and probable.
Just in the past week:
* Senator Cynthia Lummis (Republican, Wyoming) called for attention to the "cavalry" of crypto supporters arriving in Washington, and shared a proposal to have the U.S. government sell part of its gold reserves to buy one million Bit coins.
* 18 state attorneys general filed a lawsuit against the U.S. Securities and Exchange Commission, accusing it of "grossly overstepping its authority" against the crypto currency industry.
* BlackRock has expanded its tokenized money market fund BUIDL to five new blockchains: Aptos, Arbitrum, AVA, Optimism and Polygon. Notably, the U.S. Securities and Exchange Commission has previously labeled one of the assets associated with these blockchains as a "security".
We will see what will happen next week.
Over the past four years, the entire industry has faced legal disputes, regulatory uncertainty, limited basic banking services, and hostility from Washington. All of this has been swept away, replaced by a White House, a Congress, and regulators that support crypto currencies.
(In some ways, the shift in sentiment is almost surreal. For example, Elon Musk is creating a new government agency actually named after a meme coin: the Department of Government Efficiency, or DOGE.)
All of this suggests that anything is possible in the crypto space over the next four years.
What does this mean for investors?
As an investor, it's easy to be optimistic about crypto currencies seeing this. But knowing exactly which assets are worth betting on is much more difficult.
Beyond Bit coin (which is the dominant monetary asset in the crypto space and should be the foundation asset for most crypto portfolios), the future is unclear. For example, people are excited about programmable blockchains like Ethereum and Solana, but there is widespread disagreement about how things will play out:
* Will Ethereum maintain its current lead as the most valuable programmable blockchain, or will it be surpassed by faster/cheaper blockchains like Solana?
* If Ethereum remains dominant, will the ETH token or Layer 2 networks like Arbitrum and Optimism that help scale Ethereum capture more value?
* What about promising upstarts like Aptos and Sui? Will they surpass Ethereum and Solana?
* If regulation becomes clearer, how much value will crypto-based applications like Uniswap capture?
Ask ten crypto experts these questions and you'll get ten different answers.
You can see the impact of this uncertainty in the recent returns of various crypto assets. Who predicted last week that XRP would be up 77%?
As an investor, you have two choices. You can try to pick winners, researching dozens of different blockchains and their unique token economics and fundamental drivers. Or you can bet on the whole space, buying a diversified index fund that holds the leading assets by market cap.
Bitwise launched the world's first crypto currency index fund in 2017. We envisioned it as the "S&P 500 of crypto", a simple way for investors to get diversified exposure to the space. The idea then - just as it is now - is that it's wise to buy the whole track.
Sometimes you don't know at the start whether AltaVista or Google will win, but you know that internet search is going to change the world. An index lets you participate in the development and prosperity of a new frontier without having to analyze the details or make specific calls.
For bold, comprehensive, and diverse innovations like crypto currencies, and for innovations entering a new era of possibilities, this strategy seems more relevant than ever.
