Crypto investors move from market cap to stock selection approach, says bitwise CEO

The crypto market has been truly matured since its early days a decade ago, emerging from a niche community to one with an increase in adoption on both Wall Street and Main Street, marked by funds exchanged (ETF) and even sovereign adoption.

However, despite this growth and sophistication, most participants in the crypto market around the world continue to cling to a scale – market capitalization. It remains the main way that people will assess and rank cryptocurrencies by multiplying the total supply of the current price per coin, providing a snapshot of each market owner.

The institutions, too, have also been made for years, looking at the entire crypto market especially through a Bitcoin lens. However, since they switched to the more sophisticated and reliable methods of investment review, according to Hunter Horsley, CEO of Bitwise Investments, managed more than $ 15 billion in possession.

“History, institutions viewed the entire crypto market similar to Bitcoin, essentially digital gold, and made wider markets based on the market cap. However, they gradually recognized that the crypto space was more diverse, similar to the stock market, including each project that offered unique cases of use and value of proposals,” Horsley told CoinDesk in Singapore last week.

“This realization is the strengthening of a transition from a size-based approach to a more annoying, such as the stock approach of choosing property,” he added.

An approach to choosing a stock is an investment strategy in which funds choose individual stocks with strong potential for growth or value. Unlike passive investment, where funds monitor a broad market index, stock selection involves detailed financial health examination, industry position, and other factors to identify opportunities for higher return.

According to Horsley, institutions are increasingly doing the same in the crypto market, which choose to invest in coins based on their basis.

More than bitcoin

Horsley’s response came after he was asked if Bitwise, as an asset manager, faced difficulties convincing institutions to invest in assets beyond Bitcoin.

The question appeared because, at the Dubai Conference, a well -known investor in Bitcoin Defi told CoinDesk that The BTC, often seen as digital gold, is easier for investors to understand and attract billions of dollars. In contrast, institutions often struggle to understand Ethereum, Solana, and other intelligent contract blockchains, along with the complexity of staking, generation yield, and related dynamics, including regulation aspects.

Growing willingness to explore cryptocurrencies beyond Bitcoin is apparent from the number of new ETFs launched this year that targets alternative digital assets, including a cryptocurrency dog ​​joke.

Recently, Bitwise filed an S-1 with the US Securities and Exchange Commission (SEC) to launch a funds exchanged by the exchange dedicated to Avalanche’s Avax token.

Shift in strategy

The investment approach like stock is in line with the macroeconomic environment today, which is different from 2020.

After that, interest rates are close to zero worldwide, including the US, and inflation is almost nonexistent. This rare combination has caused a “all rallies,” where even the most hidden altcoins and memecoins have grown in value.

Now, however, US interest rates sit around 4%, with a bond that produces almost that level, and inflation remains stubborn. In this climate, only crypto properties with strong foundations and proven quality are likely to develop, similar to analysts that choose individual stocks based on foundations.

Many experts, including economist Mohamed El-Erian and stock market historian and global equity strategist Russel Napier, suggested using the strategy for investment in the stock market.

According to them, the current period of financial repression, inflation and prosecutor’s dominance has warned intelligent structure and allocation of dynamic possession, in short, stock selection.

Is Bitcoin still a store of value?

One of the most heated debates because institutions and corporate treasury began to accumulate bitcoin is whether it is better served as a store of value or as a payment network. This debate is important because the on-chain activity significantly slows down, motivates An observer should remember“Bitcoin is at all times high, yet the blocks are completely empty.”

This situation is especially about miners, facing the bow -time division of block rewards almost every four years. They prefer Bitcoin to change as a payment network to maintain transaction fees, rather than just as a store value.

Horsley believes that both duties are possible for Bitcoin, but likely to be alone, rather than at the same time.

“Currently, Bitcoin is widely recognized and accepted as a store of value. When it gets acceptance to governments, corporations, and institutions, and they hold it as an important owner, the next logical step is to use it for transactions,” he said. “However, in order to use Bitcoin as a payment method, it must first be recognized and adopted as a legitimate amount of value.”

“Why would one person want to pay with it if they hadn’t agreed to its value?” He asked.

When asked about Bitcoin Defi and other development efforts, Horsley said he was “recruited by work done in the payment space, including initiatives such as Lightning and David Marcus’s Lightspark.”

Bitcoin Lightning is a second-layer scaling solution that allows faster, lower cost, and higher volume of transactions by processing off-chain payments through payment channels.

Another cycle

Finally, Horsley commented on a widely discussed four -year cycle of Bitcoin tied to the quadrennial halving event. Historically, the bull market tends to peak around 16 to 18 months after each division.

Given that the final division took place in April 2024, this timeline suggests the possibility of a bear market emerging in the coming months. Previous bear markets following the stop of cycles have seen bitcoin prices dropping by 80% or more from their high market highs.

The 2022 Bear Market is marked by the collapse of major players such as Stablecoin Project Terra, the Three Arrows Capital Hedge Fund, and the FTX Exchange, each brings a massive destruction of wealth throughout the crypto ecosystem.

Similarly, the 2018 Bear Market saw the explosion of ICO Bubble and regulation of crypto trading crackdowns in China and South Korea – two countries that cost a significant part of the global trade volume at the time.

Do we have similar catalysts at this time? It’s a good idea to work out, Horsley said.

“The four-year cycle of Bitcoin is traditionally characterized by a bear market, which is often triggered by an unexpected and meaningful event. If history repeats itself and leads to a downtrend next year that is largely dependent on whether such an opposite explosion can happen again. was of age and changed, “he was not surprised.

Horsley added that if the bear comes at all, downside volatility may be more subtle than in the past, when prices have collapsed more than 80% from the peaks.

The cryptocurrency market Showing dynamic like Wall Street.