How does a TradFi company view the market today?

In this episode, hosts [Dan Smith]( and [Sam]( are joined by [Ryan Rasmussen]( and [Matt Hougan]( CIO of [BitWise]( to discuss expected fallout from FTX, Coinbase’s massive market opportunity, Bitwise’s investment products, crypto’s next big unlock and more!


Read our notes below to learn more


**Thoughts on FTX, Alameda and regulations**

* It was a classic fraud.
* It’s bad for the short-term and it’s around 6-9 months of setback.
* The market is going to pivot from lending and enormous VCs to better CEXs and DEXs and less excess in terms of lending and activity.
* For these types of events, the non-crypto enthusiasts are skeptical of crypto and often those in the industry find themselves back against the fence.
* Stablecoins are like the third rail regulatory topic in Washington.
* Suspecting they’ll chop it up and try to figure out something for spot crypto exchanges and the DeFi stuff will be harder and take longer.
* This is unfortunately like a two steps back, one step forward towards regulations.
* It shows that without proper regulations and clarity that all people have been asking for a long time, it’s letting these bad actors find their way into the industry and flourish in a very negative way.
* [Grayscale]( is a legitimate business and we can all model their revenues because we know what assets they have, what they’re earning and that’s not going away.
* The contagion story feels like it has calmed down a bit over the past few weeks.
* The market hasn’t seen the end of the black swan events yet.


**Coinbase’s massive opportunity**

* [Coinbase]( is one of the most phenomenal companies in the U.S.
* If you have a bunch of people with money who’ve entrusted your organization to hold that money, there are ways to monetize besides the most basic way of engaging in transactions.
* Coinbase’s user count in the past cycle was 20 million and now there’s 100 million.
* It is the most important exchange in the world and it has the largest assets on the platform.
* People are looking at the wrong metrics, they’re looking at short-term revenues and transaction costs.
* The trade-off using Coinbase app rather than self-custody wallets is the ease of use, being able to detect your bank account seamlessly and honestly the comfortability of a U.S. company.
* It’s cool that they offer Web3 native features like decentralized app store or offer Coinbase wallet to access [Uniswap]( and avoid using Coinbase platform.
* They’ve 10x monthly transacting users vs. where they were in 2018.
* They’re leaning into straddling that line between CeFi and DeFi.

**Bitwise’s Crypto Funds**

* Bitwise is trying to build a product that serves a role for people who aren’t all-in on crypto all the time.
* Built the index, diversified it and it rebalances every month.
* There are 7 screens that they use and the biggest ones they have screened for are the assets that might have risks of being in violation of federal securities.
* Spent a lot of time focusing on education and keeping updated over everything that’s happening.
* The broader financial industry is on adopting crypto.
* Doing a lot of research on product and strategy in the space.


**Client Interest**

* One thing that’s been really true over the last 12 months is that the category is growing rapidly.
* The biggest shift has been moving from $BTC only to $BTC and $ETH.
* Many financial advisors and family offices are more interested in $ETH than in $BTC.
* There’s more interest in L2s and a fair amount of interest in DeFi.
* There’s very little interest in NFTs.
* There’s a little bit of a lag between what everyone is excited about in the crypto industry and where that excitement falls in the traditional mark.


**Custody, Governance and Fund Allocation**

* All of Bitwise’s assets are custodied by third party institutional qualified custodians.
* The Bitwise 10 or BITW is in custody with Coinbase institutional, the DeFi fund is custody with Anchorage and the Bitcoin fund is in custody by Fidelity.
* They are a very conservative asset manager.
* The partners that they use for custody have to be able to support participating in governance while still safely and securely storing those assets in cold storage.


**Multichain vs. Cross chain future**

* Users and capital don’t really want to aggregate across a bunch of different L1s and app chains, it’s not a great user experience seeing there’s a lack of security in bridges and having to take on risk just slowly moving from blockchain to blockchain.
* Ethereum would be the largest and they are definitely bullish on L2s and scaling solutions.
* [Cosmos]( is radically different and a completely different architecture.
* It would be foolish not to diversify to some of these other interesting architectural approaches.


**Crypto’s Next Big Unlock**

* It’s going to be a combination of 3 different things, one is increases in regulation that makes it safer for people to mainstream into it, second is throughput or cost of transactions and lastly, new applications.
* The preconditions today look better than they ever have in the history of crypto.
* The expanse of the stablecoin ecosystem has gotten and how much liquidity there is in the stablecoin ecosystem across different stablecoins is really bullish for the space.
* The most bullish for the next cycle are Dynamic NFTs because it takes the conversation away from price speculations and more about benefiting from the utility.

**DeFi narrative**

* DeFi applications are software but are like businesses in a way.
* In order for them to continue growing, they do need to generate some kind of clash flow.
* Tokens embracing cash flow models are needed to get DeFi applications from a single use case or single protocol to multi-vertical businesses that are growing, flourishing and sustainable.


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1 thought on “How does a TradFi company view the market today?”

  1. Most TradFi’s see crypto as the future of finance, filled with enough opportunities still untapped. But most of them are scared about the security challenges facing crypto, which I think will be a thing of the past once regulations happens and self-regulatory products like TIDV are adopted.


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