Crypto Investors Are Now Using Wall Street's Age Old Strategy To Invest, Bitwise Ceo Says

What Happened

Institutions, too, did the same for years, viewing the entire crypto market primarily through a bitcoin lens. However, they have since moved to more sophisticated and reliable investment analysis methods, according to Hunter Horsley, CEO of Bitwise Investments, which manages over $15 billion in assets.

A stock-picking strategy is an investment approach where funds select individual stocks with strong potential for growth or value. Unlike passive investing, where funds track a broad market index, stock picking involves detailed analysis of companies' financial health, industry position, and other factors to identify opportunities for higher returns.

According to Horsley, institutions are increasingly doing the same in the crypto market, choosing to invest in coins based on their fundamentals.

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

The question arose because, at the Dubai conference, a prominent bitcoin DeFi investor told CoinDesk that BTC, often seen as digital gold, is easier for investors to understand and has attracted billions of dollars. In contrast, institutions often struggle to grasp Ethereum, Solana, and other smart contract blockchains, along with the complexities of staking, yield generation, and related dynamics, including regulatory aspects.

The growing willingness to explore cryptocurrencies beyond bitcoin is evident from the number of new ETFs launched this year targeting alternative digital assets, including joke cryptocurrency DOGE.

Recently, Bitwise filed an S-1 with the U.S. Securities and Exchange Commission (SEC) to launch a spot exchange-traded fund focused on Avalanche’s AVAX token.

The stock-like investing strategy aligns well with today’s macroeconomic environment, which differs significantly from that of 2020.

Several experts, including Economist Mohamed El-Erian and stock market historian and global equity strategist Russel Napier, have suggested using the strategy for stock market investing.

Market Context

The crypto market has truly matured since its early days a decade ago, evolving from a niche community into one with increasing adoption on both Wall Street and Main Street, marked by exchange-traded funds (ETFs) and even sovereign adoption.

Yet, despite this growth and sophistication, most crypto market participants across the globe continue to cling to one metric – market capitalization. It remains the primary way people assess and rank cryptocurrencies by multiplying the total supply by the current price per coin, giving a snapshot of each asset’s value in the market.

"Historically, institutions viewed the entire crypto market as similar to bitcoin, essentially digital gold, and made broader decisions based on market cap. However, they are gradually recognizing that the crypto space is more diverse, much like the stock market, with each project offering unique use cases and value propositions," Horsley told CoinDesk during the Token2049 conference in Singapore last week.

According to them, the current era of financial repression, inflation and fiscal dominance warrants clever structuring and dynamic asset allocation, in short, stock picking.

Why It Matters

Today, however, U.S. interest rates sit around 4%, with bond yields roughly matching that level, and inflation remains stubbornly high. In this climate, only crypto assets with strong fundamentals and proven quality are likely to thrive, much like analysts picking individual stocks based on fundamentals.

This situation is especially concerning for miners, who face periodic halving of block rewards about every four years. They may prefer bitcoin to evolve as a payments network to sustain transaction fees, rather than solely as a store of value.

Horsley believes both roles are possible for bitcoin, but likely one at a time, rather than simultaneously.

Details

"This realization is fostering a shift from a size-based approach to a more nuanced, stock-like strategy of asset selection," he added.

Beyond bitcoin

Shift in strategy

Back then, interest rates were near zero across the developed world, including the U.S., and inflation was practically nonexistent. This rare combination sparked an "everything rally," where even the most obscure altcoins and memecoins soared in value.

Is bitcoin still a store of value?

One of the most heated debates since institutions and corporate treasuries began accumulating bitcoin is whether it serves better as a store of value or as a payment network. This debate matters because on-chain activity has significantly slowed, prompting one observer to note, "bitcoin is at an all-time high, yet the blocks are completely empty."

"Currently, bitcoin is being widely recognized and accepted as a store of value. Once it gains acceptance among governments, corporations, and institutions, and they hold it as a valuable asset, the next logical step is for it to be used for transactions," he said. "However, for bitcoin to be used as a payment method, it first needs to be acknowledged and adopted as a legitimate store of value."

"Why would someone want to pay with it if they haven't yet agreed on its value?" he asked.