Crypto investors may be underestimating the next wave of growth — Bitwise

• Bitwise CIO Matt Hougan stated that crypto investors are underestimating the industry’s growth potential.
• Hougan noted that crypto apps could capture larger markets as stocks, bonds and other traditional assets become tokenized.
• He added that crypto-native firms continue outperforming major TradFi entrants despite traditional institutions’ larger customer base.

Crypto investors may be underestimating the scale of the industry’s next growth phase by relying too heavily on current market conditions, according to Bitwise CIO Matt Hougan.

Crypto apps could target a much larger asset market

In a late Tuesday report, Hougan identified three mistakes investors are making as the sector expands beyond its current boundaries.

The first argument is that investors are underestimating the markets crypto apps are designed to serve. He pointed to Uniswap as an example. The decentralized exchange was initially built to facilitate trading between crypto assets, but its potential market could expand significantly as traditional assets become tokenized.

“People think of these apps as crypto apps, just like they thought Amazon was a bookstore,” Hougan wrote.

While crypto's market cap stands at roughly $2 trillion in assets, Hougan noted that the global stock market is worth roughly $150 trillion, while the bond market stands at roughly $350 trillion.

As stocks, bonds, real estate and other assets move onto blockchain rails, platforms such as Uniswap, Hyperliquid, Aave and Chainlink could serve markets far larger than crypto alone.

“It’s widely accepted now that tokenization is going to eat every kind of asset you can imagine,” Hougan noted.

Crypto-native companies may continue to outperform TradFi entrants

Hougan’s second point centers on investors’ tendency to overestimate traditional financial institutions' ability to dominate crypto. He cited PayPal’s launch of its stablecoin in 2023 as an example.

Despite PayPal’s global brand and established customer base, its stablecoin has gained only a small share of the market. Tether’s USDT and Circle's USDC currently control about 88% of the stablecoin market, while PayPal’s share is around 1%.

“Within crypto, more people know and trust Tether than PayPal,” wrote Hougan.

Hougan also pointed to crypto custody. Fidelity entered the market in 2019, but Coinbase has emerged as the largest crypto custodian in the United States. He acknowledged that traditional financial firms can dominate in areas where they have established advantages, citing BlackRock’s leading position in the US spot Bitcoin exchange-traded fund (ETF) market.

Hougan’s final concern is that investors may be using today’s transaction volumes to estimate the future size of blockchain markets. He argued that tokenization could substantially increase transaction activity by allowing assets to trade continuously.

US stocks currently trade for about 33 hours per week, compared with 168 hours of potential weekly trading in a 24/7 tokenized market. As AI agents increasingly monitor portfolios and execute transactions, Hougan suggested trading activity could rise dramatically.

He also mentioned that the common thread behind all three mistakes is that crypto is changing faster than investor expectations.

“The gap between how quickly the industry is moving and how quickly perceptions catch up is where the opportunity lives,” Hougan stated.