Press: Is Bitcoin hitting $1 million just a matter of time or a fantasy? Bitwise Chief Investment Officer Matt Hougan gave an extremely conservative but shocking mathematical deduction in the latest interview. He believes that even without taking into account aggressive growth, Bitcoin has room for a 20-fold increase based on the natural expansion of the stored value market alone. Matt Hougan, chief investment officer of Bitwise, said this recently on Deribit’s podcast Crypto Options Unplugged.

Matt Hougan had an in-depth conversation on the podcast about DAT, the long-term value of Bitcoin, quantum threats, the relationship between AI and encryption, the Clarity Act and other topics of concern to the encryption industry. In addition, Matt made an astute observation: the real “crypto winter” is not far away, but has quietly arrived on the retail side since early 2025. When institutional capital flows cover up the departure of retail investors, when quantum threats are actually slowing down the decision-making of 50 billion funds, and when AI agents begin to reconstruct the financial track on the chain, where are we in the cycle? Matt Hougan in-depth dismantles Bitwise’s blueprint for the Cryptozoological Year (2027), the brand moat of the L1 space, and the foundation that determines the life and death of the industry - the "Clarity Act." Golden Finance has compiled and organized the main content of the podcast, as follows:

CorePoints:

1. ETF vs. Digital AssetsTreasuryTreasury (DAT):ETF is strictly superior to DAT in terms of pure currency holding. DAT must transform to "version 2.0" - create additional Alpha through options strategies, leverage, lending, etc., otherwise it will be eliminated.

2. Bitcoin's long-term value: Based on the logic of "digital gold", the stored value market continues to grow + Bitcoin's share rises from 5% to 15%, and Bitcoin is expected to reach $1 million within 10 years. The assumptions are quite conservative.

3. Quantum Threat: Technically solvable eventually, but it is actually slowing down institutional adoption - it is being asked at every roadshow, lengthening the decision-making cycle by 6 to 9 months.

4. The relationship between AI and encryption, long-term complementarity: AI causes deflation → government prints money → good for Bitcoin; the short-term increased correlation with technology stocks may be just a statistical anomaly.

5. Market cycle judgment: The crypto retail winter has started in early 2025 and may be bottoming out. The end of the year is expected to be significantly better than now. 2027 is expected to be a big year for crypto.

6. Ethereum vs.Solana: The core question is whether L1 block space will be fully commoditized. Matt is bullish on both and believes that brand moats will continue to exist.

7. Regulatory risks: The probability of passing the Clarity Act is about 50/50. If passed, it will lay a solid foundation for the industry; if not passed, the risk of partisanship in encryption will continue to exist.

1, BitcoinIntroduction of ETF

Deribit: We always ask each guest how they got into crypto, when they got into it, and what made them make this choice. Can you tell us a little bit about that?

Matt Hogan: I joined Bitwise full-time in early 2018. Before joining, I was the CEO of ETF.com and had been working in the ETF industry for more than ten years. After I sold that company, I started looking for the next thing, and cryptocurrencies were obvious to me. The reason is that today everyone knows and loves ETFs, which are the only way people invest. But in the early days of ETFs, everyone hated them. They are called "weapons of mass destruction" and the US Congress held hearings on this, saying they are destroying the American dream. People call them "unpatriotic" and distrust them, saying they will blow up the market.

But I have witnessed ETFs go from a hated technology to a mainstream way for people to invest, and they have also gone through a massive bull market. I want to find the next one like this. I have some good connections in the crypto space. Spencer Bogart from Blockchain Capital used to work for me at ETF.com and he introduced me to Bitwise CEO Hunter and I’ve been in the crypto industry ever since.

Deribit: Why are ETFs called "weapons of mass destruction"?

Matt Hougan: Because they are new and they pose a threat to the financial system. Does this story sound familiar? At the time, people were particularly worried about fixed-income ETFs—which put illiquid bonds into a liquid package and would explode the market. But this is exactly the same kind of "fear-mongering" we've seen in the crypto space for years. The Financial Times said that ETFs will destroy capitalism... To me, ETFs are better, faster, cheaper, easier to trade, and the pattern match with cryptocurrencies is too obvious. We're roughly halfway through that journey, but eventually cryptocurrencies will become as mainstream as ETFs are today.

2. Bitcoin ETF vs. Digital AssetsFinanceLibrary

Deribit: ETFs are obviously the entry point for traditional institutions to enter this field. The biggest deal last year can be said to be the explosion of digital asset treasury (DAT), and everyone's rush to copy MicroStrategy's play style. What do you think of the competition between ETFs and digital asset treasuries? If I have an ETF, do I still need DAT?

Matt Hougan: You have to think of it as a game of Leapfrog. The original digital asset treasury MicroStrategy was a kind of regulatory arbitrage - there were no ETFs at the time, and people wanted to buy Bitcoin through stocks, so MicroStrategy appeared. Because of this, it has a beautiful flywheel effect: trading at a premium to net asset value, it can then issue more shares to buy more Bitcoin, amassing a staggering balance sheet.

But the challenge is that once you have an ETF, the ETF is strictly better than the DAT. My ETF can be traded in and out on a daily basis, and MicroStrategy has premiums and discounts. So now, digital asset treasury needs to upgrade to version 2.0 and surpass ETFs, otherwise it will die. ETFs can do better if they just do what ETFs do. They have to do something different or they won't survive. What is different? MicroStrategy can do some other things, such as issue debt because of its large balance sheet. You can also see some DAT companies doing option coverage strategies, or lending assets, and doing some interesting things that hedge funds do. But if they just do what ETFs do, they will be eliminated.

So I understand that if they just track the Beta of Bitcoin, they will die. They are forced to go the alpha route, whether it's return-enhancing alpha, trading around volatility, or something else - there's no reason to exist if they don't.

If they don't, they're the walking dead. I think there is room for DATs, just like there are index funds and there are active funds. There will come a time in the market where DATs are severely undervalued because people haven’t realized that DAT 2.0 is happening. There will be winners and losers, and the market needs to distinguish between those who are trying to do hard things well and those who are doing easy things easily, and the results will be completely different.

Deribit: There may be some "Relative Value Trades" between DAT and ETF. The idea is: if interest rates drop significantly - let's say the market crashes and interest rates plummet - then these DATs (if they still exist by then), could theoretically raise money at a very low cost like MicroStrategy does, and then buy cryptocurrencies in large quantities and increase leverage? This way, they will significantly outperform ETFs when the market rebounds. So, trading this "spread" - not exactly arbitrage, but certainly fun, right?

Matt Hougan: Yeah, I think that's absolutely right. You have to think of them as part of the Capital Stack. They are more than simple Beta (benchmark returns). I agree with you that there do come up when the "trade is on" and exciting, and there are also "trade off" moments. It's up to the investors themselves to understand which stage we are in.

3. Sales language to institutions: asymmetric upside space

Deribit: At an institutional level, you have been having this conversation for many years and have seen a lot of change and adoption. Now when you go to institutions, family offices that haven't invested in Bitcoin or cryptocurrencies, what is your sales pitch? What's changed?

Matt Hougan: Early on, you have to spend a lot of time explaining what the technology is and how it works. We would go into the office, take out the computers, unplug the Wi-Fi cards and speakers, and demonstrate how to create an air-gapped computer and do cold storage. That's a very basic 101 level education because people don't touch something they don't trust. Did that for several years.

Go in now, mainly to demonstrate that Bitcoin still has asymmetric upside potential, discuss how to layout the growth of stablecoins and tokenization, and its role in investment portfolios. The good thing now is that Bitcoin and cryptocurrencies have lost that "alternative" label, and people can look at it like any asset, and it can fit well into an investment portfolio.

4. The mathematical logic behind Bitcoin reaching $1 million - digital gold

Deribit:Tell us more about asymmetric returns – why do you still believe it?

Matt Hougan: Of course! Let me calculate a conservative case for Bitcoin, which is conservative to more than 1 million US dollars. If you think of Bitcoin as digital gold, only two factors matter: how big the stored value market is, and how much share Bitcoin holds. Currently, the stored value market is $40 trillion, and Bitcoin accounts for about 4%, which is why Bitcoin is now around $75,000.

The mistake people make is saying, "Maybe Bitcoin could be 25% of the market, about a quarter the size of gold, and that would be a $10 trillion market cap, maybe five times what it is now." But the math is wrong because the stored value market itself has been growing significantly over the past 20 years. When gold ETFs were launched in 2004, the entire stored value market was only US$2.5 trillion, with a compound annual growth rate of 12.5% ​​over the past 20 years. If it grows at this rate for another 10 years to 2035, Bitcoin will only need to account for 15% of the market to reach $1 million per coin; if it accounts for 30%, it will be $2 million. These staggering figures can be arrived at using very conservative assumptions. All you have to say is that the stored value market continues to grow at the same pace, with Bitcoin going from about 5% to 15% in 10 years - that's pretty much a sure thing, assuming very conservative assumptions.

This is not a 10x growth in a year. If you want to 10x a year, I think some DeFi applications have that potential as the token economics improve. But for mainstream assets like Bitcoin, using relatively conservative assumptions, it may still be 20 times within 10 years. If you search for stocks or bonds, can you find something like this?

Deribit:Let me play devil’s advocate—gold has risen 50-60% in the past 12 months, while Bitcoin has remained basically flat. What do you say?

Matt Hougan: Bitcoin is an emerging store-of-value asset and cannot be expected to perform exactly the same in any short term. Gold has a special driver - central bank buying. After the United States confiscated Russian treasury assets, the central bank bought a lot of gold, pushing up the price of gold, not retail or financial advisors. Bitcoin has its own special driver - the four-year cycle, which is typical of crypto cycles.

But if we count from the beginning of the COVID-19 epidemic to today, this is the largest inflation in our lifetime. The US dollar has lost 25% of its value, while Bitcoin has increased 15 times. That's a pretty good store of value, right? Gold doesn't always rise. Since the beginning of the Iran war, Bitcoin has risen by 14% and gold has fallen by 5%. So we need to take a long-term view, not just the short-term.

5.The impact of quantum threats on organizational adoption

Deribit: Are you concerned about quantum threats? Many blame this for the cryptocurrency’s underperformance over the past few months.

Matt Hougan: There are two levels of concern. One is that this is a challenging problem, but I think the Bitcoin community will eventually solve it, although there are some edge cases with certain wallets where it will be complicated and tricky. We're talking about it, putting resources into it, so I'm confident it will be resolved. But it did weigh heavily on returns.

The reason is, when I go to investment committees that manage $50 billion - usually eight guys in their 40s and 50s - I have to convince everyone to allocate funds to Bitcoin. In the past year, at the end of almost every meeting, someone always raised their hand and asked, "What about quantum?" I can explain roughly how quantum will develop, but the whole process takes 6 to 9 months, which really slows down institutional adoption significantly. It will be resolved in the long term, but it is holding back in the short term, which is also reflected in the completely different trend charts of Bitcoin and Bitcoin Cash over the past year. I do think quantum has an impact, but we will get through this.

6. AI and Cryptocurrency: Deflation, Liquidity and Synergy

Deribit: Judging from the price trends in the past few months, what do you think of the relationship between AI and cryptocurrency - are they complementary or competitive?

Matt Hougan: I think they're very complementary in the long term. Beyond Bitcoin, the benefits of AI for stablecoins, tokenization, and related areas are huge. I also think that if you believe in the theory of AI-driven deflation — that AI causes massive deflation and governments will respond by printing a lot of money, just like we responded to the last big deflation when China joined the WTO — that’s also positive for Bitcoin.

Concerning the recent correlation with software stocks, I'm inclined to think it's just a statistical anomaly, but not sure. It's possible that two unique events - the four-year cycle and the October 10 deleveraging - coupled with the fear of software stocks, make the recent correlation just a short-term anomaly. This is a positive catalyst in the long term.

Deribit: Regarding the correlation between Bitcoin and Nasdaq, this correlation has been declining over the past 6 months...

Matt Hougan: Yes, low correlation is one of the main reasons why institutions allocate to cryptocurrencies. The first thing BlackRock’s marketing materials talk about is low relevance. Even if there was some correlation with the stock before, the 90-day or 180-day correlation is still relatively low. With this differentiation comes good for cryptocurrencies. In the long term, the fundamentals that drive Bitcoin and cryptocurrencies are just different from most other assets. Sometimes macro trends will push all correlations toward 1, but I think this paradigm of different returns is the long-term norm, and it is also very helpful for institutional promotion.

7. Cyclic Bottoming: Are We in a Crypto Retail Winter?

Deribit: What do you thinkBitcoinhas recently outperformedUS stocks? Is it capital flight from the Middle East?

Matt Hougan: I never think there is a single cause for these types of movements. Capital flight from the Middle East is a major factor. Crypto sentiment has also hit all-time lows, with the Fear Greed Index at just 4, which is a very asymmetrical reading with only the direction of normalization, and we are seeing this normalization.

I personally have a theory that the crypto winter actually starts in early 2025, not in October. So we're actually deep into winter and the natural cyclical bottoming out is happening. And the world is so crazy that it makes cryptocurrencies appear sane, which is also good for crypto.

Looking at the gold/bitcoin ratio, that bear market also started in early 2025, and maybe we are hitting the bottom. Bitcoin captures the two extreme tails of the risk distribution: the extreme right tail is when liquidity is abundant and everything rises, and Bitcoin rises the most; the extreme left tail is when the existing political and economic structures are challenged, and Bitcoin’s characteristics as a decentralized, non-sovereign asset begin to highlight. In its intermediate state, it doesn't show much character. Perhaps we are seeing the return of Bitcoin’s functionality as a far-left tail hedge.

Yes, I think both are correct. Regarding the theory that the cold winter starts in January - there are actually two markets in the crypto market in 2025: Bitcoin and Ethereum are doing relatively well because of the large inflows of ETF funds, and everything else has been falling since January, with some Layer 1 tokens falling by 70% in 2025. Outside of Bitcoin and Ethereum, long-term holders and whales continued to sell throughout the year. So institutional crypto will still be rising in 2025, but the crypto retail industry will begin to collapse in early 2025. I think we’re deep into the crypto retail winter and now maybe spring is coming. This cyclical factor is important and may be masked by ETF flows.

Deribit: Has AI trading stolen attention from the cryptoindustry?

Matt Hougan: Absolutely. AI trading and metal trading have become hot spots. Specific to AI, miners are selling Bitcoin to invest in AI and high-performance computing centers, which has continued to exert a negative drag on the market.

8. The future of altcoin ETFs and institutional capital flows

Deribit: Will there eventually be ETFs for other altcoins?

Matt Hougan: Technically, futures contracts need to be on a regulated exchange to launch an ETF in the United States. I think eventually there will be, but I don't think that's going to be the biggest driver. The next wave of crypto ETF growth will be thematic and index products - people want to bet on themes such as DeFi tokens and stablecoin-related assets, rather than individual token ETFs, because the market value of many DeFi projects is only in the billions, which is too small for the ETF market.

Deribit: Will retail investors come back? Or will institutions dominate this market?

Matt Hougan: Institutional funds will continue to flow in in the next 10 years. The current average institutional position is 0%. This allocation is wrong. I think it will rise to 5%. This week alone I'm meeting with Morgan Stanley, Wells Fargo and Merrill Lynch. These funds will make bull markets more stable, less volatile, and longer lasting. Retail money will also come back as prices rise, I don't think it will ever flow to AI. AI and crypto can be liked at the same time. These two are the biggest market opportunities in financial history - intelligence and currency. We can take care of both.

9. Survival of the fittest - most crypto assets will return to zero / stable currency / Ethereum vs Solana

Deribit: Many projects will not recover, do not provide practicality, and will slowly disappear without network growth. Then higher quality networks will emerge, attracting more capital concentration... Do you agree?

Matt Hougan: I strongly agree. I think most crypto assets will go to zero, or even 80% of crypto assets will go to zero, and the market will form an oligopoly, with the biggest names taking the lion's share. For investors, this means that instead of spending a lot of time trying to pick the only winners, focus your energy on weeding out the losers—sifting out the projects that aren’t scaling, not being adopted, not growing, and then buying everything that’s left. Focusing your efforts on seeking Alpha on negative screening is close to the optimal portfolio.

Stablecoins are one of the biggest successes in this space to date. In 5 to 10 years, stablecoins may dominate global payments. Ethereum benefited greatly from this, but why is Ethereum underperforming?

There is only one core question: Is L1 block space a commodity? If it is a pure commodity, investors don’t care whether it is Ethereum, Solana, or other L1 or L2, and transactions flow seamlessly, then it will be difficult for Ethereum to prove its value based on the current market value. But if block space is not a pure commodity, if it can be priced differentially, if there is a brand moat, if cross-chain is not as easy as imagined, then Ethereum is seriously undervalued - because based on its current market share, the scale of stablecoin and tokenized transaction activity is huge and underestimated by about 10,000 times, especially as AI agents enter this field, the number of transactions may be astronomical.

Deribit: When Tradfi players enter this field, they are looking at Ethereum because it is the most trusted, has the most activity, and has first-mover advantages...

Matt Hougan: Absolutely agree. This is what you see in the market, Ethereum is winning a lot, Solana is winning a lot, and others are competing on the fringes. On Wall Street, building on Ethereum won't get you fired; building on the 10th L1 probably will. So both Ethereum and Solana are winning more and more share. I'm bullish on both, I ultimately don't think the L1 block space will be purely commoditized, they have a lot of brand moat value.

10. Market Outlook: Why 2025-2027 is Good for Crypto

Deribit: If we entered a crypto winter at the beginning of last year, do you think we are coming out of it now? Will the year-end target be significantly higher than now?

Matt Hougan: Yeah, I definitely think so. I'm not sure if this year will be a record high, but the end of the year will be much better. There are some very positive long-term forces in crypto right now: stablecoins are a torrent, tokenization is a torrent, concerns about currency devaluation are a torrent, token economics are improving, L1 decentralization is improving, and blockchain is executing on the technology roadmap better than I have seen in my eight years in crypto. These are big trends, and taken together they represent a very positive environment.

There are risks, of course: regulatory bills failing, the world sliding into a Great Recession, or other unforeseen problems. But excluding these, I think the end of the year will be significantly higher, and 2027 will be a pretty good year for crypto.

11. The Clarity Act and its Impact

Deribit: How important is the Clarity Act?

Matt Hougan: I think this is going to be a big trigger. The reason is that we are now building our regulatory foundation on sand. The current regulatory environment in the United States is very good, but we are only one step away from a strong party rotation, which may bring about a completely different regulatory environment because it is not guaranteed at the legislative level. It won't be back to the Gensler era, but it may be worse than it is now. That risk is preventing Wall Street from investing more in the space. They are doing a lot now - M&A, construction, hiring - but with a solid regulatory framework, the scale would be 2 to 4 times what it is now. If the bill passes, the rest of the year will be smooth sailing for crypto; if not, we could retest the lows.

12. Circle (USDC) and the impact of stable currency legislation

Deribit: Circle has doubled in the past month. Is this pricing in a high probability of passage of the Clarity Act?

Matt Hougan: Yes, Circle has performed very well, and I think it is pricing in optimism about the Clarity Act and also pricing in the expectation that it may get a larger share of the next trillion stablecoins than it has in the existing market. Even at current prices, I think this is still a very interesting stock.

Deribit: What are the chances of the Clarity Act passing?

Matt Hougan: We paid consultants in Washington, and they told us it was 50/50 - I could flip a coin myself and come to this conclusion. I don't know why we paid them. Reality is what it is, it's really hard to judge. The window is shrinking, with Polymarket odds swinging between 65% and 40%. If I had to bet on one, I would be slightly biased and not pass. Washington is distracted, and this is a complex issue.

13. The Partisanization of Encryption

Deribit: Has Bitcoin being regarded as a "Trump concept asset" a negative factor?

Matt Hougan: You are right that partisanship in crypto is a risk that could spark countermovements. But I don't think we'll ever go back to the Gensler era - when BlackRock, JPMorgan, Group, etc. were all building and investing heavily in this space, and that was huge lobbying power. They won’t make stablecoins illegal or ban DeFi entirely when Apollo is investing in Morpho tokens. Washington is a little more realistic than that. But partisanship is a real risk, and that’s why the Clarity Act is so important—it turns our sandy foundation into concrete that can’t be easily undone even if politics change.