The market is currently underestimating the importance of Washington’s evolving attitude toward cryptocurrencies, according to Bitwise CIO Matt Hougan. He mentioned in a recent memo that the US political landscape has shifted significantly towards a more positive stance on crypto in recent weeks. Hougan believes that if the impact of these political shifts had been priced in, the market would have already reached a new all-time high. Historically, crypto has been a partisan issue, with Republicans generally supporting it and Democrats showing resistance.
Despite the Democratic opposition, crypto advocates have been strategically building political influence, leading to significant legislative actions. For example, on May 8, 21 House Democrats voted alongside Republicans to repeal SAB 121, a controversial SEC rule restricting large banks from holding crypto. The Senate followed suit, with 10 Democrats, including Senate Majority Leader Chuck Schumer, supporting the repeal. This marked a significant positive change in the legislative landscape regarding crypto in the US.
While there have been positive developments in Washington regarding cryptocurrencies, there are still ongoing political challenges that the industry faces. President Joe Biden recently vetoed the repeal of SAB 121, highlighting the complex regulatory environment surrounding crypto. However, Hougan sees these recent developments as a turning point for the industry. He believes that once regulatory uncertainty is lifted, a significant portion of the estimated $20 trillion managed by financial advisors in the US could flow into crypto.
Hougan argues that the broader market has yet to fully recognize the implications of these political shifts. Regulatory uncertainty has long been a primary concern for financial advisors and Wall Street institutions when considering investing in crypto. A recent survey conducted by Bitwise revealed that 64% of US financial advisors cite regulatory uncertainty as the main barrier to greater crypto exposure in their portfolios. If this barrier is eventually lifted, there is the potential for a significant influx of capital into the crypto market.
Despite the market’s overall indifference to these political changes, Hougan believes that savvy investors have an opportunity to capitalize on the evolving attitude toward cryptocurrencies in Washington. He stated that once the market wakes up to the fact that we are in a new era for crypto, there is the potential for significant growth and widespread adoption of cryptocurrencies as mainstream assets. Major financial institutions have been hesitant to fully embrace crypto due to regulatory concerns, but if Wall Street were to accept crypto, it could lead to new heights for the market.
The evolving attitude toward cryptocurrencies in Washington is a significant development that has the potential to reshape the crypto market. The recent legislative actions and shifting political landscape indicate a positive change for the industry, despite ongoing challenges. Investors and financial institutions should pay close attention to these political shifts and consider the long-term implications for the market.