Bitwise CIO says crypto investors are underestimating tokenization and transaction growth

Bitwise Chief Investment Officer Matt Hougan said crypto investors are making three key mistakes that could cause them to underestimate the long term opportunity for blockchain applications.

In a note published this week, Hougan argued that investors are failing to account for the expansion of crypto applications beyond digital assets, the strength of crypto native companies against traditional financial institutions, and the potential for transaction activity to increase significantly as assets move onchain.

Crypto apps could target a much larger market

Hougan said investors often value applications such as Uniswap based primarily on the existing crypto market, which he estimated at roughly $2 trillion.

He argued that this overlooks the potential expansion of these platforms as stocks, bonds, real estate, and other traditional assets become tokenized.

Hougan pointed to approximately $150 trillion in global stocks and $350 trillion in bonds as markets that decentralized trading platforms could eventually access.

“If Uniswap can tap into these markets, the opportunity is much bigger than crypto alone,” Hougan wrote.

He said the same argument could apply to platforms including Hyperliquid, Aave, and Chainlink as tokenization expands beyond crypto assets.

Crypto native companies have remained competitive

Hougan also argued that investors have repeatedly overestimated the ability of traditional financial companies to displace established crypto businesses.

He cited PayPal’s 2023 stablecoin launch as one example. Hougan said Tether and Circle currently control 88% of the stablecoin market while PayPal holds roughly 1%.

He also pointed to Coinbase’s position in crypto custody despite Fidelity entering the sector in 2019, as well as the continued dominance of offshore perpetual futures markets over CME crypto derivatives.

Hougan attributed the performance of crypto native companies to their ability to move faster, focus exclusively on crypto, and maintain established user bases.

He acknowledged exceptions including BlackRock, which operates the largest Bitcoin ETF, but said traditional finance companies have generally been more successful with traditional financial products than with crypto native applications.

Transaction activity could increase significantly

Hougan’s third argument centered on estimates for future blockchain transaction activity.

He said analysts often model blockchain revenue using current trading and payment volumes, which he believes could significantly underestimate future activity.

US stocks currently trade for about 33 hours each week during regular market sessions. Tokenized markets operating continuously could expand that window to 168 hours per week.

Hougan said artificial intelligence agents could further increase activity by continuously monitoring portfolios and executing transactions on behalf of users.

Combining continuous markets with automated trading could result in stock transaction counts increasing by 10 times or more, according to Hougan. He said increases of 50 times or even 100 times were conceivable.

Higher transaction volumes could generate significantly more revenue for blockchains and applications processing those transactions, even if individual transaction fees decline, Hougan said.

He argued that similar dynamics could emerge in payments as autonomous agents begin conducting more transactions.

Hougan said the common mistake across all three areas is relying too heavily on current market structures when evaluating an industry that is changing rapidly.

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