Bitwise's Chief Investment Officer Matt Hougan argued that the best way to build a "complete cryptocurrency portfolio" is not only to allocate to base layer assets like Bitcoin, Ethereum, and Solana, or top-stack applications like Uniswap, but also to include cryptocurrency-related stocks, citing Circle's recent IPO as a good example.
According to The Block on the 11th (local time), Bitwise's Chief Investment Officer Matt Hougan claimed that the best way to build a "complete cryptocurrency portfolio" is to include not only base layer assets like Bitcoin, Ethereum, and Solana, or top-stack applications like Uniswap, but also cryptocurrency-related stocks. He presented Circle's recent IPO as a good example.
Hougan mentioned in a memo sent to clients late Tuesday that Circle, the issuer of USDC, went public last Thursday under the ticker CRCL, which was one of the hottest IPOs in years. The offering was oversubscribed by 25 times and priced at $31, exceeding the indicated range, and surged 167% on the first day. According to The Block's Circle price page, the stock was trading at $105.91 at Tuesday's close, with a market capitalization of $28 billion, which is about half the size of Coinbase and Robinhood.
Investors are clearly eager for CRCL exposure in the area that Hougan describes as the second killer app after Bitcoin, a company at the center of the stablecoin ecosystem. He said, "In the past 5 years, stablecoin AUM has grown from just over $4 billion to $250 billion, and the U.S. Treasury forecasts it could exceed $2 trillion by 2030. It's hard to find another industry where the government's base scenario is 700% growth in the next 5 years."
Hougan continued, "Issuers make money by taking interest from government bonds. Stablecoins do not pay yields." "It's a simple but good business. With short-term government bond rates around 4%, stablecoins currently generate about $10 billion in high-margin revenue for issuers. If stablecoin AUM grows to $2 trillion, it would change to $80 billion annually."
The key cryptocurrency debate beyond Bitcoin, according to Hougan, is where value will accumulate - whether in base layers like Ethereum or Solana that drive the ecosystem, or in the top stack of apps like Uniswap that generate revenue.
While many crypto natives do not venture outside the decentralized ecosystem, Bitwise's CIO argues that cryptocurrency-related stocks like Circle are classic application plays. They utilize the infrastructure of public blockchains but pay only a small fee for that privilege.
He said, "In other words, Circle can issue stablecoins on Ethereum for a fraction of a penny, but this immediately becomes accessible to hundreds of millions of people in almost every country in the world, can be transferred almost instantly anywhere in the world at very low cost, can be used in DeFi applications, and can be programmed through smart contracts, and so on." "Just as the internet opened up content creation on a global scale 30 years ago - suddenly anyone with an internet connection could post content that anyone in the world could read instantly - public blockchains do the same thing in finance. It's software that anyone can build."
It's not just Circle. The number of cryptocurrency stocks building new businesses using blockchain is increasing. Hougan mentioned that Coinbase earns revenue on the Layer 2 Base network, Galaxy earns about $100 million annually from staking, and Mastercard operates a platform that integrates with blockchains like Ethereum and Avalanche to help companies more efficiently lend, borrow, and make cross-border payments.
He said, "What all this is saying is that we believe many parts of the cryptocurrency ecosystem will thrive in a symbiotic way in the long term. Core infrastructure will become more valuable as more applications use it, and applications will become valuable as infrastructure continues to improve." "Of course, we can't know whether more value will accumulate on the blockchain itself or on the companies building on top of it. That's why I think the best way forward is to own both."
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