Bitwise Chief Investment Officer: Three opportunities I see from the SEC's "Crypto Plan"

Written by Matt Hougan, Chief Investment Officer, Bitwise

Compiled by: Luffy, Foresight News

Last week, SEC Chair Paul Atkins delivered a speech titled "America's Leadership in the Digital Financial Revolution" at the America First Policy Institute.

You should read it now. Really, don't hesitate, this speech can be called an investment roadmap for the next five years.

In his speech, Atkins outlined a vision for the future of financial markets. Spoiler alert, everything will revolve around public chains like Ethereum. He proposed:

• All assets (stocks, bonds, US dollars, etc.) will eventually migrate to the public chain;

• Decentralized finance (DeFi) will play an important role in the future;

• Crypto assets and blockchain can give rise to exciting new business models;

• The main thing hindering this "revolution" is the hostile regulatory environment, which has now changed 180 degrees.

This is the most complete idea of how cryptocurrencies are reshaping financial markets I've ever read.

After reading this speech, it's hard not to want to allocate a lot of money to the crypto space. If you work in the financial industry, you might even want to shift your career focus here. The SEC chairman condensed all the best ideas made by crypto proponents over the past decade into this speech, and also detailed how the SEC will push these ideas to life.

"This is a once-in-a-generation opportunity," he wrote in his speech. A few years ago, I wasn't even sure if the compliance department would allow me to say that.

What it means for investors

There is so much to dig into this speech for investors. You can start a venture capital firm around Atkins' vision and build a business for every opportunity he proposes. But in my opinion, there are three investment opportunities that stand out.

Opportunity 1: The most obvious opportunity for Ethereum (and other Layer 1 public chains)

is to invest in Ethereum and other Layer 1 public chains that support stablecoins and asset tokenization.

"Today, I'm announcing the launch of Project Crypto," Atkins said, "which is a committee-wide initiative to update securities regulations to enable the migration of U.S. financial markets on-chain."

It is not difficult to see that if almost all assets are migrated to public chains, you will definitely want to deploy these public chains.

Which public chains are worth paying attention to? The best strategy may be to buy a basket of mainstream assets: Ethereum, Solana, Cardano, XRP, Avalanche, Aptos, Sui, NEAR, and more.

I know some readers will say: Ethereum is clearly the dominant chain in the tokenization and stablecoin space. I agree! It is in the lead. But looking back at the rise of digital trading in the early 21st century – the last major upgrade to the financial system, early market leaders were companies like Island ECN and Instinet.

Have you heard these names lately? Me neither. But Nasdaq's stock price has risen 2275% since it went public in July 2002.

Instead of trying to pick a single target, it is better to adopt an indexation strategy and buy a basket of assets to cover future head projects.

Opportunity 2: Coinbase, Robinhood, etc.

most instructive part of the "Super Apps" presentation was the section titled "Driving Super Applications: Horizontal Integration of Products and Services". In it, Atkins envisions a future where a single application enables customers to provide comprehensive financial services.

"Broker-dealers with alternative trading systems should be able to provide trading of non-security crypto assets, crypto asset securities, traditional securities, as well as crypto asset staking, lending, and other services at the same time, without obtaining licenses from more than 50 states or multiple federal licenses," Atkins said.

Reading this part, it's hard not to think that Coinbase and Robinhood are both practicing the concept of super apps, but the starting point is different: Coinbase started in the crypto field and is expanding into traditional assets; Robinhood, on the other hand, started as a traditional asset and is rapidly moving closer to the crypto space.

I dare to predict: one of these companies could become the world's largest financial services company and may even become the first financial services company to surpass $1 trillion in market capitalization. Atkins has just laid out a roadmap for them.

Opportunity 3: DeFi Applications

The third prominent opportunity in Atkins' presentation is decentralized finance (DeFi).

DeFi applications have been in a regulatory gray area, neither allowed nor explicitly prohibited by existing regulations. This limits their development: DeFi applications are widely used by crypto enthusiasts, but mainstream investors and institutions almost never get involved.

In a section titled "Unlocking the Potential of the U.S. Market: Vast and Robust On-Chain Software Systems," Atkins explained why regulators struggle to understand DeFi:

"Decentralized financial software systems, such as automated market makers, enable automated, unintermediated financial market activity. Federal securities laws have always defaulted to regulatory intermediaries, but that doesn't mean we have to force intermediaries when the market can operate without intermediaries."

In other words: DeFi is not just a technological revolution, but also an ideological revolution. And the SEC chairman understands that.

Despite the lack of regulatory clarity, the usage of DeFi applications has been considerable. Uniswap, the largest spot trading app, saw a record $88 billion in trading volume in June; DeFi lending protocols such as Aave also set a new record for lock-up volume, reaching $56 billion; Derivatives platforms such as Hyperliquid are just as large.

If regulations were clearer, could these numbers increase tenfold? 50 times? Or 100x? As traditional markets merge with crypto markets, the opportunities in the DeFi space will be extremely vast.

Critics point out that most DeFi tokens lack a clear economic connection to the underlying protocol. For example, Uniswap's UNI token is a "governance token": it means that holders can vote on the direction of the protocol but cannot benefit from the transaction fees charged by the platform.

I guess this is a legacy of the hostile regulatory environment of the past. Under the SEC's new vision, assets like UNI could unlock significant value by establishing more direct economic ties to the underlying protocol.

The core question: Is it already price in?

The most obvious question about Atkins' vision is: Is this already priced in? If the market had long expected the SEC to shift from a crypto opponent to a "catalyst", the prices of assets such as Ethereum, Solana, Uniswap, etc. should have reflected this.

Maybe. But the last thing I want to say is: this talk caught me off guard.

I've been researching and writing about cryptocurrencies for the past eight years, and I've been bullish on the future of cryptocurrencies for a long time, and I've said that all assets will eventually migrate to the blockchain. But after reading this speech, I realized that my pattern was not big enough and that I needed to speed up the pace of action.

If even I didn't expect it, I think everyone else too.