Amberdata Podcast Featuring Ryan Rassmussen, Head of Research at Bitwise

Welcome to Amberdata's Podcast series featuring leaders in the Crypto space where we go in-depth and dive into various topics. In this episode, Chris Martin, Amberdata's Director of Research, interviews Ryan Rassmussen, Head of Research at Bitwise Asset Management.

In this episode of the Amberdata Podcast, Chris Martin, Director of Research at Amberdata interviews Ryan Rassmussen, Head of Research at Bitwise Asset Management. In this podcast, we talk about the state of the Bitcoin and Ethereum ETFs, the adoption of crypto by retail and institutional investors, and the positive outlooks in the industry.

In addition, we recap Bitwise's 2024 predictions and shed some light on how the rest of 2024 is likely to play out.

Introduction

In this episode of the Amberdata podcast, Chris Martin, Director of Research, is joined by Ryan Rasmussen from Bitwise Asset Management to discuss the current state of crypto, the rise of ETFs, and institutional adoption. Ryan, Head of Research at Bitwise, provides deep insights into how institutional investors are navigating the complexities of cryptocurrency and what trends are emerging.

Background on Bitwise

Bitwise Asset Management, founded in 2017, is a crypto-focused asset manager that serves financial advisors, hedge funds, and institutional investors through a variety of products, including crypto index funds and the recently launched Bitcoin and Ethereum ETFs. With a team of 80 spread across the U.S. and Europe, Bitwise has played a critical role in bridging the gap between traditional investors and the world of cryptocurrency. The company's mission is to help investors access crypto through familiar investment vehicles, making it easier for institutions to participate in the crypto space.

Ryan Rasmussen’s Journey into Crypto

Rasmussen’s path into crypto began in 2017 while working in traditional finance, primarily in mergers, acquisitions, and corporate financial planning. He started by experimenting with XRP during the early crypto boom, eventually becoming fully invested in the space by 2020. The decentralized finance (DeFi) boom during the COVID-19 pandemic further convinced him of crypto’s potential to revolutionize the financial industry. Joining Bitwise in early 2021, Ryan was one of the first hires on the research team, where he has witnessed the company's growth from managing less than $1 billion to nearly $5 billion in assets.

The Evolution of Institutional Involvement in Crypto

Increased Institutional Interest

One of the most significant developments in recent years has been the growing interest from institutions in crypto. While retail investors were the first wave of adopters, institutions have been gradually entering the space, especially over the last 12 months. However, Ryan notes that many of these institutional players, such as hedge funds and family offices, are still in the early stages of learning about crypto. Many have had initial meetings with Bitwise to gain a deeper understanding of Bitcoin and the broader crypto market. Larger institutions, like pension funds and endowments, are more risk-averse and slower to adopt due to internal compliance issues and lack of regulatory clarity.

Early Adopters and Slow Movers

Institutions have been part of the crypto ecosystem since 2017, but early adopters were typically smaller, independent advisors who could move quickly. These smaller firms didn’t face the same regulatory and compliance challenges as larger, slower-moving organizations. Major institutions like Fidelity have been involved in crypto for years, but larger traditional financial institutions such as BlackRock and Franklin Templeton have only recently entered the space.

The Impact of Crypto ETFs

Bitcoin ETFs: A Game-Changer

The launch of Bitcoin ETFs in early 2024 was a watershed moment for the industry, marking the first time a spot crypto ETF was available in the U.S. Despite previous ETFs for Bitcoin futures existing in other countries, U.S. regulatory bodies had been slow to approve such products. Once the spot Bitcoin ETFs launched in January 2024, they became the most successful ETF launches in history. In the first nine months, the ETFs accumulated over $20 billion in inflows, surpassing previous records set by ETFs like the NASDAQ QQQ in 2005, which took an entire year to gather $5 billion.

Ethereum ETFs: Mixed Success

Following the successful Bitcoin ETF launch, Ethereum ETFs were introduced in July 2024. However, their launch saw more muted success compared to their Bitcoin counterparts, with many analysts predicting this outcome. Ryan suggests that most investors are still wrapping their heads around Bitcoin and have yet to fully digest Ethereum’s value proposition. Ethereum, while crucial to the future of decentralized finance and crypto in general, is still a complex asset that institutional investors need time to understand fully.

The Complexity of Staked Ethereum ETFs

A potential staked Ethereum ETF would add even more complexity to the mix. While staked Ethereum ETFs have been launched in Europe, the U.S. market would find it challenging to introduce such products due to the additional complexity of explaining staking and proof of stake to investors. For the institutional investor still trying to grasp Bitcoin, staking is likely a step too far at this point. Ryan believes that before such products can be successful in the U.S., the broader market needs to reach a higher level of crypto literacy.

Regulatory and Compliance Challenges

The Hurdles for Broader Adoption

Regulatory and compliance concerns are among the biggest hurdles for institutions when it comes to adopting crypto. Many financial advisors and firms have hesitated to engage with crypto on decentralized exchanges (DEXs) due to the regulatory gray areas surrounding them. There are also concerns about security and custody, especially with recent hacks and exploits in the DeFi space. Additionally, tax reporting and portfolio management become more difficult with on-chain assets, pushing institutional investors to stick with more traditional off-chain products like ETFs.

The Role of Regulatory Markets

Ryan highlights that the SEC’s preference for futures-based ETFs—due to the existence of regulated futures markets—delays the introduction of ETFs for assets like Solana, which do not yet have futures markets. The lack of these prerequisites means that the introduction of more exotic ETFs, such as stablecoin or staked crypto ETFs, remains a distant prospect in the U.S.

Cohorts of Crypto Investors

Ryan categorizes crypto investors into three main cohorts:

1. Retail Investors: These are everyday investors, ranging from casual retail users to those deeply engaged in crypto communities. Retail investors drove much of the initial wave of ETF adoption.
2. Financial Advisors and Small Offices: This group includes more sophisticated institutional investors, such as family offices and independent financial advisors. They are more nimble than large institutional players but still face significant regulatory constraints.
3. Large Institutions (Pensions and Endowments): These entities control the majority of wealth in the U.S. but are the slowest to adopt crypto due to high levels of risk aversion.

Crypto and Macro

A deeper integration with traditional markets is evident, as crypto is becoming more tied to macroeconomic factors, interest rates, and market liquidity. This is a change from previous years, where Bitcoin and other crypto assets had lower correlations with traditional assets like the S&P 500. As the crypto space continues to evolve, traditional finance entities like ETFs and financial institutions are becoming more integrated, a trend that has accelerated in recent times.

Conclusion

Institutional adoption of crypto is accelerating, but the journey is far from over. While Bitcoin ETFs have been wildly successful, Ethereum ETFs have struggled to gain the same traction. Regulatory challenges and the complexity of on-chain products like staked Ethereum mean that institutional investors are likely to remain focused on off-chain, structured products for the foreseeable future. As crypto literacy increases, and as more sophisticated products become available, the market may eventually see broader institutional participation across a wider range of assets.

Twitter: https://x.com/RasterlyRock

LinkedIn: https://www.linkedin.com/in/rasmussenryan/

Disclaimer: This podcast is for educational purposes only. Nothing here is trading advice or solicitation.

For high-quality, granular data feeds reach out to hello@amberdata.io to inquire about our API solution and analytics platform.

For more information visit:
Amberdata
API Docs
 

Twitter
Youtube