Why the Ethereum ETF is Bullish $ETH | Matt Hougan of Bitwise

Financial professionals love Ethereum. And it's a very different story from Bitcoin. They see Bitcoin as digital gold, a store of wealth, a way to hedge against inflation. They see Ethereum as a cash flow driven technology play that is providing an internet 2.0 and a new way for finance to exist in the world. And they love all the real world applications.

Michael Station, we are still basking in the glow of the Ethereum ETF of Glory. I would say that's pretty accurate. So we wanted to get another take here, and particularly a take that focuses on how bullish this thing is for Ethereum, for the price of Ethereum. How do you explain this to TradFi? So our guest today is Matt Hogan, who is an absolute expert in this.

Not only do we think this is bullish for ETH, the asset, Ethereum, the economy, but I think there's a pretty good argument to make that this is bullish for the entire industry.

Uh and I think really just Ethereum and ETH the Asset is being uh the vanguard for the industry, fighting a lot of the fights head on that ultimately benefits the industry as a whole. And I checked these takes uh with Matt Hogan, who will give you his answer to these kind of questions and perspectives as soon as we get to him. But first, a moment to talk about some of these fantastic sponsors that make the show possible. Bankless Nation, the exciting times continue. I'm happy to introduce you to Matt Hogan, the CIO at BitWise. He's one of the best persons to talk to to understand the ETF process and also the impact of ETFs on the crypto markets. And these questions just are seemingly endless. So we're bringing Matt back onto the podcast. Matt, welcome back to Bankless.

So glad to be here. Exciting times.

Oh my God, extremely exciting times. I kind of think that this uh this last week, uh which we are on the Friday of, uh the ETF, the Ethereum ETF was approved coming up on twenty-four hours ago. The and I think the industry's still processing it.

Um, looking back on this week, I kind of think it marks a new era for crypto, for the entire industry, for for so many different reasons. And I kind of just want to want to ask about your sentiments on that. Like, do you agree with that kind of sentiment? And uh how would you how would you take that?

I absolutely agree. I, you know, I think it's one of the most historic weeks in crypto's history.

You know, for the last 15 years, we've been fighting this fight with one arm tied behind our back and with the sword of Damocles hanging over our head from a regulatory perspective.

And that seems to have changed. We've had a complete sea change in Washington

from SAB 121 to Fit 21. Uh, the change even in the White House, in terms of going from threatening to veto SAB 21 to not threatening to veto FIT1 121.

Uh, and now the spot ETTF news. It's it's been momentous. I think it's gonna move us to new all-time highs. I think it's gonna sort of catalyze a multi-year bull market. Uh, I'm really optimistic at the end of this week.

Matt, I uh I wonder if the future textbooks, uh crypto textbooks that are going to be written, we'll call this the May surprise because um I certainly think of it as a a surprise. And um

Maybe we can go through just what exactly happened here because one, I can't hear the story enough. Two, I want to just like shake myself and and like try to just um

I guess

test what really just happened because this was this was quite the surprise. So, from your vantage point,

like what just happened here? How did we go from last Friday?

The chance of an ETF being close to zero. And maybe I don't know what your impression was, but this is certainly what some of the top analysts were saying, in particular the Bloomberg analysts who are looking at the paperwork, and frankly, I trust around this. How do we go from that to less than a week later

an actual ETF approval? What just happened to us?

That's a great question. You know, to anchor the first part of your question, it's absolutely the case that no one expected an approval a week ago. I know there were a few brave voices out there calling for it,

but at issuers, you know, we we were not moving towards approval. Van X CEO said in April that approval was unlikely. We had effectively stopped work on developing materials around an Ethereum ETF because there had been no back and forth.

With the SEC.

And then we got notice

that the exchanges were hearing from the SEC on these 19B4 applications.

And it was, it was really a stunning development.

Now, from an outside perspective, or maybe from a logical perspective, it makes complete sense.

The same arguments that were used to win the case on spot Bitcoin ETFs were applied into spot Ethereum ETFs. If you look at the 19 before for the

bitwise Ethereum ETF,

we replicated the exact same study that the SEC used to

evaluate spot Bitcoin and arrived at similar results. So there was a logical reason why this would happen, but no one expected it to happen.

And I think it's hard to look at the broader developments in DC and say,

It was a purely logical decision. There's clearly a political overlay on this, right? We saw the shocking vote

on the SAB 121 reversal, where Democrats crossed the aisle to support the repeal of an SEC rule that kept Wall Street banks from entering the crypto custody market.

We saw 70 plus Democrats move over to vote for FIT

121, a comprehensive piece of crypto uh legislation. I think there was just a complete sea change in Washington

that.

Was linked to or tied into this Ethereum change. And we went from, you know, really effectively a 0% chance to I was just on a spaces with James Seifert of Bloomberg. He said there's now a 99% chance in his view that Spot Ethereum ETFs will launch. So

amazing.

Yeah. And so your thesis, too, is that this was really politically driven? Because I'll just say that that's how it seems to us. That's how it definitely feels.

Dots connect very easily.

Those dots like definitely connect. We could just draw a line and like it's just the easiest, easiest dot game uh ever.

But that would not be

uh encompassing with what the SEC is supposed to do as a merit based regulator. And what

SEC chairs in current and of the past have said, they base things on rules. They base things on the law.

And for them to be a political organization rather than a merit based regulator.

What how how how do we square that? Who's lying? I I know I know you're on the issuer side, so maybe you can't answer that last question. But like, seriously, this was all political then?

Well, I'll I'll put on my my ETF hat. You know, before Bitwise, before I joined Bitwise seven years ago or so,

I spent 15 years in the ETF industry. So I have a lot of experience in this ETF space. I haven't seen anything like this.

I haven't seen an example of people having

no expectation of approval

and flipping to expecting approval so quickly

on effectively an overnight basis. So,

uh, to the extent that this has never happened again, there was something shocking at work here. Now, I do think you know the SEC

was spending time evaluating this space. If you look at the document that was produced.

It's a reasonable document. It's well written. It looks at data. They did their own statistical analysis. So,

you know, at the staff level, I think they were doing a very good job.

What ended up happening, one interesting little wrinkle, is that the commissioners didn't vote on this 19B4. They allowed it to pass through delegated authority, which is actually how most ETFs

19B4s are approved. They just say, staff, you do your work. We got bigger things to think about.

And so when one interesting little wrinkle here is what actually happened is the SEC just let the staff.

Do its work.