In X’s thread, Matt Hougan explained that a large valuation of cryptocurrency makes sense when compared to the large markets they aim to disrupt.
Following surprises from the cryptocurrency community in valuing multiple supporters for Bitcoin, Bitwise’s CIO took X to explain the large market where Crypto Assets is competing.
Bitcoin and Gold are actually friends
According to Matt Hougan, Bitwise Chief Investment Officer, one of the most common mistakes crypto skeptics make is to underestimate the size of the market where digital assets compete for.
In a recent thread posted on X and client’s notes, Hougan claimed Bitcoin’s $2.3 trillion valuation, surprising to many, is rooted in competition with the gold market, worth more than $25 trillion.
Hougan explained this point with a simple analogy. “Imagine there were two startups,” he said. I wrote it. “We’re trying to confuse Amazon, the other is trying to confuse money. With its value of $2.3 trillion, Amazon Disruptor needs to take 100% of the market. Gold destroyers only need 10%.”
Hougan believes it will help explain why Bitcoin has grown into one of the biggest financial assets on the planet despite the lack of everyday features of companies like Amazon. Instead, the value of Bitcoin is based on its role as digital gold.
“The size of the market is everything,” Hogan said. “When you realize that Bitcoin is chasing gold, all of a sudden it makes more sense.”
Bigger markets for Ethereum and Solana
Meanwhile, Ethereum and Solana are targeting markets that are even bigger than gold. These blockchains are the basis for issuance, transaction and settlement of ridiculous and tokenized assets, all linked to vast global payments and capital markets.
SIFMA and Savills estimates bring the total value of global stocks, bonds and real estate at $665 trillion. Meanwhile, McKinsey estimates that the global payments industry processes $3.4 trillion in transactions worth $1.8 each year. Meanwhile, Ethereum and Solana are currently valued at around $500 billion and $100 billion, respectively.
Hougan concluded his 13-part thread by pointing out the advantageous position that the cryptocurrency industry must target some of the world’s largest and most important markets. He also highlighted the risks that come with it.
According to the CEO, Tether, the world’s leading Stablecoin issuer, currently counts over 400 million users worldwide, increasing its wallets of around 35 million per quarter. The company holds over $127 billion in its US treasury and is among the top 20 owners around the world, along with sovereign countries such as Saudi Arabia and Germany.
Hougan said Tether’s dominance in non-Western markets places it for potentially historical profitability. If adoption in emerging markets accelerates and USDT manages trillions of assets, Tether’s annual profit outweighs Saudi Aramco’s profits, reporting $120 billion in 2024.
“This is why Tether is looking for a $500 billion valuation,” Hogan said. “It may sound ridiculous compared to companies like SpaceX and Openai, but the target market is bigger than you imagined.”
Hougan admitted that most of the projects would fail, and he even predicted a billion-dollar collapse in crypto than any other industry. However, he argued that these failures will outweigh projects that are larger than those seen in traditional technology.
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