Bitwise CIO Advocates for Adding Ether to Investment Portfolios
Matt Hougan, Chief Investment Officer (CIO) of Bitwise, a crypto-based index fund and ETF provider, has outlined compelling reasons for incorporating ether (ETH) into investment portfolios. Hougan identifies three primary factors: diversification, distinct use cases from bitcoin (BTC), and historical performance.
Diversification for Market Exposure
Hougan emphasizes diversification as a key strategy, noting that the nascent nature of cryptocurrencies makes it challenging to determine which traits will be most transformative. To mitigate this uncertainty, he suggests investors should aim to “own the market.” He proposes a default allocation ratio of 3:1 in favor of bitcoin to ether, arguing this balance provides comprehensive exposure to the cryptocurrency market.
Unique Use Cases of Ethereum
Ether’s distinct functionalities set it apart from bitcoin. While bitcoin aims to be the “best form of money,” ethereum offers programmability and supports decentralized finance (DeFi), representing a different market proposition. Hougan believes that adding ether to a predominantly bitcoin-focused portfolio broadens exposure to the diverse applications of public blockchains, enhancing potential returns through varied investment opportunities.
Historical Performance
Historically, portfolios that included ether have outperformed those limited to bitcoin during complete market cycles. Although bitcoin outperformed ether in the past year, Hougan notes that past performance does not guarantee future results. He asserts that while bitcoin may dominate as a new form of money, ether leads in other blockchain applications, making it a valuable addition to an investment strategy.
Bitwise’s Interest in Ether ETFs
Bitwise has recently shown significant interest in ether, evidenced by a $2.5 million seed investment in its ether ETF product. Hougan concludes that acknowledging ether’s potential and diversifying portfolios can capitalize on the broader spectrum of public blockchain innovations.
