Bitwise’s Outlook on DeFi Tokens

Digital asset manager Bitwise expresses optimism about decentralized finance (DeFi)-linked tokens despite a downturn in the crypto market, where even staunch supporters have scaled back on altcoins.

Undervalued DeFi Sector

Bitwise CIO Matt Hougan asserted in an interview with Decrypt that the DeFi sector is “substantially undervalued.” He mentioned that Layer-1 blockchains like Sui and Aptos “definitely tick the boxes” for attracting institutional investors.

ETFs for Sui and Aptos

Hougan suggested the potential for issuers to launch SUI and Aptos ETFs in the U.S., which could lead to increased investment in those altcoins. Bitwise has already filed for an Aptos ETF, although no application is pending for a SUI-based fund.

High-Quality Projects

He referenced projects led by former Meta stablecoin team members as meeting Bitwise’s criteria for strong teams and technology. Hougan stated, “I wouldn’t put 100% of my portfolio in Sui, but I wouldn’t put [in] zero.”

Burgeoning ETF Applications

Bitwise is among several investment firms submitting numerous crypto ETF applications to U.S. regulators, particularly as the Securities and Exchange Commission shows a willingness to embrace a more crypto-friendly approach under President Donald Trump.

Diverse Crypto Tracking

Issuers are looking to create funds that track a variety of cryptocurrencies, from meme coins like Bonk and Dogecoin to larger assets such as XRP and Solana. Bitwise is also pursuing approval for single-asset ETFs that focus on XRP, Solana, and Dogecoin, which are favored by DeFi enthusiasts.

Potential Market Changes

Despite the decline of altcoins since their peaks last January, Hougan believes a shift in the U.S. regulatory landscape could enhance the attractiveness of DeFi tokens and associated projects. He cited Uniswap, Ondo, and Aave as having significant growth potential.

Future of DeFi Tokens in ETFs

Hougan noted that the evolving regulatory climate may allow utility tokens with intrinsic value drivers to flourish, addressing a major issue within DeFi—overreliance on “squishy governance tokens.”

Hougan expressed confidence that the growth potential could make DeFi tokens and other non-blue chip assets viable candidates for ETF products.

Client-Centric Asset Selection

Bitwise doesn’t randomly select assets but aims to file frequently for new ETFs. Hougan explained that they focus on tokens associated with high-quality projects having real potential for inclusion in single-asset ETFs. They also prioritize client preferences when determining which assets to include.

Providing Asset Choices

“I don’t want to be paternalistic about what they should access,” Hougan stated, suggesting that it is reasonable for issuers to give clients exposure to various assets, even those he might not personally recommend, provided they aren’t linked to scams. He compared investment options and risks, noting that an ETF for Dogecoin might be less risky than direct investment.

Edited by Sebastian Sinclair