Masters in Business: Episode Summary
Title: Team Favorite At the Money: The Tech Behind a Crypto Future
Host: Barry Ritholtz, Bloomberg Radio
Release Date: March 19, 2025
Introduction
In this episode of Masters in Business, Bloomberg Radio host Barry Ritholtz delves into the intricate world of cryptocurrencies, exploring their foundational technologies, practical applications, security measures, and investment potential. Joining Barry is Matt Hogan, the Chief Investment Officer at Bitwise Asset Management, a firm managing over $10 billion in client crypto assets. Together, they unpack the current state and future trajectory of cryptocurrencies like Bitcoin and Ethereum, providing listeners with a comprehensive understanding of this rapidly evolving financial landscape.
Understanding Cryptocurrencies: Bitcoin and Ethereum
Barry Ritholtz opens the discussion by seeking clarity on the fundamental aspects of major cryptocurrencies.
[02:23] Barry Ritholtz: "What’s going on with the technology underlying cryptocurrencies? What is Bitcoin and other cryptocurrencies and what their future?"
Matt Hogan provides a foundational explanation:
[03:06] Matt Hogan: "Bitcoin is a crypto asset... the first way that investors can store wealth in a digital format without relying on any government or any bank. It's built on blockchain technology... Ethereum is more complex... making money and compute programmable in a public setting... you can build applications on that."
Hogan succinctly differentiates Bitcoin as digital gold—a store of value—while portraying Ethereum as a versatile platform enabling smart contracts and decentralized applications.
Innovative Use Cases: Beyond Digital Currency
Smart Contracts and Scalping Solutions
Barry delves into the practical applications of smart contracts, referencing an example related to concert ticket scalping:
[04:08] Barry Ritholtz: "If we put Taylor Swift contracts on Ethereum... she could sell her tickets at $50. If resold, she gets half."
Hogan enthusiastically supports the feasibility of such applications:
[05:04] Matt Hogan: "Crypto enables frictionless programmable money... this idea of attaching revenue streams downstream from it is something that you can do easily in the blockchain setting."
He emphasizes that similar applications can revolutionize various industries by ensuring creators benefit directly from secondary sales, thereby reducing the profitability of scalping.
Adoption Trajectory: Crypto Crossing the Chasm
1990s Internet Comparison
Barry draws a parallel between the current state of crypto and the early days of the internet:
[06:41] Barry Ritholtz: "So you're really suggesting where like 1993 in the Internet, is that, is that a good frame of reference?"
Hogan affirms the comparison, highlighting emerging crypto applications that hint at a broader mainstream adoption:
[06:49] Matt Hogan: "That is exactly right... like Yahoo's jumping up, email is jumping up, Hotmail is happening. But it hasn't gone mainstream yet. It's about to."
He predicts a surge of crypto applications within the next few years that will integrate seamlessly into everyday financial and technological operations.
Stablecoins as a Killer App
Hogan identifies stablecoins as a pivotal application driving crypto's mainstream adoption:
[07:38] Matt Hogan: "Stablecoins are one of the great killer apps to develop in crypto... it puts a US bank account at the fingertips of anyone with a cell phone anywhere around the world."
He cites examples like Yellow Card facilitating cross-border payments in Sub-Saharan Africa, underscoring stablecoins' potential to provide financial access in regions with unstable local currencies.
Security and Custody Evolution
From Lost Passwords to Regulated Custodians
Addressing historical security concerns, Barry references past incidents of lost bitcoins due to misplaced passwords:
[08:38] Barry Ritholtz: "Something like 20% or 25% of all bitcoins have been lost because the owners either misplaced... the password."
Hogan counters by outlining advancements in crypto security:
[09:20] Matt Hogan: "Most people custody their crypto assets through regulated, qualified custodians with insurance... The track record for those qualified custodians is sterling."
He emphasizes the transition from individual vulnerabilities to institutional-grade security measures, enhancing the safety and reliability of crypto asset management.
Investment Perspective: Beyond Speculation
Crypto as an Investment vs. Speculation
Barry probes the investment nature of cryptocurrencies:
[14:19] Matt Hogan: "Yeah, they're absolutely an investment, and some of them have elements of speculation... when you're investing in bitcoin, you're making two bets... it's not one plus one, it's two times two equals four."
Hogan explains that investing in crypto entails both a speculative element—anticipating value growth—and a fundamental bet on its role as a store of value amidst growing national debts and inflation concerns.
Addressing Skepticism: Myths and Misconceptions
What Skeptics Misunderstand
Barry questions critics who dismiss crypto as a bubble:
[10:51] Barry Ritholtz: "Some skeptics who are saying this is a bubble... How do you respond to that?"
Hogan responds by highlighting institutional adoption and ongoing technological advancements:
[10:51] Matt Hogan: "Many of the smartest investors in the world are allocating to bitcoin and crypto... It's just crossing the chasm from early adopters to mainstream."
He asserts that skepticism often stems from outdated perceptions and fails to account for current data and regulatory improvements.
What Advocates Overemphasize
When asked about potential overstatements by crypto advocates, Hogan cautions against unfounded optimism:
[13:26] Matt Hogan: "They underestimate the efficiency of markets and the ability of markets to accurately value what an asset is... there's always risk."
He urges a balanced view, acknowledging both the potential and the inherent risks associated with crypto investments.
Conclusion: Responsible Investment in Crypto
Barry wraps up the discussion by advising investors to approach crypto thoughtfully:
[15:24] Barry Ritholtz: "You just don’t want to go hog wild and get sucked into the bubble mentality... Drink responsibly, invest responsibly."
He recommends allocating a modest portion of one's portfolio to Bitcoin ETFs, cautioning against excessive exposure to prevent potential pitfalls associated with speculative bubbles.
Hogan echoes this sentiment with a light-hearted remark:
[16:32] Matt Hogan: "If I can't show it, you can't see me."
Final Thoughts
This episode provides a nuanced exploration of cryptocurrencies, balancing optimism about their transformative potential with a sober recognition of the risks involved. Matt Hogan's insights offer valuable perspectives for both seasoned investors and those new to the crypto space, emphasizing the importance of informed and responsible investment strategies as the technology continues to evolve and integrate into mainstream finance.
Notable Quotes:
- Matt Hogan [03:06]: "Bitcoin is the first way that investors can store wealth in a digital format without relying on any government or any bank."
- Barry Ritholtz [04:08]: "If you can see me, what's the point of doing anything?"
- Matt Hogan [05:04]: "Crypto enables frictionless programmable money."
- Matt Hogan [07:38]: "Stablecoins put a US bank account at the fingertips of anyone with a cell phone anywhere around the world."
- Matt Hogan [14:19]: "They're absolutely an investment, and some of them have elements of speculation."
- Barry Ritholtz [15:24]: "Invest responsibly. If you want to take a few percentage of your portfolio and throw it into a Bitcoin ETF, there's nothing terrible about that."
This comprehensive summary encapsulates the key discussions, insights, and conclusions from the episode, providing a clear and engaging overview for listeners and non-listeners alike.