Bitwise: The institutional wave has arrived, so why is the market still dormant?

Written by: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: Saoirse, Foresight News

The biggest alpha in financial markets often comes from behavioral biases. Investors always make mistakes, and if you can exploit these mistakes, you can earn substantial returns.

One behavioral bias I like to leverage is anchoring: people cling to the first information they receive and are reluctant to change. That’s also why retailers price items at $9.99 instead of $10.00 — once you remember the “9,” it’s hard for your brain to let go.

Anchoring is one of the reasons I decided to go full-time into the crypto industry in 2018.

Back then, most people still thought of cryptocurrencies as a joke. They first learned about crypto during the Silk Road scandal in 2013 and the Mt. Gox exchange bankruptcy in 2014, witnessing its wild price swings.

Fortunately, a few trusted individuals reminded me to take crypto seriously.

When I looked beyond the surface and understood what it truly was, rather than what people thought it was, I was completely shocked. This technology is far more mature than most realize, and the opportunities are much greater. Yet, most people are still stuck in the outdated impressions from 2014.

At that moment, I felt like I was back in that time again.

The world is shouting at you

Look around, and Wall Street is loudly proclaiming: finance is going on-chain. Not just a small part, but everything.

Last July, SEC Chairman Paul Atkins launched a “crypto initiative,” a comprehensive plan to modernize securities regulation. As he put it, to enable the U.S. financial markets to “operate on-chain.” And the market has indeed started to go on-chain:

In October, BlackRock CEO Larry Fink publicly stated that we are at the beginning of asset tokenization. Two weeks ago, BlackRock launched a $2 billion tokenized government bond fund on Uniswap, the world’s largest decentralized exchange; as part of the partnership, BlackRock also invested in Uniswap’s native token, UNI.

The $700 billion asset management firm Apollo, in partnership with Securitize, is tokenizing its diversified credit funds across six public blockchains. Since January 2025, this product has attracted over $100 million in capital. The company also recently announced plans to acquire a 9% stake in the leading decentralized lending protocol Morpho.

JPMorgan, Bank of America, Citigroup, and Wells Fargo are discussing joint stablecoin launches.

Meanwhile, JPMorgan issued deposit tokens on Coinbase’s Base network; Fidelity is hiring a DeFi treasury head… Similar moves are happening constantly.

The market size involved is enormous: ETF market at $30 trillion, stock market at $110 trillion, bond market at $145 trillion.

In comparison, the current global tokenization market is only about $20 billion.

If Larry Fink is right — “every stock, every bond… will eventually be tokenized” — this market still has tens of thousands of times growth potential.

The disconnect in perception

But traditional investors just don’t hear it.

They don’t hear it because of anchoring.

When it comes to crypto, their minds still picture tattoos, punk culture, skateboards. They don’t realize that those individuals have already shaved their beards, put on suits, and are building the infrastructure for the next-generation capital markets.

Ironically, even crypto investors seem to be deaf to this.

They suffer from a “boy who cried wolf” syndrome. After hearing promises of “institutional entry” for so long, when it finally happens, they become numb and indifferent.

But data doesn’t lie.

Look at the growth curve of tokenized real-world assets (RWAs), which is as steep as Mount Everest.

Value of tokenized real-world assets (RWAs):

Source: Bitwise Asset Management, data from RWA.xyz. Data range from January 1, 2020, to December 31, 2025.

Note: Stablecoin issuers like Circle and Tether are intentionally omitted.

Seizing the opportunity

The challenge is that it’s hard to precisely know how to profit from this.

Because the crypto industry still faces a series of unresolved key issues, such as:

Will the value created by tokenization flow into underlying protocols like Ethereum and Solana, or are these base layer block spaces becoming commodities?

If value is stored at the base layer, will new private-like chains such as Canton Network and Tempo outperform public chains?

As institutions like BlackRock and Apollo embrace DeFi, will DeFi tokens explode, or are there fundamental economic model issues that are hard to overcome?

If the ultimate value flows to the builders rather than the blockchain itself, will the beneficiaries be traditional giants like BlackRock and JPMorgan, or crypto-native institutions?

I have my own judgments on these questions and will share my thoughts in upcoming articles over the next few months. But honestly, most answers are currently: nobody knows.

The only certainty I have is this:

There is a huge gap between what people think the crypto market is and what it is actually becoming.

To me, this gap represents a major opportunity — not rushing to pick winners early, but broadly positioning across the entire sector while the market is still mispricing this structural transformation.

The greatest alpha opportunities often occur when market consensus is outdated, reality has already moved forward, and investors are still anchored to old narratives.

The crypto industry is now at this critical juncture.

If you can see through to its essence, opportunities are everywhere.