'95%' of Cryptocurrencies Will 'Die', Only a Few Will Be Useful, Veteran Analyst Claims

Matt Hougan, the head of research at Bitwise Asset Management, a San Francisco-based firm that helps “individuals, investment managers and institutions in navigating cryptocurrency”, has said that “95%” of the (approximately) 2,000 cryptocurrencies are “useless.”

Hougan, the former CEO at ETF.com, a firm that educates investors on how to invest in exchange-traded-funds (ETFs), told Bloomberg’s Barry Ritholtz during his podcast that the historic crypto bull market was a “massive run-up” followed by a “massive pull-back.”

Although financial “bubbles” can potentially have a negative impact on the economy, Hougan argued that the bitcoin (BTC) bubble may have helped the crypto industry as it brought a lot of media attention. There are also many talented professionals that have joined the nascent crypto ecosystem because of all the hype created by the bull run in late 2017 and early 2018, Hougan said.

Comparing the dotcom bubble to the bitcoin bubble, Hougan remarked: 

[The bitcoin bubble] did the same thing that happened with the internet. [Both bubbles] attracted a huge amount of talent. It did bring a lot of capital and interest in development to the ecosystem. So, I do think interesting things will [develop] from that. But, yes, it was a difficult year in 2018.

Amazon Was "Created" From The Dotcom Bubble

Similar to the way in which other analysts have argued, Hougan said that the introduction of cryptocurrency and blockchain “is the next dotcom.” He recalls how the doctom bubble “created” Pets.com, a company that promoted various products for household pets in the late 1990s and early 2000s but went bankrupt due to a poorly designed business model. However, Hougan mentioned that the world’s largest and most successful online retail firm, Amazon was also launched during the dotcom craze.

Although Hougan believes most, or 95%, of all cryptocurrencies will “die a painful death”, he noted that “from those ‘ashes,’ will [emerge] important things ... like from the dotcom ashes emerged Amazon, Google, and Facebook, etc.” He added that “the sooner” all the useless cryptocurrency projects “die”, the “better” it will be for the digital asset industry.

Comparing Gold And Bitcoin Investments

Drawing comparisons between the gold bullion and bitcoin, the flagship cryptocurrency, Hougan said that millennials tend to have a more favorable view of cryptoassets when compared to older investors (who usually prefer traditional forms of investments). Observing investment trends among different age groups, Hougan remarked:

Every generation has an asset that they love or a way of getting exposure that they love. The Greatest Generation love gold, then people loved active mutual funds. Gen X loved hedge funds. Millennials love crypto.

According to the crypto researcher, millennials (born between 1981 to 1996) are interested in cryptocurrencies because of their decentralized nature. When conducting crypto transactions, a third-party is usually not required. This, Hougan believes is the main reason why the younger investors find digital assets more appealing - as they give people more control over their finances.