Episode Summary
Executive Summary: The conversation centers on Matt Hogan’s journey from ETF.com to Bitwise and his argument that crypto follows a similar adoption path to ETFs: initially dismissed, then mainstream. He explains ETF mechanics, why ETFs are tax- and liquidity-efficient, why crypto is both overhyped and potentially transformative, and why investors need better education and product design as crypto ETFs, indexing, and personalized investing evolve.
Main Topics: Matt Hogan’s career path and ETF.com legacy (Priority: 5/5): Hogan discusses building ETF.com, launching Inside ETFs, creating ETF classification/rating systems, and helping normalize ETFs as a mainstream investment vehicle. How ETFs work and why structure matters (Priority: 5/5): He explains creation/redemption, the tax advantages of ETFs over mutual funds, and why ETF liquidity depends on the liquidity of underlying assets. Crypto as the next disruptive asset class (Priority: 5/5): Hogan compares crypto’s current perception to early ETFs and the dot-com era, arguing that most coins will fail but the space will still produce major winners. Blockchain vs. crypto assets (Priority: 4/5): He distinguishes public blockchains from private ones, emphasizing that the real breakthrough is removing trusted middlemen from transactions. Crypto ETFs and indexing strategy (Priority: 5/5): Hogan outlines Bitwise’s filings for Bitcoin and a top-10 crypto basket ETF, describing market-cap weighting and the rationale for diversification. ETF market structure and product innovation (Priority: 4/5): He defends the Darwinian launch/closure process for ETFs while criticizing complex products like volatility ETFs that can hurt retail investors. Advice on careers, investing, and learning (Priority: 3/5): Hogan reflects on mentors, failed investments, book recommendations, and advice for young professionals to choose managers and firms carefully.
Key Arguments: ETFs succeeded because their structure reduces costs, avoids forced capital gains for other investors, and is liquid as long as the underlying securities are liquid. Mutual funds force investors to share tax events, while ETF investors can sell without passing capital gains to others. Crypto is widely dismissed after only superficial consideration, similar to early ETF skepticism, but deeper analysis reveals real long-term potential. Most cryptocurrencies are likely worthless, but the industry can still produce transformational winners like Amazon or Google after the dot-com bubble. Public blockchains matter more than private blockchains because open systems can displace trusted middlemen in finance and record-keeping. A crypto ETF would make exposure safer, cheaper, and easier for mainstream investors, especially those currently excluded from retail-only crypto venues. Volatility ETFs are problematic because many investors do not understand contango and the difference between spot volatility and volatility futures. The ETF industry naturally concentrates around a few large players because scale, liquidity, and low costs dominate in index-based products. Investors should prioritize choosing a strong company and manager over title or pay, because career development depends more on environment than starting salary. When assessing investments, framing and understanding what decision-makers care about matters more than what seems exciting to the analyst.
Data Points: Top crypto assets in proposed ETF: 10 - Bitwise filed an ETF intended to hold the top 10 crypto assets. Crypto market coverage of top 10: 80%–85% - Hogan says the top 10 crypto assets capture roughly 80 to 85 percent of the market. Proportion of cryptocurrencies he expects to fail: 95% - He estimates 95% of roughly 2,000 cryptocurrencies are useless and will die. Approximate number of cryptocurrencies: 2,000 - Used when comparing crypto’s speculative excess to the dot-com bubble. Bitcoin drawdown history: 6 or 7 drawdowns of 70%+ - Hogan cites Bitcoin’s repeated severe drawdowns as part of its early-stage volatility. Bitcoin’s decline in 2018: About 75%–80% - He describes the post-2017 crash as a major retrenchment after the bubble peak. Crypto price run-up over two years: 300% - He notes crypto was still up 300% over a two-year horizon despite the crash. Historical drawdown comparison: 81% - He compares Bitcoin’s decline to the Nasdaq 100’s 2000–2003 drawdown. Inside ETFs attendance: 2,000–3,000 people - Barry Ritholtz describes the conference as a giant annual gathering of investors and managers. Vanguard and BlackRock scale: About $5T–$7T and $6T–$7T - Ritholtz cites the enormous asset bases of the largest ETF managers. Chicks purchased: $3.75 each - Hogan mentions the cost of baby chicks he and his children bought. First egg cost estimate: About $2,000 - He jokes that the first backyard egg will be very expensive after coop setup. Titan Pharmaceuticals loss: About $2 million - Hogan describes a biotech investing mistake that cost the fund heavily. Fidelity crypto team size: 150 people - He says Fidelity built a large team to support institutional crypto custody and access. Lost coins estimate: Approximately 25% - He discusses the claim that about a quarter of all created coins may be lost due to lost keys or destroyed storage.
Pivotal Quotes: "If the ETF came first, the SEC would never have approved a mutual fund structure." — Matt Hogan: On why ETFs are structurally superior to mutual funds, especially regarding tax efficiency and liquidity. "Bitcoin was the new millennial gold." — Matt Hogan: On generational preferences for stores of value and why younger investors gravitate toward Bitcoin over gold. "The top 10 captures about 80, 85% of the market." — Matt Hogan: Explaining why Bitwise’s crypto index ETF focuses on the largest assets rather than a much broader basket.
Implications: The episode frames crypto as an early but potentially durable market that needs better products, custody, and education. For investors, ETFs may become the mainstream gateway; for the industry, winners will likely be a few large platforms, while risky products and weak coins are left behind.
About Masters in Business
Barry Ritholtz speaks with the people that shape markets, investing and business.