Morning Minute: Why Wall Street Going Onchain Could Power the Next Bull Market
GM.
Bitwise Chief Investment Officer Matt Hougan is making a bold claim: the next crypto bull run will not be led by memes and manic speculation, but by Wall Street quietly migrating its core infrastructure onchain.
In a new memo, Hougan argues that this cycle will be fundamentally different from 2017’s ICO frenzy or 2021’s retail-driven leverage blow‑off. Instead of retail gamblers chasing dog tokens and unsustainable yields, he expects the main driver to be a fusion of traditional finance and blockchain rails: tokenized assets, stablecoins at scale, institutional DeFi, and real revenue‑generating activity that never sleeps.
From Speculation to “Real” Financial Use
Previous bull markets were largely powered by narrative and leverage. Capital rotated from one hot sector to another-ICOs, DeFi summer, NFTs, meme coins-often detached from sustainable cash flows.
Hougan’s thesis is that this time, the core flows will look much more like classic financial plumbing:
– Stablecoins acting as dollar infrastructure for global payments and trading
– Tokenized treasuries, funds, and securities giving investors instant settlement and programmable ownership
– 24/7 markets where traditional assets trade with crypto-like liquidity and speed
– Institutional DeFi rails that let funds, banks, and corporations borrow, lend, hedge, and settle using compliant onchain protocols
If those rails start handling real volumes-corporate treasuries, hedge fund collateral, cross‑border payments, tokenized funds-the growth in transaction fees and protocol revenues could justify higher valuations, not just hype them.
His central claim: a bull market built on actual financial services and recurring revenue can be larger and more durable than one built purely on narrative and leverage.
Wall Street’s Onchain Pivot
“Wall Street moving onchain” doesn’t mean Goldman Sachs suddenly apeing into memecoins. It means the biggest players in finance start using blockchains for things they already do:
– Settling trades faster and cheaper
– Holding tokenized cash and bonds instead of legacy money‑market funds
– Using onchain collateral for margin and repo
– Issuing tokenized versions of existing funds and structured products
This shift is already visible at the edges:
– Real‑world asset protocols offering onchain exposure to U.S. Treasuries and credit
– Stablecoins processing tens of billions in daily transfer volume
– Asset managers experimenting with tokenized funds and onchain share registries
Hougan’s view is that as these experiments move from pilot projects to core workflows, capital will follow-and markets will reprice the entire crypto stack that powers them.
Why This Cycle Could Be Bigger
A bull market driven by genuine financial activity has a few important implications:
1. More predictable revenue
Protocol fees from payments, trading spreads, tokenization platforms, custody, and lending look a lot more like traditional financial income than casino revenues from speculation. That supports more mature valuation frameworks.
2. Deeper institutional participation
Institutions are far more comfortable with tokenized bonds, stablecoin settlement, and compliant DeFi than with speculative altcoins. As rails professionalize, large allocators can justify bigger ticket sizes.
3. Lower dependence on retail mania
Retail speculation can still create blow‑off tops, but the structural demand for onchain settlement and tokenized assets gives the market a sturdier floor.
4. Resilient liquidity
24/7 trading combined with global stablecoin liquidity creates a more continuous flow environment. That reduces dependence on a single geography or retail demographic.
In Hougan’s framing, blockchain ceases to be just a new asset class and becomes part of the operating system of global finance. The upside, he suggests, lies in the re‑rating of whatever infrastructure ends up sitting at that core.
The Policy Backdrop: Republicans Push “Clarity,” SEC Eyes DeFi
This shift toward institutional onchain finance isn’t happening in a vacuum. In Washington, policymakers are scrambling to define the rules of the game.
A new draft of the Clarity Act from Republican lawmakers aims to draw sharper boundaries for digital assets in U.S. law. While the precise language is still evolving, the thrust is familiar:
– Clearer criteria for when a token is treated like a security versus a commodity or payment instrument
– Guardrails intended to prevent agencies from stretching existing law too far, especially in enforcement actions
– A framework designed to let compliant projects and financial institutions operate without constantly wondering if they’ll be reclassified after the fact
For Wall Street, regulatory clarity is not a nice‑to‑have-it’s a prerequisite for serious onchain adoption. Banks and asset managers care less about the ideology of decentralization and more about whether they can operate at scale without retroactive legal risk.
At the same time, an SEC Commissioner has been issuing fresh warnings to the DeFi sector. The message, paraphrased:
– Simply using smart contracts and buzzwords does not exempt a platform from securities laws
– Projects that market tokens, facilitate trading, or provide yield‑bearing products may still be offering securities, even if there is no traditional intermediary
– “Decentralization” must be real and substantive, not just a branding exercise, if projects expect different regulatory treatment
For institutional DeFi-the very category Hougan thinks will drive the next cycle-this is a crucial tension. Protocols that want to serve banks and funds will need:
– KYC/AML‑compatible designs
– Transparent governance and risk frameworks
– Clear jurisdictional strategies and legal opinions
The bull case, paradoxically, is that a more serious regulatory environment forces out the weakest actors and pushes the remaining protocols to professionalize.
Stablecoins: The Quiet Killer App
In Hougan’s onchain‑Wall‑Street scenario, stablecoins are the unglamorous workhorses. They already function as:
– Base money for crypto trading
– A bridge currency in cross‑border commerce
– Instant settlement rails for businesses moving dollars 24/7
As more treasurers, fintechs, and payment processors integrate stablecoins, they create consistent, non‑speculative demand for blockspace and for the infrastructure that secures and routes these transfers.
In a future bull market, the headline may still be “Bitcoin hits new high,” but under the surface, the main economic engine could be stablecoins quietly processing trillions in annual volume.
Tokenization: Turning Legacy Assets Into Onchain Primitives
Tokenization is the other big pillar in Hougan’s thesis. By representing traditional instruments-treasuries, corporate bonds, ETFs, even private credit-as tokens, markets can achieve:
– Instant settlement instead of T+2
– Fractional ownership and global distribution
– Automated interest payments and redemption logic
– Composability with DeFi tools for lending, borrowing, and hedging
For Wall Street, this is not about reinventing finance from scratch; it’s about getting more efficient capital markets. For crypto infrastructure, every tokenized instrument is a new source of recurring onchain activity.
If that thesis plays out, the networks and protocols that handle these flows may see their valuations decouple from short‑term sentiment and track something closer to traditional growth metrics.
Institutional DeFi: Compliant by Design
Hougan’s reference to “institutional DeFi” points toward a category that is still nascent but critical:
– Permissioned pools where only KYC’d counterparties can interact
– Onchain credit markets with enforceable legal agreements behind them
– Hybrid systems where smart contracts handle settlement but regulated entities handle onboarding, reporting, and custody
This is the kind of environment big funds and banks can realistically operate in. The growth of these rails could be one of the clearest indicators that Wall Street is, in fact, going onchain.
What It Means for Investors
If Hougan is right and the next bull market is fueled by onchain adoption rather than pure speculation, several things follow:
– Infrastructure-base layers, scaling solutions, stablecoin issuers, compliant DeFi, tokenization platforms-may matter more than the latest hype narrative.
– Regulatory developments, especially around the Clarity Act and SEC policy, will be central to the thesis, not background noise.
– Metrics like fee revenue, stablecoin velocity, tokenized assets under management, and institutional volume may become more predictive than social‑media buzz.
The story shifts from “Will people keep gambling on coins?” to “How much of global finance will actually run on these rails?”
That’s the bet Hougan is making: that real financial activity migrating onchain-backed by Wall Street and shaped by evolving regulation-will be powerful enough to ignite the next bull market, and potentially make it the largest one yet.