On 1 August 2024, Matt Hougan, the Chief Investment Officer (CIO) of Bitwise Investments, took to the social media platform X (formerly known as Twitter) to address a common question posed by professional investors: How can Bitcoin have value when it doesn’t produce cash flows?

Bitwise Investments specializes in managing cryptocurrency index funds, providing diversified exposure to the digital asset market. The firm is a leading crypto asset manager in the U.S., offering various products, including spot Bitcoin and Ethereum ETFs, which allow investors to gain direct exposure to these cryptocurrencies. Bitwise also manages other ETFs focused on specific crypto sectors, such as the Bitwise Crypto Industry Innovators ETF and the Bitwise Web3 ETF.

Matt Hougan is known for his extensive experience in the financial industry, particularly in the areas of exchange-traded funds (ETFs) and indexing. Prior to joining Bitwise, Hougan was the CEO of ETF.com and the Global Head of Research at Bitwise’s parent company, Inside ETFs. He is recognized for his expertise in market analysis and investment strategies, and he frequently speaks at industry conferences and contributes to financial publications.

Earlier today, in a detailed thread, Hougan shared his perspective on Bitcoin’s value proposition, drawing parallels with traditional services to explain his viewpoint.

Bitcoin as a Service

Hougan began by stating that Bitcoin provides a unique service: the ability to store wealth securely in a digital format without relying on traditional institutions such as banks, companies, or governments. According to Hougan, this service is akin to any other service that offers value by fulfilling specific needs.

Comparison with Salesforce


To illustrate his point, Hougan compared Bitcoin to Salesforce, a company that offers the service of tracking customer relationships and sales activities in a database. Hougan highlighted that while Salesforce charges a fee for its service, Bitcoin, not being a company, does not charge any fees. The only way to access the service Bitcoin provides is by purchasing Bitcoin itself. Hougan emphasized that this purchase grants users access to the service of secure wealth storage.

Valuation Dynamics

Hougan explained that when viewed through this service-oriented framework, questions about Bitcoin’s valuation become more straightforward. He drew a parallel between the valuation of Salesforce and Bitcoin, noting that Salesforce’s value increases with greater demand for its service and decreases with less demand. Hougan asserted that the same principle applies to Bitcoin: if more people seek the service Bitcoin offers, its value rises; if fewer people seek it, its value declines. If no one desires the service, Bitcoin’s value would drop to zero.

Increasing Demand and Value Growth

Hougan observed that the demand for Bitcoin’s service is rapidly increasing. He cited the significant growth in Bitcoin’s value, which has risen approximately 9,700% over the past decade. Hougan expressed his belief that this trend is likely to continue, indicating his optimism about Bitcoin’s future value.

Decentralization and Value Accrual

The Bitwise CIO pointed out the fundamental difference in how value accrues for Bitcoin compared to traditional companies. Hougan believes that the core service that Bitcoin offers is the ability to store wealth without relying on any centralized entity. This lack of centralization means there is no entity to collect fees. However, Hougan reiterated that despite this difference, the end result remains consistent: higher demand leads to higher value, lower demand leads to lower value, and no demand results in no value.

Featured Image via Pixabay



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