Bitcoin or Diversification? Bitwise CIO Matt Hougan Draws a 2004 Parallel
Bitwise CIO Matt Hougan sees echoes of the 2004 internet era in today’s crypto market, arguing that betting solely on the biggest name may not be the winning strategy.
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In a recent note to investors, Bitwise Chief Investment Officer Matt Hougan called Bitcoin the “king of crypto assets,” citing its liquidity and strong prospects of becoming a globally significant currency.
However, he also emphasized the importance of diversification, drawing a parallel to investing in internet stocks in 2004. At that time, investors could have spread their capital across several high-performing tech companies instead of placing all their bets on the leading search engine (Google).
Related: Bitcoin Stagnates as Ethereum Takes the Lead
Hougan’s insights come amid a 40% weekly surge in ETH, the native token of the Ethereum network. This rally follows the successful rollout of the Pectra upgrade.
As a result, these market moves are reigniting the debate around diversification.
The 2004 Investment Analogy
In 2004, after the dot-com bubble burst, internet search became the dominant narrative, led by Google. Investors who believed in the long-term promise of the internet and bought Google stock saw more than 6,309% returns over the next 20 years.
It was a clear win for those who backed the category leader.
Nevertheless, as a general-purpose technology, the internet extended far beyond search. It also powered:
- E-commerce
- Video streaming
- B2B software
- And a range of other sectors
Hougan points out that investors in 2004 would have benefited even more by diversifying with companies like Amazon, Netflix, or Salesforce. In hindsight, Netflix emerged as the top performer, underscoring the long-term value of a diversified portfolio.
Blockchains as a General-Purpose Technology
So, why blockchain? According to Hougan, different blockchain platforms today resemble internet companies in the early 2000s when viewed as general-purpose technologies.
- Bitcoin aims to become digital gold.
- Ethereum, Solana, and Avalanche build programmable networks to transfer real-world assets.
- DeFi and DePIN platforms enable new applications in finance and industry.
- Middleware protocols (like Chainlink) and infrastructure providers (such as Coinbase, Circle, and Marathon Digital) reflect the ecosystem’s growing breadth.
Moreover, Hougan notes that the true potential of blockchain is still unknown. Since different chains serve different functions, their long-term returns could vary widely.
Still, he believes the trajectory is familiar. As the internet became essential to modern society and the global economy, blockchain appears to be on a similar path.
Related: Bitwise Adds NEAR to Its ETF Roster With New SEC Filing
Hougan’s Take on the Future
If the goal is to hedge against fiat debasement, Hougan sees Bitcoin as the obvious choice.
Bitcoin is the king of crypto assets—the largest, most liquid, and most established,
he said.
However, for those who believe that nearly all global assets will eventually move onchain, Hougan points to a diversified basket that includes at least Bitcoin, Ethereum, Solana, and Chainlink.
Don’t fret about picking winners; invest in the big picture,
he added, noting that 97% of actively managed U.S. funds have underperformed index benchmarks over the past 20 years.
Related: JPMorgan, Chainlink, and Ondo Finance Test Cross-Chain Bond Settlement
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