Bitwise's Matt Hougan highlights a shift towards DeFi following U.S. strikes in Iran, predicting rapid integration with traditional finance.
Recent military actions by the U.S. in Iran have shifted cryptocurrencies to the forefront of global trading, according to Matt Hougan, Chief Investment Officer at Bitwise. The strikes, which occurred on February 28 during the closure of traditional stock markets, prompted investors to turn to decentralized finance (DeFi) as a 24/7 trading alternative.
Hougan remarked on Twitter, "For the first time in my memory, crypto markets became just a market, period," indicating a significant transition in trading dynamics. This surge in on-chain activity resulted in notable increases in various metrics across specialized crypto platforms:
- Futures trading volumes for oil and cryptocurrencies skyrocketed on Hyperliquid;
- The daily turnover for Tether's tokenized gold (XAUT) surpassed $300 million;
- Prediction markets Kalshi and Polymarket recorded their highest trading volumes to date;
- Bitcoin and Ethereum saw intensified trading interest.
As a result of this rapid shift, Hougan reassessed his previous outlook, which anticipated on-chain markets would remain peripheral for the next 5-10 years. He now believes these markets will increasingly integrate with traditional financial systems. He emphasized that banks, hedge funds, and corporate traders must adapt by creating wallets for stablecoins and engaging with decentralized exchanges (DEX).
"Even if you don't do it, others will," Hougan cautioned.
Bitcoin's Role in Investment Portfolios
In addition to his insights on DeFi, Hougan, along with quantitative analyst Malika Kolar, has updated their research regarding Bitcoin's impact on a standard investment portfolio composed of 60% stocks and 40% bonds. Their analysis of market data from January 2014 through December 2025 indicates that incorporating Bitcoin enhances both cumulative and risk-adjusted returns across all three-year holding periods.
New study update: Adding bitcoin to a 60/40 portfolio has increased cumulative and risk-adjusted returns in 100% of three-year holding periods. The win rate over two years is 93%!
They discovered that a mere 2.5% allocation to Bitcoin, with quarterly rebalancing, could elevate cumulative returns from 127.9% to 187.4%, while a 5% allocation could double returns to 258.5%. The study highlights that a small Bitcoin allocation minimally affects maximum drawdown, maintaining portfolio stability.
Bitwise stresses the importance of a long-term investment strategy, noting that holding Bitcoin for three years or more significantly stabilizes results. The asset's volatility necessitates active profit-taking and regular rebalancing to mitigate risks effectively. Despite the potential for high returns, neglecting to rebalance could lead to substantial drawdowns.
Analysts found that while a Bitcoin allocation between 0.5% and 4.5% does not considerably impact risk metrics, exceeding a 5% allocation significantly increases potential losses. They concluded that moderate exposure to Bitcoin can structurally enhance diversified portfolios, although past performance does not guarantee future results.
Additionally, analysts from the London Crypto Club noted that the recent U.S.-Israel military actions could have a favorable effect on Bitcoin's price.
