Bitwise: Why We Are Bullish on Chainlink

Author: Matt Hogan, Chief Investment Officer, Bitwise; Translated by Jinse Finance

I have some thoughts on this most undervalued, yet most important and attractive, crypto asset.

Last week, we launched a Chainlink exchange-traded product (ETP). By cryptocurrency industry standards, the launch was rather low-key: trading volume was decent, bid-ask spreads were stable, but it didn't generate the same frenzy as Bitcoin ETPs.

Investors are missing out. Chainlink is one of my most favored crypto assets. In fact, I believe it is currently the most misunderstood, yet most important, and likely severely undervalued crypto asset on the market.

In this week's memo, I want to share the reasons behind this. What is Chainlink? Chainlink is the 11th largest cryptocurrency by market capitalization globally, approaching $10 billion. However, investors rarely mention it. I believe this is mainly due to its overly complex business model. Most high-profile crypto assets have a simple and easy-to-understand positioning: Bitcoin is "digital gold," Ethereum is a platform for stablecoins and tokenized assets, and Dogecoin is a "meme coin." As for Chainlink… if you ask most people in the crypto world what it is, they will tell you, **it's a "data oracle" service provider.** But this explanation has two problems. First, it's incomplete. As I'll explain later, acting as an oracle is just one of Chainlink's businesses. As Zach Rynes recently stated in Bitwise's X Platform Space livestream, calling Chainlink a "data oracle" is like defining Amazon as "a bookstore." But the more crucial issue is that the general public has no idea what an "oracle" actually means. In the crypto space, most people consider oracles to be a service that allows blockchains to access real-world information. When a blockchain needs to query the price of short-term U.S. Treasury bonds, it uses oracles to obtain data; decentralized finance (DeFi) applications need to predict stock price movements; banks need to verify whether customers have passed Know Your Customer (KYC) and Anti-Money Laundering (AML) checks; and prediction market platforms like Polymarket need to verify whether the Senate has passed the Transparency Act—all these rely on oracles. The term "oracle" originates from ancient Greece. People would travel to temples to ask priests and priestesses for answers to worldly questions (such as the famous Oracle of Delphi), and these clergy would provide explanations. So, it seems ingenious to think of Chainlink as a blockchain "oracle," right? Actually, no. Very few people understand ancient Greek oracles, and to understand "decentralized oracles," most people probably need another "oracle" to explain it. My understanding of Chainlink is much simpler—I see it as a software platform company. Specifically, it is a high-growth software platform that holds a dominant share in a large and rapidly growing market. The core value of a software platform lies in problem-solving. Take Salesforce as an example; its role is to help people integrate and manage complex customer data. The core pain point that Chainlink aims to address is that blockchains are isolated from each other and cut off from the external real world. Currently, financial services and capital markets are accelerating their migration to blockchain, and Chainlink is a key support for this process. We can draw an analogy like this: blockchain is like an Excel spreadsheet installed on a new computer, not yet connected to the internet. This spreadsheet is powerful, capable of performing addition and subtraction, data sorting, calculus calculations, and even enabling cell-to-cell linkage through conditional statements. But the key problem is—it is in a completely isolated state. For this table to function effectively in the real world, especially in financial services, external connections are essential: It needs to acquire information such as stock prices and news events (this falls under the scope of Chainlink's "data oracle" service); it needs to interoperate with other tables (corresponding to Chainlink's "cross-chain interoperability" service); it needs to be compliant and meet regulatory requirements (i.e., Chainlink's "automated compliance" service); and it needs to orchestrate these functions into repeatable workflows via macros (i.e., Chainlink's "runtime environment" developer platform), and so on. Chainlink is the platform upon which almost all blockchains rely to achieve these functions. In the areas of infrastructure services connecting blockchains, crypto applications, and the real world, as well as between different blockchains, its market share ranges from 50% to 100%. The Core Logic of Investing in Chainlink: I firmly believe that institutional investor demand for Chainlink ETPs will eventually surge. The reason is simple: it is the key link connecting the various crypto ecosystems favored by institutional investors. Bullish on stablecoins? Stablecoin price supply, cross-chain transfers, and proof-of-reserve all rely on Chainlink's support. Bullish on asset tokenization? Pricing, asset servicing, and compliance in the tokenization process all depend on Chainlink. Bullish on decentralized finance (DeFi)? Without Chainlink, there would be no DeFi ecosystem as we know it today. Bullish on prediction markets? The answer is obvious—it's still Chainlink.

Similar examples abound.

A core trend in the crypto industry over the next decade will be its deep integration with the real world. Currently, the vast majority of connections between the crypto world and the real world are made through Chainlink. This is why numerous institutions and platforms, including SWIFT, Deutsche Börse, Euroclear, Fidelity Investments, Franklin Templeton Fund, FTSE Russell, Coinbase, decentralized lending platform Aave, JPMorgan Chase, BNP Paribas, Visa, Mastercard, the Depository Trust and Clearing Corporation of the United States (DTCC), and prediction market platform Polymarket, have chosen to use Chainlink. If you, like me, believe that a massive amount of stocks, bonds, and other assets will be migrated to the blockchain in the coming years, then you'll find that behind this transformation, a low-key yet powerful force is quietly driving everything—this is precisely why I firmly believe in Chainlink.