In a recent analysis, Matt Hougan, the chief investment officer at Bitwise Asset Management, expressed optimism about the potential recovery of the broader cryptocurrency market. Despite the recent fluctuations seen in digital asset prices, Hougan suggests that the sector may be transitioning away from its bear market phase, driven by increasing institutional interest and strengthening fundamentals.
Hougan pointed out that the cryptocurrency market already faced a significant downturn last year, which may not have been fully recognized due to the relative resilience of major assets like Bitcoin, Ethereum, and XRP. He noted that these assets benefited from institutional inflows, particularly from exchange-traded funds (ETFs) and corporate purchases, while other cryptocurrencies without similar backing saw declines ranging from 50% to 60%. This pattern mirrors previous bear markets, such as those in 2018 and 2022.
According to Hougan, the market is now potentially entering a recovery phase, having already hit bottom during the previous cycle. He stated, “We ran the four-year cycle last year. We”re already at the bottom. I think we”re coming back up.” A significant factor in this shift is the anticipated introduction of Bitcoin ETFs in early 2024, which Hougan believes will fundamentally alter demand dynamics.
He elaborated that the levels of ETF and corporate purchases have, at times, outpaced the new supply of Bitcoin entering circulation. Drawing a comparison to the gold market, Hougan explained that sustained buying from central banks initially stabilized gold prices before leading to a more robust rally as selling pressure from existing holders diminished. “Just like gold eventually entered a parabolic move, Bitcoin will follow suit. We”re just earlier in that process,” he asserted.
Looking ahead, Hougan indicated that the forthcoming phase for altcoins is likely to be more selective, contrasting with past cycles when nearly all projects surged. He emphasized that investors are now differentiating between high-quality projects and lower-quality ones. “We”re not going to have a classic alt season where every zombie coin rises,” he remarked. Instead, he highlighted networks that demonstrate significant activity in areas like stablecoins, tokenization, and decentralized infrastructure as the likely frontrunners in the next cycle.
Moreover, Hougan noted a broader market trend where early investors and long-term holders are gradually selling portions of their holdings, while institutional investors are increasingly becoming the dominant buyers. This shift is indicative of a maturing asset class and does not necessarily imply a decrease in demand. “We”re working through that sale wall… but we”re going to get through it,” he added, reinforcing that the long-term trend of rising institutional participation remains strong.
While exact timing remains uncertain, Hougan believes that the combination of structural demand, improved infrastructure, and investor selectivity could pave the way for the next growth phase in digital assets. In this environment, stronger projects are expected to lead the recovery rather than the entire market moving in tandem.
