Bitwise CIO: Crypto Bear Cycle Over, Selective Altcoin Rally Ahead

According to Matt Hougan, much of the cryptocurrency complex already endured a significant down cycle in 2023, even though major assets like Bitcoin (BTC), Ether (ETH), and XRP appeared steadier. Hougan attributes this stability to heavy buying from exchange-traded funds (ETFs) and corporate entities, which absorbed selling pressure and prevented these headline coins from showing the full extent of broader market losses. In contrast, many tokens without similar institutional support fell sharply, often by 50% to 60%, mirroring the behavior of past bear markets.

Hougan emphasizes that this institutional buying has fundamentally shifted market dynamics. “We ran the four-year cycle last year,” he stated. “We’re already at the bottom. I think we’re coming back up.” The critical mechanism, he highlights, is that purchases from ETFs and corporate treasuries at times outpaced the supply of newly mined Bitcoin, creating a persistent bid underneath the market. This scenario draws a direct parallel to gold, where consistent central bank buying first stabilized prices and later contributed to more substantial price appreciation.

Looking ahead, Hougan anticipates that the next market up-cycle will be markedly different from the indiscriminate rallies of the past. Investors are becoming increasingly discerning, and capital is expected to flow selectively toward projects with clear utility and steady on-chain activity. Networks with tangible applications in areas like stablecoins, real-world asset tokenization, and core infrastructure are positioned to attract significant investment.

Conversely, this view suggests that lower-quality projects lacking real users or a defined purpose will likely see little interest and remain sidelined. This bifurcation represents a maturation of the crypto market, where fundamental value and use cases begin to outweigh hype and speculation. Hougan draws a further analogy to gold’s historical trajectory, suggesting, “Just like gold eventually entered a parabolic move, Bitcoin will follow suit. We’re just earlier in that process.”

Amid these structural shifts, Bitcoin’s price action has remained volatile, keeping traders on alert. Recently, BTC retreated from earlier peaks to a range between $60,000 and $65,000 before finding support and rebounding above $65,000. This movement occurred against a backdrop of fluctuating risk appetite driven by geopolitical headlines, contributing to one of Bitcoin’s rougher trading stretches in recent weeks. Reports indicate traders are monitoring news flow closely, as it can prompt sudden and outsized price moves.

Simultaneously, a significant transfer of assets is underway beneath the surface. Long-term holders who bought Bitcoin at lower prices are beginning to take profits, creating what market observers describe as a ‘sale wall.’ This supply is being absorbed by large institutions entering the market via ETFs and direct accumulation. This hand-off from early adopters to institutional capital can create messy, volatile price action, but it mirrors the maturation process observed in other asset classes. Importantly, this transition does not inherently signal weakening long-term demand; rather, it reflects a changing of the guard as the market institutionalizes.