Bitwise's Matt Hougan warns that Bitcoin may not have hit its bottom yet, with potential declines ahead despite recent price recovery.
Matt Hougan, Chief Investment Officer at Bitwise, highlighted on the Blockspace podcast that Bitcoin has not yet reached its lowest point in the current cycle. After experiencing a significant drop to $60,000 on February 6, marking a new low since September 2024, the cryptocurrency has seen a recovery to over $68,000. However, Hougan warns that further corrections could occur, stating, "It’s common to see one or two major shocks. I wouldn’t be surprised to see a similar event happen again in the future."
He contested the narrative that the record liquidation event on October 11, which surpassed $19 billion, signified the beginning of a bear market. Instead, he attributes the start of the crypto winter to January 2025, coinciding with the inauguration of U.S. President Donald Trump, which triggered a sell-off affecting Bitcoin and Ethereum. This slow reaction from institutional investors contributed to the massive losses during that period.
Historically, Bitcoin has followed four-year cycles influenced by halvings, often experiencing significant price surges followed by steep declines of 80-90%. However, Hougan suggests that with more institutional players entering the market, future downturns might be less severe, potentially limited to 50-60% declines. He remarked, "This is the new reality we find ourselves in," indicating a shift in market dynamics between institutional and retail traders.
Concerns Regarding Market Trends
Recent analysis from Santiment reveals a troubling trend: while retail traders, especially those holding less than 0.01 BTC, are actively buying during price dips, institutional investors have sold off large quantities of Bitcoin in the past month. This divergence has raised concerns among analysts, who noted, "Historically, sustainable bull markets require accumulation by 'smart money,' not retail purchases during dips." Additionally, on-chain transaction volumes, new address creation, and overall network growth are on the decline, suggesting a lack of real market expansion.
Despite these issues, some positive indicators have emerged. The number of overly optimistic price predictions for Bitcoin on social media has diminished, which is seen as a healthy sign for market stability. Furthermore, the 30-day MVRV ratio is at -6, indicating a significant chance for a recovery rally.
Prolonged Recovery Ahead
Macro economist Lyn Alden pointed out that Bitcoin typically does not rebound quickly unless there is external economic stimulus, noting that the cryptocurrency often remains stagnant at its bottom for extended periods. She suggested that Bitcoin's price could still decline by another $10,000-20,000 before any substantial recovery occurs. Alden believes a peak in AI stocks could trigger renewed interest in Bitcoin, as investors seek new opportunities once AI stocks plateau. Both Hougan and Alden see potential in the DeFi sector as a possible catalyst for the crypto market's resurgence from its current correction phase.
