Matt Hougan: “Crypto markets have already been through the depths of winter…we’re closer to the tail end of the downturn”

The cryptoasset (cryptocurrency) market has moved beyond a short-term correction and into a full-fledged bearish phase, and is now judged to be closer to the end of the slump than its beginning.

According to crypto-focused outlet The Block on the 3rd, Matt Hougan, chief investment officer (CIO) at Bitwise, said in a recent memo to investors that “the cryptoasset market entered a ‘full crypto winter’ as far back as January last year,” adding that “we’re now in a phase closer to the late stage than the start.”

Describing current conditions, Hougan said, “This is not a simple pullback but a textbook bear market similar to 2018 and 2022,” explaining that “as excessive leverage collides with profit-taking by early investors, even positive news is failing to translate into price rebounds.”

He added, “It’s clear why the Fear & Greed Index remains stuck in extreme fear even though the incoming Fed chair is seen as friendly toward Bitcoin,” pointing out that “it’s because we’re in the middle of a bear market.”

According to Bitwise, Bitcoin is down about 39% from its peak last October, while Ethereum has fallen roughly 53% over the same period. Many altcoins have posted even steeper declines.

Hougan noted, however, that the bearishness in this cycle has not been properly recognized by many investors. “Institutional inflows have obscured the market’s true weakness,” he said, explaining that “inflows into ETFs and digital-asset treasuries cushioned the declines in some large-cap assets.”

In practice, assets with high institutional accessibility such as Bitcoin, Ethereum and XRP saw relatively limited drawdowns, while assets without institutional demand plunged more than 60%, the analysis said. Hougan added, “Without ETF and corporate treasury buying, Bitcoin’s decline could have reached 60%.”

Bitwise estimates that more than 744,000 BTC were purchased via ETFs and digital-asset treasuries over the period, worth about $75 billion.

Even so, Hougan said the market is advancing structurally. “There is clear progress in the regulatory environment, institutional adoption, stablecoins and tokenization,” he said, adding that “crypto winters always end not with excitement but amid fatigue and apathy.”

He continued, saying, “The frustration and lethargy spreading through the market right now are very similar to past bottoming phases,” adding, “I can’t pin down the exact timing, but we are now positioned closer to recovery than further downside.”

Meanwhile, Hougan cited potential catalysts ahead including resilient economic growth, positive developments around the Clarity Act, and the possibility of Bitcoin being adopted as a sovereign asset. He added, “The darkest moment is always just before dawn.”