Four-Year Cycle Drives Current Bitcoin Retracement
Matt Hougan, the Chief Investment Officer at Bitwise Asset Management, says that Bitcoin’s recent drop is mostly due to its 4-year market cycle. He said that this kind of drop has happened 3 times before in the history of the larger cryptocurrency market. Hougan says that the pattern shows structural rhythm instead of just 1 outside shock.
He stressed that investors often look for 1 reason why the market goes down. But he said that cyclical corrections are usually caused by more than 1 force that overlaps with another. He thinks that the current retracement is more in line with how things have happened in the past than with something that has never happened before.
Investors Rotate Toward Gold And AI Stocks
Bitcoin has been weak at the same time that more money has been going into other investments like gold and stocks in artificial intelligence. Hougan said that capital rotation shows how people’s risk preferences change when the economy is unstable. During times of market uncertainty, investors often choose sectors that they think are safer or growing faster.
This move away from cryptocurrencies has made selling pressure even stronger in recent sessions. When mood changes quickly, risk assets often see big swings that aren’t really there. The rotation trend shows how the psychology of the market as a whole affects the prices of digital assets.
Federal Reserve Concerns Add Macro Pressure
Hougan said that worries about changes in leadership at the Federal Reserve were another thing that was affecting people’s feelings. Speculation about Kevin Warsh, the Fed’s nominee, has made currencies and bonds less stable. Bear markets often make macro anxiety worse, making existing downward trends even worse.
He said these worries were not the main reasons for the decline, but rather things that made it worse. During bearish times, even small doubts can cause big reactions. Because of this, Bitcoin’s cyclical dynamics are affected by the larger macroeconomic picture.
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ETF Growth Likely To Keep Going
Even though the market has pulled back, Hougan is still sure that exchange-traded funds that focus on cryptocurrencies will keep growing. He said that worries about short-term weakness hurting long-term ETF adoption were not true. He thinks that structural demand is still strong despite short-term fluctuations.
Bitwise, which manages more than $15 billion in assets, still has a lot of exposure to crypto ETFs. The company just started a staking ETF that focuses on Solana and tracks the price of the cryptocurrency. The fund has lost a lot of value since it started, but Hougan sees these kinds of setbacks as normal.
The Scarcity Thesis is Still Basically the Same
Hougan said that the story of Bitcoin’s scarcity hasn’t changed, even though more people are using it for money. There will only ever be 21 million coins, which keeps the asset’s supply structure limited. Over time, activity in the derivative market eventually makes its way back to the spot market.
He admitted that ETF flows and derivatives can change prices during the day. But these tools don’t change the long-term supply limits built into Bitcoin’s design. So, the argument about scarcity still shapes his strategic view.
The Psychology of the Market and Self-Fulfilling Prophecy
Hougan said that people in the market might be making negative feelings stronger by having the same expectations. When investors expect prices to go down, their defensive positions can make prices go down faster. This kind of behavior makes feedback loops that make volatility worse.
He said that the current situation is partly self-fulfilling. There may be good news below the surface, but it often takes a long time to show up. During bearish times, it’s hard for optimism to take hold when everyone else is being careful.
Bitcoin Drops to Lowest Point in 16 Months
Last week, Bitcoin dropped below $61,000 for a short time, which was its lowest point in about 16 months. In October, the cryptocurrency hit a record high of more than $126,000. That big change shows how big the current correction is.
Hougan says that cyclical resets are a normal part of the growth of the crypto market, even though losses have made investors nervous. He thinks that the retracement fits with what has happened in the past, not that the structure has broken down. In the next few months, we will find out if the 4-year cycle theory is right again.
