- Cryptocurrencies have typically observed a four-year cycle, characterised by notable periods of recession and growth.
- The demise of TerraUSD and FTX marked the end of the previous bull market, while Grayscale’s success over the SEC laid the groundwork for the next upward trend.
- Matt Hougan, Bitwise CIO, suggests that Trump’s presidency could disrupt this established cycle, driven by significant industry events and adoption.
- Trump’s executive order, which advocates for crypto adoption and regulatory clarity, could lead to widespread use of digital currencies and potentially push Bitcoin’s value past US $200k.
Like many other assets, cryptocurrency has historically adhered to a four-year cycle. However, its recession and growth cycles are more pronounced, making them easier to observe.
Essentially, the first three years of the four-year cycle are typified by strong price increases across digital assets, while the final year is a harsh bear market we know as a ‘crypto winter’.
Most pundits believe we are moving into the final phases of the four-year cycle in 2025, as the impact of last year’s Bitcoin halving starts to ricochet among investors.
However, Bitwise Chief Investment Officer, Matt Hougan, believes those annoying ads that disclaim ‘past performance is not a reliable indicator of future performance’ might be onto something.
He believes the Trump presidency could finally break the four-year cycle.
Related: Bitwise Files S-1 for DOGE ETF as Bitcoin, Ethereum Funds See Massive Outflows
Catalysts and Supply and Demand Determine Cycles, Not Halving, Hougan Says
Hougan argues that, unlike what many believe, these cycles aren’t driven by the Bitcoin halving. Rather, large industry catalysts spur pre-existing sentiment among investors.
When the crypto market was running super hot in 2021 on the back of record-low interest rates, it was only natural for an inflation-based correction to wash over the industry. However, it was the collapse of TerraUSD and FTX that hammered the final nail into the bull market’s coffin.
Similarly, Grayscale’s resounding victory over the SEC regarding their constant denial of Bitcoin ETF products was the first step toward spot crypto funds. In turn, once they were eventually approved in early 2024, the seeds of Bitcoin’s next bull market were sown.
Hougan suggests that such catalysts – be they technological, political or social – have the power to disrupt the four-year cycle.
In particular, he believes that Trump’s recent executive order was ‘so overwhelmingly bullish for the [crypto] space’ that the widespread adoption of digital currencies might be just around the corner.
Will Crypto Ice Ages Become a Thing of the Past?
Trump’s executive order outlined a couple of key areas that Hougan suggests will prove pivotal for the industry.
He notes the EO labels growing the crypto sphere as a ‘national priority’ within the United States, while also outlining a clear “path for…regulatory framework”.
On top of this, Trump has created a task force to assess whether a ‘national crypto stockpile’ is viable.
But perhaps the biggest changes will come to adoption.
The full mainstreaming of crypto…where banks custody crypto…stablecoins are integrated broadly into the global payments system…the largest institutions establish positions in crypto…will bring trillions.
Matt Hougan, CIO of BitwisePut it all together, and Hougan believes Bitcoin can exceed US $200k (AU $320k) this cycle – and that the lines between what a ‘crypto cycle’ is may start to get blurry.
My guess is that any pullback will be shorter and shallower than in years past…The crypto space has matured; there’s a greater variety of buyers and more value-oriented investors than ever before.
Matt Hougan, CIO of BitwiseCredit: Source link
