Bitcoin (BTC) is now nearly 50% below its all-time high set four months ago.
And according to Bitwise Chief Investment Officer Matt Hougan, there is “never a single reason why the crypto market falls,” but rather multiple factors at work.
Hougan believes there are six major drivers behind the downturn.
Chief among them is long-term investors selling to “front-run the four-year cycle.” Hougan estimates those investors sold over $100 billion of BTC last year.
Another key factor is shifting investor attention, thanks to AI stocks and precious metals.
Hougan also blames a historic leverage liquidation event on October 10th of last year, concerns about Fed leadership, worries over quantum computing risks and broader macro risk-off sentiment.
“Could it fall further? Yes, it’s possible, if history is any guide. Previous drawdowns have been significantly larger than the current 54% fall from the peak… And prior crypto downturns have tended to last 12-13 months, meaning this one could have a ways to go.
Our internal ‘market bottom’ models suggest the probability of a bottom is increasing, but it’s not a surety.”
Hougan says crypto is a more mature asset class than it was in the past, and potential catalysts include regulatory progress such as the Clarity Act, a return to risk-on markets, progress on quantum, rising rate-cut expectations, and crypto breakthroughs connected to the rise of AI.
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