TLDR
- Bitcoin has experienced its steepest two-week decline since June 2022, down more than 50% from its October high.
- Bitwise CIO Matt Hougan attributes the downturn to long-term investors selling Bitcoin and taking advantage of liquidations.
- Hougan believes that the current market stress is caused by macroeconomic factors and not crypto-specific issues.
- Market sentiment around Bitcoin is near all-time lows, with Hougan suggesting much of the bad news has already been priced in.
- Despite the decline, Hougan argues that Bitcoin’s recovery could be in sight as bear markets often end in exhaustion.
Bitcoin has experienced its biggest two-week decline since June 2022, falling more than 50% from its October peak. The cryptocurrency is currently showing signs of recovery, bouncing back from a low of $60,000 to $70,000. According to Matt Hougan, CIO of Bitwise, this decline has been driven mainly by long-term investors, debt liquidations and broader market shifts.
Bitcoin’s two-week pullback and market pressure
Bitcoin’s sharp decline can be traced back to several contributing factors. First, long-term investors have been selling their holdings to adapt to Bitcoin’s historically observed four-year cycle. This adjustment, according to to Hougan, has triggered a significant amount of selling activity, including Bitcoin worth “well north of $100 billion.” In addition, debt-driven liquidations and a broader shift into risky assets have increased selling pressure.
The sale coincided with reduced speculative demand in the market. As capital has shifted to AI-linked stocks and, more recently, precious metals, Bitcoin has faced reduced interest from “attention investors.” The general market sentiment has shifted away from cryptocurrencies, which has impacted the price of Bitcoin and led to a sharp decline.
Bitwise CIOs tackle the recession
Bitwise CIO Matt Hougan believes the current recession is different from previous bear markets. He pointed out that the macroeconomic factors driving the sell-off are not crypto-specific, as we have seen in previous recessions. Hougan explained that unlike in 2022, when systemic risks and insolvencies caused major disruptions, this time there are no signs of forced selling due to market disruptions.
Hougan also emphasized that crypto markets have matured since previous cycles, which could mean less severe declines in the future. Despite the current downturn, he suggested that much of the negative news may already be priced into Bitcoin’s value. However, he warned that Bitcoin’s price could fall further, although a repeat of the 2022-style collapse seems unlikely.
Market context and potential recovery
The broader financial markets have also shown signs of stress, with other risk assets such as gold, silver and US stocks under downward pressure. Uncertainty around interest rates, economic growth and capital expenditures have weighed heavily on these assets, creating a risk-free environment. As a result, Bitcoin’s price is caught in this broader market trend.
Despite the challenges, there is a sense that Bitcoin’s recovery could be near. Hougan stated that bear markets in crypto often end in exhaustion, not excitement. With crypto sentiment at an all-time low, it seems likely that the market is approaching a turning point.
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