Cryptocurrency asset management firm Bitwise said the current high level of market anxiety could indicate that the crypto market is nearing its lowest level.
The firm argued that current investor psychology is similar to sentiment from the lows of the 2018 and 2022 cycles, periods that presented “excellent buying opportunities.”
Bitwise Chief Investment Officer Matt Hougan noted that investors who bought at the 2018 low saw returns of around 2,000%, while those who took positions at the 2022 low saw gains of around 300% in three years. Hougan said the disconnect between current price movements and the fundamental development of the sector reflects characteristics of past cycles.
According to Hougan, the rise of stablecoins, advances in asset tokenization, and developments at the intersection of AI and finance indicate that the crypto ecosystem continues to mature. Therefore, despite short-term pricing pressure, the company does not see a structural break in the fundamental dynamics of the sector.
According to Bitwise analysis, crypto markets usually end not with a sudden wave of euphoria, but with emotional exhaustion. The company said investors’ risk appetite is low in the current environment, but this could also be a natural part of the price decline process.
Potential upside catalysts include the implementation of the Clarity Act in the United States, an improvement in overall market risk perception, strengthening expectations for lower interest rates, and technological breakthroughs at the intersection of AI and cryptocurrencies. According to Bitwise, unless there is a sudden and strong positive shock, the market could enter a “gradual bottom” phase.
*This does not constitute investment advice.
