Bitwise Chief Investment Officer: Now is a great time for long-term cryptocurrency investors
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Bitwise Chief Investment Officer: Now is a great time for long-term cryptocurrency investors
Once the market absorbs the short-term liquidity shock, the future will surely be bright.
Navigating Web3 tides with focused insightsAuthor: Matt Hougan, Chief Investment Officer at Bitwise
Translation: Luffy, Foresight News
The current market pullback appears to be a gift for long-term investors; key tailwinds could push Bitcoin to $100,000 by year-end.
The cryptocurrency market is in a strange state: all the short-term news is bad, while all the long-term news is good. This contradiction creates a once-in-a-lifetime opportunity for long-term investors. Let me explain.
The Powerful Forces Behind Cryptocurrency
For long-term crypto investors, now is the best time.
Massive inflows into spot Bitcoin ETPs: Since their launch in January, spot Bitcoin ETPs have attracted $15 billion in net new assets, making them the most successful ETPs ever. And I believe they're just getting started. Major wealth management platforms like Morgan Stanley and Wells Fargo haven't even entered this space yet. I expect both giants to enter later this year, potentially bringing in billions more in inflows.
Bitcoin halving: In April this year, Bitcoin underwent its quadrennial halving, cutting new supply issuance by 50%. Historically, Bitcoin has performed exceptionally well in the year following each halving. Will this time be different?
Spot Ethereum ETPs: The U.S. Securities and Exchange Commission has approved key filings for spot Ethereum ETPs—listing is imminent. We estimate these ETPs could attract $15 billion in net inflows within the first 18 months after launch.
A major shift in U.S. government attitude toward crypto: For years, Washington has been hostile toward cryptocurrencies, hindering industry growth. But over recent months, attitudes have shifted dramatically. In May, 71 Democrats joined 208 Republicans in supporting a new crypto regulatory framework. One reason for this bipartisan support? The crypto industry now wields political influence through one of Washington’s most powerful Super PAC networks. Even more significantly, Trump and the Republican Party have made historic public endorsements of crypto, highlighting its growing importance in the U.S. election cycle.
Fed rate cuts: Federal funds futures markets are pricing in two rate cuts by the end of 2024 and four to five cuts over the next 12 months. Lower interest rates will drive more capital into crypto.
Add in strong stablecoin growth, major Layer 2 advancements, deeper institutional involvement from firms like BlackRock, and the picture looks incredibly bright. In the second half of the year, the combined effect of these factors could push Bitcoin to $100,000 and Ethereum to new all-time highs.
Short-Term Headwinds
So with so much positive news, why is Bitcoin's price falling? The answer: one-time dumps.
Specifically, the crypto market has recently faced several short-term liquidity shocks. Over the past two weeks, we’ve seen:
Mt. Gox repayments: The defunct 2014 cryptocurrency exchange Mt. Gox finally began paying creditors in early July. This is a big deal: Mt. Gox is expected to distribute over $8 billion worth of Bitcoin to creditors over the coming months. Billions of dollars’ worth of Bitcoin could be immediately sold.
U.S. government sales: The U.S. government holds over $12 billion in Bitcoin seized in 2013 from the notorious online black market Silk Road. On July 1, the U.S. Marshals Service announced it would sell these assets via Coinbase Prime, indicating they may soon hit the market.
German government sales: Germany, which has seized Bitcoin multiple times, is also selling aggressively, having already offloaded $900 million in Bitcoin. The remainder could be sold soon.
Consider this: $8 billion from Mt. Gox, $12 billion from Silk Road, $2 billion from Germany—that’s a massive amount of Bitcoin flooding the market. Worse, these sales and distributions began during the week of July 4, a period of typically low crypto liquidity. This triggered heavy liquidations in the futures market, further pressuring prices.
This Too Shall Pass
But remember: these are one-time dump events, and they will eventually end.
As investors, we must ignore transient events when assessing investments—they don’t reflect long-term value.
In other words, this too shall pass. The impact of Mt. Gox repayments will fade. The U.S. government’s sale of Silk Road assets will conclude.
Meanwhile, the positives aren’t going away. Bitcoin ETPs aren’t disappearing, Ethereum will keep attracting new capital, Washington’s acceptance of crypto continues to accelerate, and so on.
That’s why the recent pullback is a gift to long-term investors.
I believe these one-off sell-offs are suppressing what would otherwise be strong bull market momentum. Once the market absorbs these short-term liquidity shocks, the future looks extremely bright.
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