No More Bitcoin Bear Markets Ever? Fund CIO Explores New Market Reality

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In a new investor note published on January 29, 2025, Matt Hougan, Chief Investment Officer at Bitwise, questioned whether the historical four-year market cycle of Bitcoin could finally be coming to an end. His reasoning is rooted in seismic shifts in US policy toward crypto, highlighted by a recent executive order from President Trump aimed at solidifying the nation’s leadership in digital assets.Could 2026 Buck The Bitcoin Bear Trend?Hougan’s note begins with an explanation of the so-called “four-year cycle,” where Bitcoin has typically seen three years of substantial gains followed by a pullback. This cycle, he explains, mirrors broader boom-bust patterns in traditional markets:“The four-year cycle in crypto is driven by the same forces that drive broader cycles of growth and recession in the general economy,” he wrote.These expansions, fueled by technological breakthroughs or increased investor interest, often lead to over-leverage, occasionally resulting in fraud or industry-wide strain. Eventually, something “breaks” and triggers a market correction—such as the 2014 Mt. Gox collapse or the 2018 SEC crackdown on ICOs.Hougan describes the current crypto upswing as the “Mainstream Cycle,” emerging out of 2022’s “massive deleveraging” caused by failures like FTX, Three Arrows Capital, and others. According to him, the latest bull phase took off in March 2023, when Grayscale convincingly “won the opening argument” in its legal challenge against the SEC over a spot Bitcoin ETF.“Bitcoin was trading at $22,218 when Grayscale mounted its argument. It’s trading at $102,674 today. The mainstream era has arrived.” Once a spot Bitcoin ETF was approved and launched in January 2024, investor inflows surged, further cementing Bitcoin’s acceptance among both retail and institutional players.The most striking component of Hougan’s analysis is his examination of last week’s executive order issued by President Trump. The order not only deemed the development of the US digital asset ecosystem a “national priority,” but it also set in motion a clearer regulatory framework for crypto.“Last week, President Trump issued an executive order that was so overwhelmingly bullish for the space that it’s making me wonder,” Hougan wrote, noting how the document outlines plans for a potential “national crypto stockpile” and encourages banks and financial institutions to accelerate their adoption of digital assets.Combined with a now more welcoming stance from the SEC, Hougan believes these measures could unleash trillions in new investment over the coming years, far surpassing the hundreds of billions that an ETF-driven market was already expected to generate.Hougan’s analysis acknowledges that Bitcoin has historically followed its pattern of eventual pullbacks after surging bull runs. But with Wall Street behemoths and major banks preparing to integrate crypto at every level, there’s a growing possibility that the market may not face the traditional plunge in 2026: “If it’s not until next year that we feel those impacts, will we really have a new ‘crypto winter’ in 2026?” he posited. “If BlackRock CEO Larry Fink is calling for $700k Bitcoin, are we really going to see a 70% pullback?”While he concedes that leverage continues to build in the system—citing an uptick in Bitcoin-backed lending programs, derivatives, and levered exchange-traded products—he also highlights an increasingly diverse pool of crypto investors. This diversity, he argues, could dampen severe drawdowns. “My guess is that we haven’t fully overcome the four-year cycle. Leverage will build up as the bull market builds. Excess will appear. Bad actors will emerge. And at some point, there could be a sharp pullback when the market gets over its skis,” Hougan argued.However, Hougan expects that any future market correction will be “shorter and shallower” than previous cycles. With the industry’s infrastructure now significantly more robust and mainstream participants treating crypto as a legitimate asset class, a dramatic bear market akin to those of 2014 or 2018 may be less likely. “As for now, it’s full steam ahead,” he concluded. “The crypto train is leaving the station.”At press time, BTC traded at $105,275.