Bitcoin Plunge Highlights TradFi Deleveraging and Four-Year Cycle Reset

Remy: Let's get to the big story breakdown. While the recent Bitcoin collapse is being called a crisis of confidence, last week the market saw a 30% drawdown that erased $2 trillion in capitalization and sent the crypto major below the $61,000 mark. But the story here is not crypto native. This wasn't an exchange failure or even a protocol breach, and data does reveal a multi-layered deleveraging cascade originating in TradFi's plumbing from Secretary Bessent and rejecting the strategic reserve narrative to a 3.5 Z-score liquidation event in global multi-strat funds. The transmission mechanisms are now clear, but from the forced unwind of Yen carry trades and IBIT options that turned a standard volatility spike into a cross asset route. We are breaking down the anatomy of the crypto crash with Matt Hougan, who is CIO at Bitwise Asset Management. Matt, great to have you here. Thank you so much for joining me.

Matt: Thanks for having me. I'm excited to be here.

Remy: Well, first and foremost, let's talk about what happened in terms of that Bitcoin crash. I know that you're calling it a retracement. But tell us what you think really happened.

Matt: Yeah I mean first of all this is completely normal in crypto right. We have had big pullbacks before in 2022, in 2018. We're right on schedule. I think we're near the end of it. It's multifactor. So you had existing crypto investors who are selling ahead of the four year cycle. You had some concern about quantum. You had some concern about Kevin Warsh coming in as the new Fed chair. as you mentioned, you had the intersection with traditional finance and traditional macro hedge funds, which may have used Bitcoin as part of a complicated trade that unwound in a hurry.

So like anything, there's no mono causal explanation. But I would emphasize this is a normal retracement. Historically, these have been interesting buying opportunities. I think that's the case here as well.

Remy: Yeah. And Matt, for viewers who may not be as familiar with the four year cycle, break this down for us. And where are we right now?

Matt: Yeah,absolutely. We're in year four. So if you go back to when Bitcoin first started trading publicly in 2011. It followed this familiar cycle of three big up years and a pullback year. We had pullback years in 2018, 2014 and 2022. 2026 is obviously the next line in that cadence. Now, I think people were noticing that they actually sold Bitcoin ahead of it last year. So I think we're front running it a little bit. But this is a big psychological force in the market. Everyone in crypto talks about this four year cycle. Everyone thought this would be a pullback year. Indeed it is. And again I think we're far into that. I think we're starting the bottoming process. I don't know if this is the exact lows, but I think we're in that process of finding a bottom.

Remy: Yeah. And Matt, I was just thinking the last time you were here on set at the New York Stock Exchange, it was one spot Bitcoin ETFs first launch here at the New York Stock Exchange. So would you say that the honeymoon period for Bitcoin as an institutional asset is officially over?

Matt: Well maybe the honeymoon period is over. But I think it's a long and lasting marriage. I think this is a 40 or 50 or 100 year romance. Um, yeah. We saw this initial boom in assets. We saw $60 billion of inflows from Bitcoin ETFs from when they started until October 10th, which is when this pullback started. Since then notably we've seen about $7 billion of outflows.

Now that sounds like a lot. But when you think about the market pulling back 50%, the fact that almost 90% of investors have stayed stuck in, I think tells you something. We actually did a survey of financial advisors who bought Bitcoin in 2025, and 99% of them said they were either going to sit tight or buy more in 2026 again.

Yeah, maybe the honeymoon period is over. Maybe we're transitioning to real life. But I do think this is a long term marriage. I think it's going to only really grow from here.

Remy: And of course, when we take a look at other asset classes outside the crypto space, whether we're talking about commodities or equities, we've seen a lot of volatility here. So I understand that. Goldman Sachs Prime brokerage data showed a massive anomaly around February 4th. So this was before February 6th. So tell us what's happening. And given the focus on Yen carry trades as well as JGB and even silver. Tell us what you think is happening below the surface here.

Matt: Yeah, I think there are two things happening from a macro perspective. is there's just a great deal of uncertainty in the market, right.

Depending on who you talk to. Either the economy is booming or it's in trouble. Either we're going to cut rates by a percent or we're going to sit tight. Either AI is going to destroy software stocks or there's an incredible opportunity. We're seeing things we've never seen before silver crashing 26% in a single day.

Gold acting as volatile as Bitcoin. In uncertain times, I think people leave risky parts of the market. I think Bitcoin is a risky part of the market. So I think that is a big piece of what's going on. We've never been in a market like this where you have force as big as AI, reshaping essentially how our economy works. I think that's creating uncertainty and that's driving some of this crazy movement and cross asset movement that we haven't seen in the past.

Remy: Yeah. And when we think about what's been moving the broader market in terms of sectors, including names that are listed on the S&P 500, we're looking at wealth management in terms of major moves as well as financials. So there's a lot happening when it comes to concerns about artificial intelligence and how that will disrupt industries. How do you see AI actually affecting the crypto space?

Matt: Yeah, in the long term it's a huge catalyst, right? If you look at what's happening with AI agents, do you think they're going to walk down to the local chase and open a bank account? No, they don't have legs. They're going to use a digital wallet. They're going to use stablecoins. That's what we've seen. If you look at how they're building and how they're using finance, they're all using crypto. Coinbase just rolled out an agentic crypto wallet. You're going to see an AI crypto convergence. I think it's actually going to be one of the narratives that leads crypto out of this bear market, that crypto is the financial Ecosystem for AI agents. They're not going to be here on the floor. And I think it's going to be a major bull market for that.

Remy: And I'm sure at Bitwise, you and your team are focusing on what's happening in terms of volume as well as data. So what is that telling you and what does this mean as we head into the rest of 2026?

Matt: Yeah.Look, I think we're seeing a classic bear market style activity. You're seeing leverage come out of the crypto ecosystem. You're seeing some long term crypto whales starting to accumulate Bitcoin again at the bottom. I hate to say that this is just a repeat of what we've seen, but it feels an awful lot like what Bitwise saw in 2022, an awful lot like what we saw in 2018. You know, bitwise has been helping financial advisors access crypto for eight years. I note that the people who bought at the bottom in 2018 or up 2,000% even after their trade. So when we look at the data, that's what we see leverage coming out of the system. Still some sustained interest and really just a normal crypto bear market. I know it doesn't feel like it, but that's what I feel like to me.

Remy: Yeah. And that finally, before I let you go, you're here in New York City and you're going uptown to attend the Bitcoin Investor Week gathering. And the who's who of the crypto space will be there. So tell us what you're looking forward to and what you expect to see.

Matt: Yeah.Look, I think crypto is narrowly focused on the next day and the next week. And it's ignoring the long term trends. It's ignoring the rise of tokenization. It's ignoring the fact that BlackRock is tokenizing all of its ETFs that, you know, Chair Atkins is probably going to testify about how he wants to move crypto, move the financial system onto blockchain. expect that that conference, there's going to be a lot of talk about the very near term, how much of this unwind is done, how much cross, you know, macro hedge fund volatility will be injected.

And then can people focus out on the long term. Because if you look at the long term at crypto, if you look at worries about fiat currency, if you look at Wall Street building on blockchain, you're very optimistic So I think it's sort of redirecting people's focus for the next week to the next few years, because the next few years look pretty great.

Remy: And speaking of which, Matt, I do have to ask you, what is your part price target, not just for 2026, but also beyond?

Matt: Yeah, it's a great question. So our long term price target for 2035 is about a million and a half dollars in Bitcoin. I think that's the direction we're going. As for where we go here, it's context dependent. Does the Clarity Act pass? Does the economy stay on track. Do we see more progress on quantum? If we get those things, I think we may get back to our all time highs on Bitcoin this year, which is about 126,000. If we don't, I think we'll struggle. I think we'll be up from here by the end of the year. But it could be a slower bottoming process. So it really depends on whether those catalysts materialize or they don't.

Remy: Okay, Matt. Well, I will have to jot down that price target and we'll talk about it next time you're here. Thank you so much for joining me.

Matt: Thanks for having me.