Matt Hogan, CIO of Bitwise, reflects on how investors often forget the harsh crypto downturns of past cycles and why today’s market conditions closely mirror previous sell-offs that ultimately preceded major bull runs. He explains that while past declines were driven by fear, weak narratives, and regulatory pressure from bodies like the SEC, the current environment is supported by stronger fundamentals such as the growth of stablecoins, tokenization, AI-driven finance, and renewed DeFi innovation. Hougan outlines the strongest bullish case for the next year, emphasizing that core blockchain fundamentals remain intact and that market pullbacks have historically presented major long-term opportunities. He also discusses realistic risks investors may be overlooking, from regulatory uncertainty to macroeconomic downturns, comparing potential delays to a “Groundhog Day” moment, much like Phil Connors reliving the same day. Overall, he argues that while short-term setbacks are possible, structural trends suggest the broader trajectory for digital assets remains firmly upward.
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Let me kick things off with this.
What do you feel investors have forgotten about what happened in 2018 and again in 2022, those Bitcoin sell-offs that kind of apply to what we're living through today.
Yeah, I love the question.
They've completely forgotten what it was like then, right?
In 2018, and 2022, we were in desperate situations.
There were no new positive narratives.
People thought the world was ending.
People had been in crypto, were leaving crypto.
We're seeing all of that again.
And yet for some reason, crypto can't remember what happened in 2019 and 2023, which is that we kicked off a major bull market.
There are reasons to believe we'll see that happen again, and it's funny to me that people can't see past their skis.
They can't remember what happens when we turn the chapter to the next page.
Do you view the heavy selling we've had off the October highs, uh, pretty similar or dissimilar from the previous exactly the same, right?
This is a, a textbook crypto winner, right?
We peaked in October, we've sold off about 50%.
It, it, it, it rhymes almost precisely with what happened in 2028 and 2022, except for there are a few negative catalysts back then that we don't have.
Now, in 2022, we had an extremely hostile regulatory environment.
The SEC was trying to crush crypto.
In 2018, there were really no positive narratives to point to.
Now we have a pro-crypto regulatory environment.
We have stablecoins booming.
We have tokenization booming.
We have AI finance coming online.
We have Defig being reborn.
So we have a lot more to be optimistic about now than we did in those previous winters.
What is the strongest bull case for crypto over the next 12 months?
Well, uh, the strongest bull case is that this is a classic crypto winner.
It's an opportunity to get in low, and nothing has changed about the fundamental technology that makes it less useful.
All finance is moving on chain.
The SEC chair is saying that stablecoins are going to be a multi-trillion dollar market.
The world is souring on fiat currencies.
As we get past this classic crypto winner experience, I think we have so much to focus on, and I'd remind people, if you bought at the end of 2018, you're up 2,000%.
If you bought at the end of 2022, you're up 300%, and that's after the pullback.
Those are extraordinary returns.
I see no reason why this time will be different.
What is the most realistic bear case people are not talking enough about?
Sure, if the Clarity Act fails in Congress, I think that will be seen as a setback.
If concerns about quantum risk continue to rip, I think that will be a setback.
If the broader equity market turns down, which there's every chance that that could happen, I think that would be a setback as well.
I think of those as sort of Groundhog Day moments for this crypto winner.
If it happens, we'll see our shadow and the bull market recovery will be delayed.
It will not be denied.
We will get there eventually, but I do think those three things could set us back and and postpone the rally that I think is coming.
Phil, Phil Connors.
That's exactly right, yep, that's the Clarity Act, uh, that is the Phil Connors of crypto.
Uh, stablecoin supply is stuck right now, somewhere around 300 billion AUM.
Is that a ceiling or is that a launch pad, Matt?
It's a launch pad.
Look, the clarity of the, the Genius Act, which governs stablecoins, which brings them into regulatory perimeter, doesn't even go into effect until January of next year.
So we're still in the pre-Genius Act stablecoin world.
We're going to see all of the growth.
Ultimately, all dollars will be on chain.
Ultimately all payments will take place in stablecoins.
Ultimately we will crypto dollarize a huge part of the world, but even though the news narrative has moved on, it thinks we're in this pro-stablecoin regulatory environment.
Again, the regulations aren't actually in place.
So, look, that number's going to $3 trillion in the next handful of years.
There's nothing that's stopping that.
We're just in the wait phase before that goes into effect.
Matt Hogan, CIO of BitW, very grateful for your generous time.
Thanks for joining us today.
Nice to have you as always.
Yeah, thanks for having me.
This was fun.