Bitcoin's Long-Term Outlook: Expect Steady Returns, Not Huge Gains, Says Bitwise CIO

In a recent discussion on CNBC’s Crypto World, Bitwise Chief Investment Officer (CIO) Matt Hougan shared his insights on Bitcoin's future, emphasizing a shift from a four-year cycle to a more extended, stable period of growth. He highlighted how institutional investment and regulatory clarity are reshaping the market dynamics.

Key Takeaways

Long-Term Growth: Bitcoin's upcoming years are expected to provide steady returns rather than vast gains.
Institutional Influence: Institutional investors are stabilizing Bitcoin’s market behavior, leading to reduced volatility.
Regulatory Impact: Clear regulatory frameworks can significantly influence Bitcoin's market performance and potential rallies.

Bitcoin likely to see steady long-term returns

A Shift to Steady Returns

Matt Hougan from Bitwise stated that the cyclical nature of Bitcoin, previously marked by four-year cycles, is evolving into what he calls a "10-year grind." This new phase is characterized by consistent growth instead of remarkable spikes in value. In his view, factors such as institutional adoption, progress on regulations, and the rise of stablecoins have a more substantial impact than the traditional halving cycles that have previously defined Bitcoin's price trajectory.

“I believe the relevance of the four-year cycle is diminishing,” Hougan remarked. “I anticipate the market will show an upward trend next year, supported by moderate yet consistent returns and decreased volatility.”

Institutional Buying Reduces Volatility

Hougan observed a notable decrease in Bitcoin’s volatility, suggesting this reflects fundamental changes in the market. He pointed out that Bitcoin is currently experiencing less volatility than NVIDIA has over the past year.

Institutional investors tend to approach buying differently than retail investors. They usually rebalance their portfolios in a systematic manner, as opposed to chasing market momentum. “In contrast to retail investors, who act based on trends—buying when prices rise and selling during dips—institutions have a more strategic approach,” explained Hougan.

The shift in Bitcoin ownership demographics from retail investors to institutional players continues. Notably, prestigious entities, such as Harvard’s endowment, are acquiring Bitcoin while retail investors seem to be selling, creating what Hougan described as a "staircase up and then an elevator down" effect in the market. He asserted that the reason Bitcoin's value has dropped by 30% rather than 60% since its peak in October is largely due to steady institutional buying that supports the market.

One-Time Benefit from Regulatory Clarity

Hougan also mentioned the regulatory landscape during the Trump administration as having provided a singular boost to the market by alleviating fears around regulations.

“When asked in prior years about their hesitations to invest in Bitcoin, institutional investors frequently cited regulatory uncertainties as their primary concern, rather than issues of volatility or valuation,” he noted. Both Hougan and his colleagues agree that clear regulatory legislation is crucial for any significant upward movement in the crypto market. “Without regulatory clarity, it will be challenging for cryptocurrencies to experience notable rallies,” Hougan cautioned. “However, if such clarity is achieved, it could serve as an all-clear signal for the current market pullback.”