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Despite the recent volatility in digital asset markets, Matt Hougan, chief investment officer at Bitwise Asset Management, says the broader crypto sector may already be emerging from a bear-market phase, with institutional demand and improving fundamentals likely to drive the next cycle.
“We already had a bear market”
Hougan argued that much of the crypto market experienced a significant downturn earlier, even if major assets appeared relatively resilient.
“We had a full-blown bear market last year. We didn’t experience it because Bitcoin, ETH, and XRP did okay — they had institutional flows from ETFs and corporations,” he said.
Assets without institutional backing, he noted, fell sharply, with some large cryptocurrencies declining 50%–60%, resembling conditions seen during previous bear cycles such as 2018 and 2022.
According to Hougan, the market may already be moving into a recovery phase.
“We ran the four-year cycle last year. We’re already at the bottom. I think we’re coming back up.”
Institutional demand reshaping the market
Hougan said the introduction of Bitcoin exchange-traded funds in early 2024 created a structural shift in demand. ETF purchases, corporate accumulation and other institutional buying have, at times, exceeded the amount of new Bitcoin entering circulation.
“If you look at ETF purchases or corporate purchases, it’s vastly more than the amount of new Bitcoin being produced,” he said.
He compared the situation to the gold market, where sustained central-bank buying initially stabilized prices before eventually driving a stronger rally once selling pressure from existing holders declined.
“Just like gold eventually entered a parabolic move, Bitcoin will follow suit. We’re just earlier in that process.”
A more selective altcoin cycle ahead
Hougan said the next phase of the crypto market is unlikely to resemble past “everything rallies” altcoin cycles. Instead, investors are becoming more selective, rewarding projects with real adoption and strong fundamentals.
“We’re not going to have a classic alt season where every zombie coin rises,” he said. “People are going to distinguish between high-quality projects and low-quality projects.”
He pointed to networks with strong activity in areas such as stablecoins, tokenization and decentralized infrastructure as potential leaders in the next cycle, while weaker projects could struggle to attract capital.
Long-term outlook remains constructive
Hougan also highlighted a broader shift occurring within the market: early investors and long-term holders are gradually selling portions of their holdings, while institutional investors increasingly replace them as the dominant buyers.
This transition, he said, is typical of maturing asset classes and does not necessarily signal weakening demand.
“We’re working through that sale wall… but we’re going to get through it,” he said, adding that the long-term trend of increasing institutional participation remains intact.
While timing remains uncertain, Hougan said the combination of structural demand, improving infrastructure and investor selectivity could support the next stage of growth in digital assets, with stronger projects leading the recovery rather than the entire market moving in unison.