Presented in a recent investor memo dated January 29, 2025, Matt Hougan, Bitwise’s Chief Investment Officer, raised doubts about the long-standing four-year market cycle of Bitcoin possibly nearing its conclusion. This speculation stemmed from significant shifts in US cryptocurrency policy, highlighted by a recent executive directive from President Trump aiming to solidify the nation’s dominance in digital assets.
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Hougan’s note elaborates on the “four-year cycle,” a phenomenon where Bitcoin tends to experience three years of notable growth followed by a decline. This cyclic pattern reflects broader boom-bust trends observed in traditional financial markets: “The crypto four-year cycle mirrors the cyclical nature seen in the general economy,” he articulated.
These expansions, often sparked by technological advancements or heightened investor enthusiasm, tend to lead to overextension, occasionally resulting in fraudulent activities or industry-wide tension. Eventually, a breaking point is reached that heralds a market correction – examples include the Mt. Gox collapse in 2014 or the SEC’s crackdown on ICOs in 2018.
Hougan characterizes the current surge in cryptocurrency as the “Mainstream Cycle,” emerging from the substantial deleveraging witnessed in 2022 due to incidents involving FTX, Three Arrows Capital, and others. According to his analysis, the latest bullish phase took flight in March 2023 when Grayscale convincingly argued against the SEC in a legal battle revolving around a spot Bitcoin ETF.
“Bitcoin was priced at $22,218 when Grayscale made its case. Presently, it sits at $102,674. The mainstream era has dawned.” Following the approval and launch of a spot Bitcoin ETF in January 2024, a surge in investor capital poured in, solidifying Bitcoin’s embrace by both individual and institutional investors.
One of the noteworthy aspects of Hougan’s assessment centers on President Trump’s recent executive order. The order not only designates the development of the US digital asset ecosystem as a “national priority” but also outlines a clearer regulatory pathway for cryptocurrencies.
“Last week’s executive order from President Trump was overwhelmingly bullish for the sector to such an extent that it prompts me to reevaluate,” Hougan remarked, highlighting the order’s initiative for a potential “national crypto stockpile” and the encouragement directed at banks and financial institutions to hasten their adoption of digital assets.
When coupled with the more favorable stance of the SEC towards cryptocurrencies, Hougan predicts that these steps could unlock trillions of dollars in fresh investments over the forthcoming years, surpassing the anticipated hundreds of billions generated by an ETF-driven market.
While Hougan concedes that Bitcoin historically experiences corrective phases post-significant surges, the increasing integration of cryptocurrencies in large financial institutions and Wall Street entities hints at the possible avoidance of the conventional 2026 market downturn: “Do we really anticipate a new ‘crypto winter’ in 2026, especially if BlackRock CEO Larry Fink is touting a $700k Bitcoin with a subsequent 70% pullback?”
Despite the increasing leverage in the system, indicated by the rise in Bitcoin-backed lending platforms, derivatives, and leveraged exchange-traded products, Hougan emphasizes the growing diversity among crypto investors. This diversified investment landscape, he argues, could mitigate severe downturns. “I suspect that we have yet to completely surpass the four-year cycle. Leverage will accumulate as the bull market progresses, excesses will manifest, and there may be a sharp correction once the market becomes overheated,” Hougan contended.
Nevertheless, Hougan anticipates that any future market correction will likely be “shorter and less severe” compared to past cycles. With the industry’s infrastructure now more resilient and mainstream participants recognizing crypto as a legitimate asset class, the probability of a dramatic bear market akin to those in 2014 or 2018 appears diminished. “For now, momentum is firmly in place,” concluded Hougan. “The crypto industry is on an upward trajectory.”
As of the latest update, BTC was trading at $105,275.
