Source: New Era Finance Podcast
Broadcast Time: March 10
Compiled by: Felix, PANews
Matt Hougan, Chief Investment Officer at Bitwise, manages $15 billion in crypto assets. In an appearance on the New Era Finance Podcast, Matt Hougan provided an in-depth analysis of the current market's true state, suggesting the market peak will be in December 2024, not when Bitcoin hits a new high of $125,000; the process of emerging from this bear market will be slower and more grueling than previous ones; the next cycle will be a new bull market with lower volatility and a slow, grinding ascent. Additionally, Matt Hougan believes Ethereum is undervalued and proposed the 'Big Four' of cryptocurrencies. Below are the highlights of the conversation.
Bitcoin Plunge Due to Long Selling Pressure, Not Derivatives
Host: What was the reason for Bitcoin's sharp drop in recent months? Was it caused by so-called 'paper Bitcoin (derivatives)'?
Matt Hougan: I strongly disagree with that notion. The Bitcoin price crash was mainly because a large number of holders sold their Bitcoin in advance to prepare for the 'four-year cycle,' or sold the upside potential using covered call strategies. The reason on-chain data doesn't show massive selling is precisely because many trades were executed through options strategies. Although this is categorized as a 'paper' factor, its essence is that longs decided to sell, leading to the price plunge.
Host: But many Bitcoin maximalists strongly oppose 'paper Bitcoin,' believing it interferes with the free market.
Matt Hougan: I understand the concern, but the reality is that derivatives mostly translate into physical demand eventually. For example, if someone goes long in the futures market, the counterparty, to hedge, usually must buy an equivalent amount of physical Bitcoin on the other end. Of course, in extreme cases, like the crash on October 10th, derivatives did amplify the volatility through 'cascading liquidations,' and this dynamic can worsen the situation short-term. But in the long run, it ultimately settles back to physical. The core reason Bitcoin fell nearly 50% is still because people sold their Bitcoin.
Bitcoin Decoupled from Gold but Bullish Long-Term
Host: From your perspective, how much impact do you think this rally in gold prices has had on Bitcoin in the short term?
Matt Hougan: It has had a significant impact, mainly in two aspects. First, attention shifted to gold and AI. Second, gold strengthening while Bitcoin weakened created a 'narrative break.' Institutional investors ask: 'If Bitcoin is digital gold, why is it falling while gold is rising?'
Explaining this phenomenon takes time. The fact is: since the US confiscated Russia's foreign reserves in 2022, global central banks' gold purchases surged from 400 tons to over 1000 tons. But central banks haven't started buying Bitcoin yet. Bitcoin happens to be in the traditional corrective year of its four-year cycle, coinciding with the year central banks are frantically buying gold, leading to their divergent performances.
But this doesn't mean Bitcoin is failing. The world is still digitizing, young people still trust digital assets more; and when the gold ETF launched in 2004, gold's market cap was only $2.5 trillion, now it's over $30 trillion. This means the store-of-value market is expanding rapidly, and Bitcoin's future market share will increase accordingly. So from a growth potential perspective, Bitcoin is more attractive than gold right now.
Retail Ammo Dried Up, Institutional Funds Drive Bitcoin's Slow Bull
Host: Although the four-year cycle theory suggests Bitcoin peaks at $125,000, why do you think it actually peaked in December 2024?
Matt Hougan: The reason is there are two separate markets now. One is the institutional market, building allocations from scratch; the other is traditional crypto investors following the four-year cycle. If you look at the data, you'll see that starting around December 2024, institutional investors are buying Bitcoin heavily through ETFs, while long-term holders and retail are selling heavily. Look at L1 altcoins like Avalanche, Sui, Aptos without ETF support, they entered a 'crypto winter' from January 1, 2025, falling up to 70%. Therefore, crypto asset holders are now in the bottoming area, whether measured by RSI or the 'Fear and Greed Index,' both at historical lows. So I really don't think the turning point was in October. I think the data suggests it started around January 1st, or when Trump took office, around that period. Except for ETFs, everything else is falling relentlessly.
Host: So the question is, are we really seeing a bull market? Seriously, the only reason we're seeing Bitcoin's price rise is because of ETFs, and you guys attracting more institutional adoption of Bitcoin, otherwise we wouldn't see new all-time highs.
Matt Hougan: That's true, and it's something we should ponder. This might mean the retail money that drove past booms has been squeezed dry. They're out of money, after FTX, after the Meme craze, they don't have more funds. This emergence from the bear market will be slower and more grueling than previous ones. Because retail funds might be depleted, while new institutional money is slow and steady. It might be a bit boring. I think it will be a great bull market, but compared to previous ones, it might be a bit bland.
Host: Maybe the trajectory will be more like gold, gradually moving towards a peak over the next 5 years.
Matt Hougan: Who knows? The institutional market is just beginning. Although figures like Larry Fink (BlackRock CEO), Kevin Warsh (potential Fed Chair candidate) are publicly supporting Bitcoin, institutional money moves in slowly, investing just a bit each quarter. This is completely different from the past 'hot money' fast-in-fast-out state. My basic assumption is: we are entering a new bull market with lower volatility and a slow, grinding ascent, especially for Bitcoin.
Host: Compared to when ETFs launched, how are institutions feeling now? Facing current market crashes or events like 'October 10th,' is there some negative sentiment, or still sustained positive sentiment?
Matt Hougan: Yes, they still have sustained positive sentiment, with only one or two caveats. Regarding institutions, they haven't completed their allocations yet. And there's the question 'why is gold rising but Bitcoin isn't.' But the answer to that is very simple, so it's not a real objection. Quantum computing is a real concern that has emerged.
Bitcoin Adoption Requires Long-Term Education, Stablecoins Are a Lifeline
Host: Although Bitcoin's fundamentals are stronger than ever; currently, public perception of Bitcoin is more negative than ever. How do we reverse this narrative and make people understand now is the time to really pay attention to Bitcoin?
Matt Hougan: I think the reversal is happening. The reason is, there are many highly respected people constantly talking about Bitcoin now. You hear BlackRock CEO Larry Fink talk about Bitcoin. You hear potential incoming Fed Chair Kevin Warsh say, 'If you're under 40, Bitcoin is your gold.' You hear Ray Dalio say to hold 15% in gold and Bitcoin. These are thought leaders gradually changing their stance on Bitcoin. I think for the general public, it's a continuous education process, letting them understand how bad the fiat system is, and all the wonderful things you gain through Bitcoin. This takes time. For the world's fund managers, Bitcoin's reputation now is better than at any time since I've been full-time in this space. I've been in crypto for eight years, and it's in a better position than ever.
Host: I also feel the situation seems completely flipped. It used to be retail first, now we see institutions first, retail follows. How much impact do you think stablecoins will have in driving Bitcoin adoption?
Matt Hougan: The impact is absolutely huge. Whether people realize it or not, the fact is everyone will interact with stablecoins and tokenized assets in the coming years. It will become as natural as using WhatsApp. The adoption of tokenization and stablecoins will be the same. This is important because it brings people into the digital asset ecosystem; they are just 'one click away' from Bitcoin, and the concept of digital wealth becomes less foreign. If you could snap your fingers and give everyone in the world a crypto wallet, do you think that would be good or bad for Bitcoin? Obviously good, because it brings people closer to owning Bitcoin.
For the billions of unbanked people in the world, stablecoins are a lifeline. Payment giants like Stripe are fully entering this space. More importantly, Meta plans to launch stablecoin access on Facebook, WhatsApp, and Instagram, which will expose 3 billion people directly to digital wealth. Even if only 10% eventually buy Bitcoin, it will be a huge incremental market.
Host: Let's talk politics and regulation. After Trump took office, the anticipated 'Bitcoin Strategic Reserve' seems to have no movement?
Matt Hougan: People might be a bit impatient. Government moves much slower than retail. Retail decides in a minute, a central bank might take a decade. But there is good news: SEC leadership changed, no longer suing the top 12 crypto companies; the GENIUS Act ended discriminatory policies against crypto businesses. The core now is the CLARITY Act in Congress. If it passes, big Wall Street banks will truly enter on a large scale.
No Need to Worry About Quantum Attacks, Bitcoin Can Benefit from AI Boom
Host: What's your view on the threat of quantum computing?
Matt Hougan: Quantum computing is an 'institutional-grade FUD (Fear, Uncertainty, Doubt)'. While it is a real risk, Bitcoin can be upgraded. If quantum computing could easily break Bitcoin, then global nuclear codes and banking systems would have collapsed long ago; Bitcoin would be the least of your worries.
Host: Regarding AI, many say miners are shifting computing power from Bitcoin mining to AI.
Matt Hougan: This is an extreme phenomenon. If using assets for AI yields better profits, miners will indeed pursue it, but I'm not worried. If enough people switch to AI, Bitcoin mining difficulty drops, costs fall and profit margins rise. Over the past 16 years, facing countless threats like national crackdowns and computing power exodus, the system has always self-corrected economically. It will be the same for the next 160 years.
Host: What overall impact will AI have on the economy? Will it cause massive deflation?
Matt Hougan: No one knows for sure. But either way, the benefits ultimately flow back to Bitcoin. If AI just improves production efficiency and the economy performs well, it's good for risk assets like Bitcoin. If an extreme doomsday scenario happens: AI replaces all jobs, causing massive deflation, people have nothing to do and don't consume. Then the only way governments respond to deflation is by printing money frantically and injecting it into the ecosystem, causing asset price inflation, which is extremely favorable for digitally scarce Bitcoin. But my basic assumption is that AI will lead to fundamental business disruption and reorganization, reducing costs and increasing efficiency, making the world wealthier, which is also good for cryptocurrency.
Multiple Tailwinds Drive Crypto Recovery, Agentic Finance is Growth Flywheel
Host: When talking about the crypto winter, what narrative will pull us out of this trough?
Matt Hougan: It's never just one thing. I think the rise of 'Agentic Finance', the growth of institutional DeFi (e.g., lending over a trillion dollars), the four-year cycle, more dovish-than-expected rate cuts, the fading of quantum risk, and the growth of stablecoins and tokenization, the approval of the Clarity Act, and other factors combined. So many positive messages together will pull us out of the bear market.
Host: Why will Agentic Finance impact tokens?
Matt Hougan: Top payment giant Stripe pointed out in their annual letter that Agentic Finance will account for the majority of all internet transactions, and all this will happen on blockchain and stablecoins. AI agents won't open accounts at JPMorgan Chase; they will only open stablecoin wallets. When they represent the vast majority of economic activity, it's a massive growth flywheel.
Ethereum Undervalued, The 'Big Four' of Cryptocurrencies
Host: So projects like Near, building quality technology in the ecosystem, fit well. Also, is the market extremely undervaluing Ethereum right now?
Matt Hougan: Yes, the market is currently undervaluing both dominant players, Ethereum and Solana. I am very bullish on Ethereum. Vitalik is back in the community as a major force, and there's a faster technology delivery roadmap. As the leader in stablecoins and tokenization, it is winning most of the institutional mandates.
Solana also benefits from its position as a challenger in the same market. When talking to institutions, in the past they only focused on Bitcoin, now the interest allocation is roughly fifty-fifty (half Bitcoin, half stablecoins and tokenization, i.e., ETH and SOL).
Host: I've been a supporter of Chainlink for nine years. Many only look at the token price and ignore the complexity of its underlying technology. Why are you so bullish on it?
Matt Hougan: I think the 'Big Four' of cryptocurrencies are: BTC, ETH, SOL, and LINK. Institutional investors might not even know what an 'oracle' is; they are missing all of this.
My logic is simple: blockchains will increasingly interact with the real world, and 75% of the market share is occupied by Chainlink, which is responsible for connecting data, auditing, cross-chain bridging. If it were a traditional software company, it would absolutely be one of the hottest tech stocks today. Chainlink isn't hot only because token economics seem complex to the average person. But once you understand the business core that 'connecting to the real world requires bridges,' its vast and dominant value becomes obvious.
Advice for Young Investors
Host: If a 25-year-old wants to enter the market now, what advice would you give them?
Matt Hougan: First, buy some cryptocurrency, but not Meme coins. A 25-year-old has a long time horizon. Put most of the allocation into a diversified basket of crypto index products and hold long-term. At the same time, spend time deeply understanding a few specific assets and invest in them. Whether the investment brings huge profits or not, the process itself yields enormous cognitive returns over time. The key is to have 'skin in the game.'
Host: How do you maintain sanity amidst these market fluctuations full of external noise?
Matt Hougan: My investment time horizon is measured in 'decades.' If you ask the most pessimistic person in crypto right now, they will still tell you: in ten years, Bitcoin will be bigger, stablecoins will be huge, tokenization will be huge. So the current fluctuations are just noise.
I've been fortunate to experience two crypto winters. The first experience was the hardest, but once you truly understand the long-term drivers of cryptocurrency and see they still exist, the fluctuations no longer bother you. Keep your eyes on the 'prize ten years from now,' not the prize ten minutes from now.
Related reading: Dialogue with Dalio: AI is Devouring Everything, Gold is Still the Preferred Choice, Bitcoin Still Has a Long Way to Go
