Bitwise Chief Investment Officer Matt Hougan stated that the cryptocurrency market is no longer the primary focus for investors, having shifted into a contrarian bet. Hougan attributed the weakness to fading momentum, competition from AI stocks, and regulatory uncertainty surrounding the proposed Clarity Act. While he suggested the market downturn may be nearing its end, other analysts have warned of a prolonged bear phase extending into 2027.
Matt Hougan, Chief Investment Officer at Bitwise, declared that the “brutal” cryptocurrency market is no longer the “belle of the ball.” He said digital assets are increasingly becoming a contrarian investment as investor enthusiasm wanes.
Bitcoin is down 24% this year, while Ethereum has fallen 36%. Spot trading volumes have dropped to their lowest levels in years alongside exchange-traded fund outflows.
Hougan attributed part of the weakness to investors’ growing preference for artificial intelligence-related opportunities. He noted the Nasdaq-100 has gained 43% year-over-year.
The dominance of the AI trade has forced crypto to evolve from a momentum investment into a contrarian bet. Hougan said this pivot explains why investors are paying greater attention to revenues and projects with clear fundamentals.
The second factor is uncertainty surrounding the proposed Clarity Act, a U.S. market structure bill. Prediction market Polymarket currently assigns only a 55% probability it will be approved before year-end.
Hougan argued that large-cap crypto assets are unlikely to experience a sustainable rally until this uncertainty is resolved. He added that the resolution itself is more important than the outcome for the market to adapt.
Hougan observed the current downturn differs from previous bear markets as investors rotate toward smaller cryptocurrencies. He pointed to one-month gains for Hyperliquid, Zcash, and Stellar despite declines in larger assets.
This rotation demonstrates that fundamentals are becoming more important. Hougan suggested it may indicate the market is “closer to the end of this winter than the beginning,” while acknowledging coming weeks could remain painful.
Not all analysts share this view, however. Analyst Doctor Profit has repeatedly warned the worst could still lie ahead, expecting Bitcoin to bottom between $40,000 and $50,000.
CryptoQuant CEO Ki Young Ju, on the other hand, cautioned that the current bear market could extend into early 2027.
