Bitwise Asset Management CIO Matt Hougan argued on Thursday that markets are experiencing a macro-driven risk repricing of all risk assets, including bitcoin, which introduces “significant volatility” in the short term.
Bitwise Asset Management CIO Matt Hougan warns volatility in the crypto market will stick around for the next few months.
Speaking on “Varney & Co.” he warned that volatility will stick around for the next three to six months, but noted that he believes “the long-term outlook for bitcoin is very strong.”
|COINS||COINBASE GLOBAL INC.||54.19||+0.47||+0.87%|
|BITQ||EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E||7.55||-0.21||-2.71%|
Hougan provided the analysis as bitcoin plunged to the $25,000 level, then bounced back over $30,000 on Thursday, according to CoinDesk. As of Thursday afternoon, the crypto was trading around $29,000, down from its all-time high of over $68,000 reached in November 2021.
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Bitcoin is down more than 36% year-to-date.
Bitcoin and other cryptocurrencies have had some rough weeks in anticipation of and following the half-point interest rate hike by the Federal Reserve. It was the second of several anticipated increases this year as the central bank seeks to combat soaring inflation, which is at a high not seen in four decades.
This past year, tighter monetary policy has impacted both stocks and cryptocurrencies.
|I: DJI||DOW JONES AVERAGES||31415.2||-418.91||-1.32%|
|I:COMP||NASDAQ COMPOSITE INDEX||11199.263635||-164.97||-1.45%|
The tech-heavy NASDAQ fell 1.5% last week, and has lost about 28% year to date, hurt by the potential of persistent inflation, which is forcing the Fed to raise rates despite slowing growth.
Adding to more fears of volatility in the crypto market was the decoupling of the TerraUSD, a stablecoin whose value was tied to $1, the Wall Street Journal reported on Thursday.
“Long-term, cleaning up risks like that, regulating the stablecoin market, will be good for crypto, but over the short-term, it introduces significant volatility and if I’m being honest, I think that volatility could continue for a period ,” Hougan said on Thursday.
Concerns over inflation, which remains near 40-year highs, according to the data for April released on Wednesday, is also contributing to the turbulence. The expectation now is that the Fed will take aggressive action to try and curb the price hikes, which has reduced investor appetite to hold assets perceived as higher risk.
When asked if the lower prices present a buying opportunity, Hougan said that “for long-term oriented investors, this is an interesting time to be building a position.”
“I think the long-term outlook for bitcoin is very strong,” he stressed, noting that over the next few months, investors should expect more volatility “so it depends on whether you’re a short-term trader trying to time the bottom … or a long-term investor.”
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I have noted that trying to time the bottom is “risky.”
“I think the long-term fundamentals are stronger than they’ve ever been,” he went on to argue.
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