Welcome back to Distributed Ledger! In light of a recent court ruling regarding cryptocurrency XRP, the digital asset industry has been buzzing with excitement. To gain some insights into the market’s future, I had a conversation with Hunter Horsley, the CEO of Bitwise Asset Management. With over $1 billion in assets under management, Bitwise is a prominent crypto-focused firm. In this interview, we explore Horsley’s expectations for the market in the next few years.
A History of Crypto Cycles
Horsley breaks down the history of the crypto market into distinctive four-year cycles. Typically, there are three years of upward momentum followed by a bear market that sees a drawdown of 60% to 70%. Each bull market has its catalyst, with the first being the creation of Bitcoin in 2009. This led to the initial bull market, which persisted until 2013. Subsequently, the launch of Ethereum in 2015 triggered the next bull cycle, which ended in 2018. From 2019 to 2021, various applications of blockchain technology drove an increase in crypto prices.
A Promising Setup for the Future
In 2022, both Bitcoin and Ethereum experienced significant declines of over 60% as the Federal Reserve raised interest rates for more than a year. However, Horsley believes that we are now in the first year of a new four-year cycle for crypto, setting the stage for a potential rally. Drawing from historical patterns, he predicts a forthcoming bull market that may span two to three years.
Current State and Potential Catalysts
Though Bitcoin has already gained around 80% this year, reaching approximately $30,000, it remains more than 50% below its all-time high in 2021. In this cycle, Horsley envisions the rally being driven by the mainstream adoption of not just Bitcoin, but also other digital assets. He identifies institutional mainstream counterparties, consumer use cases, and wider adoption of decentralized applications as catalysts that could propel the market forward. Horsley specifically highlights the potential shift from a user base of five to ten million towards 100 million as a significant factor.
As we navigate the ever-evolving landscape of cryptocurrency, Horsley’s insights shed light on the possible future trajectory of the market. While the recent court ruling may have caused some turbulence, there is optimism in the air. With the potential for a two-year bull market on the horizon, fueled by increasing adoption and wider use cases, it’s an exciting time to be involved in the world of digital assets.
Embracing Crypto: A New Perspective on Investment Strategies
As the crypto space continues to evolve, it’s important to recognize that it is still a relatively young industry. Past performance may not always be an accurate indicator of future results. However, recent progress in regulatory clarity within the United States has the potential to significantly benefit the crypto space.
For years, the lack of regulatory clarity has hindered the maturation and adoption of cryptocurrencies. The increasing oversight by U.S. regulators now means that certain projects and assets may find themselves on the wrong side of the line, facing consequences. Nonetheless, the overall crypto space stands to gain from these regulatory advancements.
Read: Crypto can become a regular part of investors’ portfolios once regulations are clear, says Franklin Templeton
Crypto in Barbell Portfolios
In the current market environment, cryptocurrencies can be an attractive option for portfolios that follow a barbell strategy. This investment concept involves dividing assets into two baskets. One basket consists of safe and predictable investments, while the other holds speculative yet potentially lucrative assets.
While cryptocurrencies are notorious for their volatility, bitcoin has demonstrated exceptional returns this year and over the past decade. This makes digital assets an ideal pairing with Treasury bonds, which are considered safe and currently offer a yield over 5%. The combination of these assets in barbell portfolios can be highly compelling.
Crypto in a Snap
Bitcoin (BTCUSD) experienced a 2.9% decrease in value over the past seven days and was trading around $29,728 on Thursday, as reported by CoinDesk. Ether (ETHUSD) also dropped by 1.7% during the same period, reaching approximately $1,885.