Bitwise CIO Explains Why He Does Not See Latest Crypto Crash as Anything More than a ‘Hiccup’
2024-12-19
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Late Wednesday (U.S. hours), Matt Hougan, the Chief Investment Officer (CIO) at Bitwise Asset Management, took to the social media platform X to comment on the Fed’s announcement and its impact on the crypto market.
On Wednesday, the Fed announced the decision of the Dec. 17-18 meeting of its Federal Open Market Committee (FOMC). According to the Fed’s FOMC Statement, although progress has been made on cutting inflation, it still remains higher than what they would like, which is “2 percent over the longer run” (they hope to get there by 2027). Anyway, to achieve their inflation target as well as meet their goal of maxium employment, the FOMC decided to lower the target range for the federal funds rate by 25 basis points (bps), thereby bringing it to 4-1/4 to 4-1/2 percent.
More importantly, the dot plot the Fed released yesterday revealed that the Fed governors now anticipate only two rate cuts in 2025. This is a significant change from September’s projections, where the dot plot suggested four cuts for the same year.
Although the 25bps rate cut was widely anticipated by both the U.S. stock market and the crypto markets, the Fed’s signals for fewer rate cuts in 2025 shook investor confidence, resulting in broad declines across U.S. stock indices and cryptocurrencies.
Hougan started by pointing out that higher rates are bad news for risk assets such as crypto and stocks, ans mentioned that the impact on BTC was to fall from around $106,000 early in the day to below $99,000 near the end of the day.
He then went on to say that such a sharp pullback in the crypto market led to approximately $600 million in levered crypto positions getting liquidated, “exacerbating the pullback.”
However, Hougan does not seem too dismayed by yesterday’s price action in the crypto market, believing this to be a “hiccup” rather than a “reversal.”
His reasons for still being very bullish on crypto?
The Bitwise CIO is optimistic about the incoming U.S. administration’s pro-crypto stance, the increasing institutional adoption of crypto, the increasing flows into BTC ansd ETHER spot ETFs, BTC purchases at the governmental and corporate levels, and breakthroughts we are seeing in blockchain technology.
He concluded by saying:
“Crypto’s in a multi-year bull market. 50bps of projected rate cuts won’t change that.“
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