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Highlights
- Bitcoin typically dips alongside S&P 500 but averages a 189% gain within a year post-correction.
- USDC deposits surged on January 20, hinting at investor readiness despite broader market hesitation.
- Crypto market loses $120 billion in a day, with Bitcoin and Ethereum leading the plunge.
Bitwise CIO Matt Hougan has addressed the ongoing crypto market crash, providing insights into historical patterns and potential recovery trends.
His remarks come as Bitcoin, Ethereum, and other leading cryptocurrencies experience sharp declines, prompting widespread investor concern. Hougan’s analysis highlights both short-term market behavior and long-term recovery potential, offering a perspective grounded in historical data.
Crypto Market Crash: Bitcoin and Ethereum Lead Dip
The global crypto market suffered a decline, and Bitcoin, Ethereum, and other major cryptocurrencies suffered considerable losses.
Bitcoin traded below $100,000, down 2.95% in the last 24 hours, while Ethereum was down 5.11% to trade at $3,147.62. XRP price and Solana also followed the downward trend with losses of 2.72% and 6.03% respectively.
The total crypto market cap also dropped falling from $3.61 trillion to $3.49 trillion. This marked a 3% reduction in just 24 hours which sparked Bitwise CIO comments. This sell-off has been attributed to general fluctuations in the financial market, where even risky assets such as equities have been under pressure.
Bitwise CIO Matt Hougan Predict Bitcoin Recovery
Bitwise CIO Matt Hougan recalled the connection between large sell-offs in traditional markets and cryptocurrencies. In Hougan’s analysis, Bitcoin has usually declined in sync with the S&P 500 index during the significant market crashes.
“Historically, Bitcoin tends to fall during market pullbacks but tends to recover well in the long term,” Bitwise CIO Matt Hougan said. He cited a research which indicated that when the S&P 500 loses 2% in a single day, Bitcoin loses an average of 2.62%. However, post such events, the future profitability of Bitcoin has been impressive with returns averaging 189% in a year.
People always panic about correlations on days when the market drops and crypto sells off too. But history suggests: Short-term dip, long-term rip.
My colleague @singularity7x did a great study on this. Over the past decade, if you look at all the days SPX has fallen 2% or more,…
— Matt Hougan (@Matt_Hougan) January 27, 2025
The data indicate that gold, which is often considered as a hedge, behaves differently in these periods and increases by an average of 0.11% on such days. Hougan agreed with this but pointed out that over the longer term Bitcoin has always bounced back and provided higher returns.
Increased Stablecoin Activity Signals Mixed Sentiment
Concurrent with Bitwise CIO statements, data suggests that stablecoin deposits have been on the rise, especially USDC, which increased sharply on January 20. This happened at the same time with the inauguration of the former US President, Donald Trump, which attracted speculations of the policies that could favor cryptocurrencies in the US.
Nonetheless, while USDC has become more dominant, overall buying pressure, especially from American investors, has not picked up.
The Coinbase Premium fell into the negative territory, pointing to weak demand for Bitcoin in the US consumer market. This implies that, even as stablecoin trading signals preparedness for market entry, investors remain cautious given the prevailing conditions.
Experts Predict Extended Consolidation Before Recovery
Prominent analysts have issued their predictions about the future of Bitcoin and the rest of the cryptocurrency market, with many expecting an extended period of consolidation. According to the latest report from CryptoQuant, it appears that Bitcoin price is not going to bounce back anytime soon aligning with Robert Kiyosaki’s prediction.
QCP Capital also offered a cautious tone and said that the Bitcoin rally may need a confirmation of the strategic reserve or national stockpile. Presently, options markets show only mildly positive expectations up to March, and important events such as the FOMC meeting could contribute to further changes in volatility.
Nonetheless, Bitwise CIO Matt Hougan is still positive about the digital currency in the long run. “I can’t say that something very important has happened to the crypto world today,” he noted, meaning that today’s downturn is probably a short term market fluctuation.
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