In a recent note to investors published on January 29, 2025, Matt Hougan, the Chief Investment Officer at Bitwise, raised doubts about the potential conclusion of Bitcoin’s historical four-year market cycle. His arguments are anchored in significant changes in US policy towards cryptocurrencies, underscored by a recent executive directive from President Trump aimed at reinforcing the nation’s role in digital assets.
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Hougan’s note commences with an outline of what is referred to as the “four-year cycle,” in which Bitcoin has generally experienced three years of considerable gains, followed by a downturn. He clarifies that this cycle reflects broader boom-bust dynamics seen in traditional markets: “The four-year cycle in crypto is influenced by the same factors that govern broader cycles of growth and decline in the general economy,” he stated.
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These growth phases, propelled by technological advancements or heightened investor enthusiasm, often culminate in over-leverage, at times leading to fraud or strain across the industry. Ultimately, something “breaks” triggering a market correction—such as the 2014 Mt. Gox failure or the 2018 SEC crackdown on ICOs.
Hougan describes the ongoing crypto rally as the “Mainstream Cycle,” which emerged from the considerable deleveraging of 2022 caused by collapses like FTX, Three Arrows Capital, and others. According to his observations, the recent bullish phase began in March 2023 when Grayscale convincingly “won the opening argument” in its legal dispute with the SEC regarding a spot Bitcoin ETF.
“Bitcoin was valued at $22,218 when Grayscale presented its argument. Today, it trades at $102,674. The mainstream phase has commenced.” Following the approval and launch of a spot Bitcoin ETF in January 2024, investor inflows surged, further solidifying Bitcoin’s acceptance among retail and institutional investors alike.
The most notable aspect of Hougan’s examination is his analysis of the executive order issued by President Trump last week. The order not only classified the development of the US digital asset ecosystem as a “national priority” but also initiated a clearer regulatory framework for cryptocurrencies.
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“Last week, President Trump signed an executive order that was incredibly bullish for the sector, making me ponder,” Hougan remarked, noting how the document lays out plans for a possible “national crypto reserve” and urges banks and financial institutions to enhance their adoption of digital assets.
Alongside a more favorable attitude from the SEC, Hougan believes these initiatives could unleash trillions in new investments in the coming years, vastly exceeding the hundreds of billions expected from an ETF-driven market.
Hougan’s assessment acknowledges that Bitcoin has historically adhered to its tendency of experiencing pullbacks after substantial bull runs. However, with major Wall Street players and major banks ready to integrate crypto at every level, the likelihood of the market encountering the usual downturn in 2026 is increasing: “If the impacts are not felt until next year, will we truly see a new ‘crypto winter’ in 2026?” he questioned. “If BlackRock CEO Larry Fink is advocating for a $700k Bitcoin, can we genuinely expect a 70% decline?”
While he admits that leverage continues to escalate within the system—citing a rise in Bitcoin-backed lending schemes, derivatives, and leveraged exchange-traded products—he also points out an increasingly varied group of crypto investors. He argues that this variety could mitigate severe downturns. “My prediction is that we haven’t entirely overcome the four-year cycle. Leverage will accumulate as the bull market develops. Excess will emerge. Unscrupulous participants will show up. And at some juncture, a sharp pullback could occur when the market becomes overly inflated,” Hougan contended.
Nevertheless, Hougan anticipates that any forthcoming market correction will be “shorter and less severe” than previous cycles. Given that the industry’s infrastructure is now considerably more solid and mainstream participants perceive crypto as a legitimate asset class, a dramatic bear market akin to those of 2014 or 2018 seems less probable. “For now, it’s full steam ahead,” he concluded. “The crypto train is departing the station.”
At the time of press, BTC was valued at $105,275.
Featured image created with DALL.E, chart from TradingView.com