Crypto is at the start of a three-year bull market, says this asset manager

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Hi, this is Frances Yue, a reporter at MarketWatch. Welcome to Distributed Ledger.

After a court ruling on XRP cryptocurrency XRPUSD +2.14% excited the digital asset industry last week, this week has been relatively quiet.

I spoke to Hunter Horsley, managing director of Bitwise Asset Management, a crypto-focused firm with over $1 billion in assets under management, about his expectations for the market in the next few years.

Another rally to come?

The crypto market should see at least a two-year bull market, Horsley told Distributed Ledger in an interview.

The history of crypto could be broken down into several four-year cycles, according to Horsley. Historically, bitcoin and the crypto space have been up for three years, then it has a bear market, down 60% to 70%, he said.

Bitcoin returns every four years. Bitwise asset management

Each bull market had a different catalyst, Horsley said. The inception of Bitcoin in 2009 led to the first crypto bull market that lasted until 2013, and the launch of ether in 2015 sparked a bull cycle that ended in 2018. Crypto prices were boosted by different blockchain applications from 2019 to 2021, Horsley said.

In 2022, as the Federal Reserve raised interest rates for more than a year, bitcoin and ether both fell by more than 60%.

This year is the first year of a new four-year cycle for crypto, and there is a setup for digital assets to rise, Horsley said. If history is any guide, the crypto has a bull market ahead of it for the next two to three years, he said.

Bitcoin has gained more than 80% so far this year to around $30,000, but is still down more than 50% from its 2021 all-time high, according to data from CoinDesk.

In this cycle, the crypto rally could be driven by the widespread adoption of bitcoin and other digital assets, Horsley noted.

Consumer-grade institutional counterparties, consumer use cases, and wider adoption where the number of decentralized app users grows from 5-10 million to 100 million, could all be bull market catalysts, Horsley said.

Admittedly, the crypto space is still relatively young, while past performance is not necessarily indicative of future results.

Any progress in regulatory clarity in the United States for crypto could also significantly benefit the space, Horsley said.

Over the past four or five years, the biggest barrier to crypto maturation and adoption has always been regulatory clarity. As US regulators step up their oversight of the industry, that means some projects and assets will be on the wrong side of the line. And there will be a price to pay for that. But the space as a whole will benefit.

Read: Crypto can become an integral part of investors’ portfolios once regulations are clear, says Franklin Templeton

Crypto in Dumbbell Wallets

According to Ben Weiss, Managing Director of CoinFlip, cryptocurrencies could be a good option for portfolios adopting barbell strategies in the current market environment.

The barbell strategy refers to investment concepts that reduce two baskets of assets, one being extremely safe, while the other holds speculative but potentially highly profitable assets.

While cryptocurrencies are highly volatile, bitcoin’s returns this year and over the past 10 years are well above those of most other major assets, Weiss noted. That makes digital assets and Treasuries, which are considered very safe and yield more than 5% now, a great combination in barbell wallets, Weiss said.

Crypto at a Glance

Bitcoin BTCUSD, +0.33% has lost 2.9% over the past seven days and was trading at around $29,728 on Thursday, according to data from CoinDesk. Ether ETHUSD, +0.24% fell 1.7% over the same period to around $1,885.

Essential readings

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