Bitwise CIO Matt Hougan calls crypto a 'contrarian bet'

Bitwise Chief Investment Officer Matt Hougan said crypto is increasingly a "contrarian bet" as the digital asset market posts losses when stacked up against a growing stock market and enticing opportunities like "AI stocks, robotics companies and SpaceX." 

"Who needs crypto when the Nasdaq-100 is up 43% year-over-year?" Hougan wrote in a weekly memo on Tuesday. "With AI sucking all the oxygen out of the room, crypto is being forced to go through a painful metamorphosis: from momentum trade to contrarian bet."

This isn’t to say crypto is "going away," but that the investment thesis around crypto assets has shifted. These investments now require "a long-term orientation, and a focus on fundamentals," and are attracting a different "kind of investor."

Hougan also noted that the current 'crypto winter' is different from previous cycles in that investors have not been rotating into supposedly safer assets like Bitcoin, but instead into smaller assets with "credible fundamentals."

"Hyperliquid is up 72% in a month. BNB is up 17%. Zcash is up 50%. Stellar is up 44%. None of them are macro names. All of them have idiosyncratic stories that the market is rewarding," Hougan said. "This is how the contrarian bet I mentioned above is playing out. When crypto stops being a momentum trade, fundamentals start to matter."

Perhaps this will change when there’s a little more clarity on the Clarity Act, the crypto market structure legislation that has been winding its way through the legal system for months. Analysts at Galaxy currently give the law a 50% chance of passing, in line with betters on Polymarket, which is signaling 55% odds. 

The chance of a legislative setback is limiting institutional investments in crypto. "For that reason, I don’t think large-cap crypto assets will see a sustainable rally until we put this uncertainty in the rearview mirror," Hougan said.

"Contrarian bets are won by looking in the places no one is looking and acting in ways that may feel awkward," he added.