Bitcoin retail investor at ‘max desperation,’ says Bitwise CIO, but crypto winter not coming

Bitcoin‘s fall below $100,000, its lowest level since June, has sparked fears that the worst is yet to come, another so-called crypto winter (a prolonged bear market in cryptocurrencies) that the market wrestles with every time digital currencies sell off hard in a short period of time.

But Bitwise chief investment officer Matt Hougan says that while the retail investor is in “max desperation” mode, he sees that as a reason to bet that a bottoming in crypto prices may materialize sooner rather than later. With Wall Street institutional investor and financial advisor support for bitcoin, and growth in crypto ETFs, he is even willing to go out on a limb and say that amid the heavy selling a new record high for bitcoin before the end of the year isn’t unreasonable.

“It’s almost a tale of two markets,” he said on CNBC’s “Crypto World” on Tuesday. “Crypto retail is in max desperation. We’ve seen leverage blowouts. … the market for sort of crypto native retail is just more depressed than I’ve ever seen it,” he said.

But Hougan believes more crypto trading will continue to shift into an institutionally driven market, “and interestingly, that market is still bullish,” he said.

“When I go out and speak to institutions or financial advisors, they’re still excited to allocate to an asset class that if you pan back and look over the course of a year, is still delivering very strong returns. So my view of the market is we have to get through this retail flush out. We have to hit bottom from a sentiment perspective. I think we’re very close to that,” he added.

The boom in crypto exchange-traded fund launches, including iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) and Grayscale Bitcoin Trust (GBTC) is changing the investor composition, and while week-to-week flows into these ETFs have slowed since the second quarter of the year, “we continue to see strong inflows into bitcoin,” Hougan said.

He expects more support to materialize for crypto into the end of the year among financial advisors who will look past the current dip and see an “opportunity to show their clients that they understand where this market is going.”

Bitwise’s own Solana staking ETF (BSOL) brought in over $400 million in flows in its first week, he said, though it has sold off sharply in the recent crypto downturn, with a near 20% loss since its Oct. 28 debut.

Last week, Strategy CEO Michael Saylor told CNBC he thinks bitcoin could reach $150,000 by the end of the year, one among several recent bullish calls on crypto that for now at least look ill-timed. But Hougan said he doesn’t think it’s an outlandish call even as bitcoin hovers near a six-month low.

“I think bitcoin could easily end the year at new all-time highs,” Hougan said. “So that means getting north of about $125,000 up to $130,000. Whether we’ll get all the way to $150,000, we’ll have to see.”

“I do think the sellers are nearing exhaustion and the buyers are still relatively hungry. And when those two things sort of cross paths, again, I think we could end the year close to or at new all-time highs. And if we’re lucky, we’ll get to Saylor’s target as well,” he said.

Institutional investors, whom Hougan described as “more maybe even keeled about what’s going on at a fundamental level in crypto” will start to drive the market forward. “But we do have to finish this washout of retail sentiment … I think we’re closer to the end of that than the beginning, but … there always could be a little bit more downside.”