Hi, this is Frances Yue, reporter at MarketWatch. Welcome back to Distributed Ledger.
After a court ruling about cryptocurrency XRP
XRPUSD,
excited the digital asset industry last week, this week has been relatively quiet.
I spoke to Hunter Horsley, chief executive at Bitwise Asset Management, a crypto-focused firm with over $1 billion assets under management, about his expectations for the market in the next few years.
Further rally ahead?
The crypto market is likely to 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 are up for three years, and then it has a bear market, seeing a drawdown of usually 60% to 70%,” he said.
Each bull market had a different catalyst, Horsley said. Bitcoin’s creation in 2009 led to crypto’s first bull market which lasted through 2013, and ether’s launch in 2015 triggered a bull cycle that ended in 2018. Crypto prices received a boost from different applications of blockchains from 2019 to 2021, said Horsley.
In 2022, as the Federal Reserve raised interest rates for more than a year, bitcoin and ether both declined over 60%.
This year is the first year of a new four-year cycle for crypto, and there is a setup for digital assets to move higher, said Horsley. If history is any guide, crypto has a bull market ahead of it for the next two to three years, he said.
Bitcoin gained over 80% so far this year to around $30,000, but is still down more than 50% from its all-time high in 2021, according to CoinDesk data.
In this cycle, crypto’s rally could be driven by mainstream adoption of bitcoin and other digital assets, noted Horsley.
“Institutional mainstream counterparties, consumer use cases, and wider adoption where the number of users of decentralized applications goes from the five to 10 million range towards 100 million, could all be catalysts of the bull market,” said Horsley.
To be sure, the crypto space is still relatively young, while past performance is not necessarily indicative of future results.
Any progress in the regulatory clarity in the U.S. for crypto could also significantly benefit the space, Horsley said.
“For the last four or five years, the biggest impediment to crypto’s maturation and adoption has always been regulatory clarity.” As U.S. regulators increase their oversight of the industry, “it means that some projects and assets will be on the wrong side of the line. And there’ll be a price to pay for that. But the space as a whole will benefit.”
Read: Crypto can become regular part of investors’ portfolios once regulations are clear, says Franklin Templeton
Crypto in barbell portfolios
Cryptocurrencies could be a good option for portfolios that adopt a barbell strategies in the current market environment, according to Ben Weiss, chief executive at CoinFlip.
The barbell strategy refers to investment concepts that pare two baskets of assets, with one of them being extremely safe, while the other one holds speculative but potentially highly rewarding 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, noted Weiss. That makes digital assets and Treasuries, which are considered very safe and yield over 5% now, a great combination in barbell portfolios, Weiss said.
Crypto in a snap
Bitcoin
BTCUSD,
lost 2.9% in the past seven days and was trading at around $29,728 on Thursday, according to CoinDesk data. Ether
ETHUSD,
dropped 1.7% during the same period to around $1,885.
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