Matt Hougan says regulatory uncertainty around the Clarity Act is keeping investors sidelined while fundamentals gain importance.
Bitwise CIO Matt Hougan said crypto is becoming a contrarian bet as the market struggles with weak performance, ETF outflows, low spot volumes, and growing competition from AI stocks.
In his latest weekly memo, Hougan said Bitcoin is down 21% this year, while Ethereum, Solana, and XRP have fallen 33%, 37%, and 31%, respectively. He said the market has lost momentum as investors rotate toward AI stocks, robotics companies, and private market names such as SpaceX.
Hougan said the shift is forcing crypto to move from a momentum driven market into a contrarian trade. That change, he said, is making investors more focused on revenue, fundamentals, and protocols with clearer business models, such as Hyperliquid.
Crypto is not disappearing, Hougan said. Instead, he argued that the market is changing the type of projects and investors it rewards, with fundamentals replacing broader speculative momentum.
He also pointed to the Clarity Act as a major source of uncertainty for crypto markets. The bill is aimed at creating a market structure framework for digital assets, but Hougan said its path through Congress remains far from certain.
Hougan said Polymarket currently places the odds of approval by year end at 55%, while several Washington insiders he spoke with gave lower estimates, ranging from 5% to 30%. He said that uncertainty is making it difficult for institutional investors to allocate to crypto while AI stocks continue to hit new highs.
Large cap crypto assets are unlikely to see a sustainable rally until that uncertainty clears, Hougan said. He argued that crypto could survive if the Clarity Act fails and rally if it passes, but that the market cannot thrive while the outcome remains unresolved.
Hougan also said this downturn looks different from previous crypto winters. In earlier bear markets, investors typically rotated into Bitcoin as a safer asset. This time, he said, capital is moving toward smaller assets with stronger individual stories.
He cited Hyperliquid, BNB, Zcash, and Stellar as examples of tokens that have outperformed over the past month while Bitcoin, Ethereum, and Solana have struggled. Hougan said the divergence shows that investors are rewarding fundamentals and idiosyncratic growth instead of simply buying the largest crypto assets.
Hougan said the next few weeks could remain difficult as crypto faces continued regulatory uncertainty and competition from AI related market narratives, including SpaceX’s planned public listing and Anthropic’s confidential IPO filing.
Still, he said the emergence of green spots in the market suggests crypto may be closer to the end of the current downturn than the beginning. He said contrarian bets require patience, but can reward investors who focus on fundamentals and value.
Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our