Bitwise Chief Investment Officer: Now is an excellent time for long-term investors in cryptocurrency

Original Title: “Short-Term Pain, Long-Term Gain”

Author: Matt Hougan, Chief Investment Officer of Bitwise

Compiled by: Luffy, Foresight News

The current market pullback seems like a gift for long-term investors; key tailwinds could propel Bitcoin to $100,000 by the end of the year.

The cryptocurrency market is in a strange state: all short-term news is bad news, while all long-term news is good news. This contradiction creates a once-in-a-lifetime opportunity for long-term investors. Let me explain.

The Huge Drivers Behind Cryptocurrency

For long-term cryptocurrency investors, now is the best time.

Incredible inflows into spot Bitcoin ETPs: Since their launch in January, spot Bitcoin ETPs have attracted $15 billion in net new assets, making them the most successful ETPs in history. And I believe they are just getting started. Major wealth management platforms like Morgan Stanley and Wells Fargo have yet to enter this space. I suspect these two giants will officially enter later this year, potentially bringing in billions of dollars in inflows.

Bitcoin Halving: In April this year, Bitcoin underwent its quadrennial halving, reducing the new supply by 50%. Historically, Bitcoin has performed exceptionally well in the year following each halving. Will this time be different?

Spot Ethereum ETP: The U.S. Securities and Exchange Commission has approved key documents for a spot Ethereum ETP, and the launch of Ethereum ETPs is just around the corner. We believe these ETPs could attract $15 billion in net inflows within the first 18 months of trading.

A Major Shift in the U.S. Government's Stance on Cryptocurrency: In recent years, Washington has been hostile to cryptocurrency, hindering the industry's growth. However, in the past few months, there has been a dramatic shift in Washington's attitude. In May, 71 Democrats joined 208 Republicans in supporting a new regulatory framework for cryptocurrency. One reason for this bipartisan support? Thanks to one of Washington's most powerful super PAC networks, the cryptocurrency industry has gained political influence. More importantly, Trump and the Republicans have historically expressed public support for cryptocurrency, indicating its growing importance in the U.S. elections.

Federal Reserve Rate Cuts: The federal funds futures market expects two rate cuts by the end of 2024, with four to five cuts anticipated over the next 12 months. Lower interest rates will lead to more capital flowing into cryptocurrency.

Coupled with the strong growth of stablecoins, significant advancements in Layer 2, and the deepening involvement of institutions like BlackRock, all of this paints a picture of a bright future. In the second half of the year, the combined effects of these factors are likely to push Bitcoin to $100,000, while Ethereum will also reach new all-time highs.

Short-Term Resistance

So, with so much good news, why is the price of Bitcoin still declining? The answer is: one-time sell-offs.

Specifically, the cryptocurrency market has recently been affected by several short-term liquidity shocks. In the past two weeks, we have seen:

Mt. Gox Repayments: The now-defunct cryptocurrency exchange Mt. Gox, which collapsed in 2014, has finally begun repaying creditors as of early July. This is a big deal: Mt. Gox is expected to repay over $8 billion in Bitcoin to creditors in the coming months. Billions of dollars' worth of Bitcoin may be sold off immediately.

U.S. Government Sell-off: The U.S. government holds over $12 billion in Bitcoin, which was seized from the notorious online black market Silk Road in 2013. On July 1, the U.S. Marshals Service announced that it would sell these assets on Coinbase Prime, indicating that these assets may soon hit the market.

German Government Sell-off: The German government, which has seized Bitcoin multiple times, is also not to be outdone, having sold $900 million worth of Bitcoin. The remaining Bitcoin may soon be sold as well.

Think about it: $8 billion from Mt. Gox, $12 billion from Silk Road, $2 billion from Germany… that's a substantial amount of Bitcoin. Worse yet, these sales and distributions began during the holiday week of July 4, a time when cryptocurrency liquidity is typically low. This led to significant liquidations in the futures market, further pressuring prices.

Everything Will Pass

But remember: these are one-time sell-offs, and they will eventually come to an end.

As investors, we should ignore random events when evaluating investments; they do not represent the long-term value of the investment.

In other words, all of this will pass. The impact of Mt. Gox repayments will eventually fade, and the U.S. government's sale of Silk Road assets will also come to an end.

Meanwhile, the positive aspects will not disappear. Bitcoin ETPs will not vanish, Ethereum will continue to attract new capital, and Washington's acceptance of cryptocurrency is accelerating, among other things.

That’s why I say the recent pullback is a gift for long-term investors.

I believe that one-time sell-off events are suppressing the original bullish momentum, and once the market digests these short-term liquidity shocks, a bright future is inevitable.