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Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiled by: 0xjs@Bitlink Vision
In July 2024, I wrote an investment memorandum called “Short-term Pain, Long-term Benefits”.
At that time, the cryptocurrency market was in a difficult situation.Bitcoin rose to a peak of more than $73,000 in March 2024, and then fell to about $55,000, with a pullback of 24%.Ethereum fell 27% during the same period.
I wrote that the cryptocurrency market is currently facing a strange trend, with all short-term news not being good, while all long-term news is getting better.
On the favourable side, I see long-term positive factors such as inflows of exchange-traded funds (ETFs), Bitcoin halving, and a shift in attitudes in Washington.On the downside, I see short-term challenges like the distribution of Mt. Gox Bitcoin and the German government’s selling of Bitcoin.
I concluded that this difference between short-term negative and long-term positive creates excellent potential opportunities for long-term investors.
As it turns out, this judgment is very prescient.Shortly after I wrote the memo, Bitcoin bottomed out and then soared all the way to $100,000.
The market structure today is very similar, with short-term negative and long-term positive.For investors with a long enough investment period, I think this provides a very similar opportunity.
Bad news: The end of the Meme coin craze
First, let’s take a look at the bad news.
The cryptocurrency market was selling sharply when I wrote this memorandum on the morning of February 25.Bitcoin fell 8%, trading price fell below $90,000, Ethereum fell 10%, and Solana fell 12%.
The direct reason is that the Singapore-based cryptocurrency exchange Bybit was subsequently affected by hacking last weekend.Hackers stole $1.5 billion worth of Ethereum from the exchange using a classic phishing scam.Although Bybit (amazingly) able to use its own funds to restore the assets of all customers as they did, the hacking attack still shocked the cryptocurrency market and triggered a series of liquidations.
However, the Bybit hacking is not an isolated incident.There have also been a series of Meme-related scams in the past few weeks, including:
Libra: Argentine president and cryptocurrency enthusiast Javier Milei once stood up for a Meme coin called Libra, which turned out to be a multi-billion dollar scam.
Melania: A Meme coin associated with First Lady Melania Trump also suffered a Waterloo, costing investors billions of dollars.
Trump: The degree is slightly lighter, and a similar situation has occurred in a Meme coin related to President Trump.
News reports say Bybit hackers may be associated with the North Korean government and they are trying to launder money from the stolen Ethereum through the Meme currency platform.Bybit scams also have Meme coin-related factors; regulatory investigations are likely to follow.
Overall, these events may mean the end of the recent Meme coin craze.
While this may be comforting for “serious” cryptocurrency investors, Meme has been the hottest sector in the cryptocurrency field outside of Bitcoin for the past year, injecting into the field, especially the Solana ecosystem.Lots of trading volume and vitality.Removing this activity from the system will have subsequent effects, and you are witnessing this now.
Good news: Supporting cryptocurrency regulation, institutional investors, stablecoin boom, and more
The problem with short-term news is that its impact will eventually end.With a few exceptions, Meme coins will no longer matter and things will end there.Attention will not drop below zero.
Fortunately, my long-term cryptocurrency has never revolved around Meme.
On the other hand, I think there are some long-term trends that will last for several years.These include:
Supporting cryptocurrency regulation: Washington’s attitude toward cryptocurrencies is in the early stages of a major shift.In the past few weeks alone, we have seen the U.S. SEC withdraw high-profile lawsuits against companies like Coinbase, while lawmakers agree on bills that support cryptocurrencies related to stablecoins and market structures.These developments will bring cryptocurrencies into the mainstream and significantly reshape the financial landscape in the coming years.
Institutional adoption: Institutions, governments and businesses are buying Bitcoin on a large scale.Investors have invested $4.3 billion in Bitcoin ETFs so far this year.We expect this figure to reach $50 billion by the end of the year, and there will be hundreds of billions of dollars inflows in the next few years.
Stablecoin: The asset management scale (AUM) of stablecoin has reached an all-time high of $220 billion, an increase of nearly 50% from last year.But we think this is just the beginning.As stablecoin-related legislation advances in Congress, we expect the market size may surge to $1 trillion by 2027.
The rebirth of decentralized finance (DeFi) and the rise of tokenization: Decentralized finance (DeFi) applications are receiving renewed attention, with activities in areas such as lending, trading, forecasting markets and derivatives.Meanwhile, the AUM of tokenized RWA is hitting record highs every day.
Where is the market going
I find this analytical framework useful because to some extent, it makes investment strategies clear at a glance.On the one hand, we are facing the impact of the Meme coin craze fading and Bybit hacking.On the other hand, there are the regulation of supporting cryptocurrencies, large-scale institutional adoption, a trillion-dollar stablecoin boom, the rebirth of DeFi and the rise of tokenization.
This seems to me to be an obvious choice.
However, I want to remind you that this market pullback is more severe than the one I mentioned in July 2024.The callback was indeed short-lived, triggered by a one-time asset sale and ended at the beginning.
The Meme coin boom is huge, and its subsequent impact may be more significant.It may take days, weeks, or even months to digest.
But the overall conclusion is consistent: short-term news is unfavorable, long-term news is improving.When this happens, I am optimistic about long-term investment.
