Bitwise CIO Cools Crypto Enthusiasm as Investor Sentiment Turns Bullish

Just as the crypto crowd starts popping champagne, a veteran voice throws cold water on the party.

The Contrarian in the Room

While retail investors pile into digital assets with renewed vigor—fueled by recent rallies and mainstream whispers—Bitwise's Chief Investment Officer is hitting the brakes on unbridled optimism. The shift in market mood is palpable, but experience breeds caution where hype breeds FOMO.

Navigating the Sentiment Cycle

Market cycles in crypto don't follow polite calendars; they run on raw emotion and liquidity. The CIO's tempered stance highlights a classic disconnect: the crowd's bullish turn often precedes a reality check from those who've seen this movie before. It's the old finance dance—just with blockchain as the soundtrack.

Between Greed and Fear

True opportunity lies not in following the herd, but in understanding its direction and speed. The current bullish shift is a signal, not a siren call. Smart money watches the metrics, not the memes—even if that means being the buzzkill at the digital asset party. After all, in traditional finance, 'irrational exuberance' was a warning; in crypto, it's often mistaken for a business plan.

The path forward demands more than sentiment. It requires the gritty work of due diligence, regulatory navigation, and separating technological promise from pure speculation. The bulls may be running, but the seasoned are checking the fence lines.

Stock market must remain stable for the crypto market to thrive

According to Matt Hougan, although the crypto markets are steady, the passage of the CLARITY Act is key to the long-term future of crypto in the US. “Without legislation, the current pro-crypto regulatory tilt at the SEC, CFTC, and other agencies could reverse under a new administration,” he added. 

The bill is currently making its way through Congress. The Senate is targeting January 15 for markup, a process that involves aligning drafts in the Senate banking and agriculture committees and pushing the final bill to a vote. However, hurdles remain, including competing visions of how to regulate DeFi, stablecoin rewards, and political conflicts of interest. 

David Sacks, the WHITE House crypto czar, stated that  “we are closer than ever” to passing the bill. Kalshi puts the odds at 46% by May and 82% by year’s end. Matt Hougan stated that he is cautiously optimistic.

Ultimately, the crypto community should pray for the stock markets, as the overall stability of the stock market is crucial for the crypto market to thrive. “We don’t need a raging bull market; crypto is not highly correlated with stocks. But a sharp collapse—say, a 20% pullback in the S&P 500—would take the shine off of all risk assets in the short term, crypto included,” Hougan stated.

However, prediction markets see a relatively low probability of a recession in 2026 and approximately 80% probability of S&P 500 gains. However, the AI bubble remains a significant concern. 

Overall crypto market cap plummets 3% 

The crypto market has recorded a 3.07% decline in market cap in the last 24 hours. According to analysts, this week’s strengthening of the crypto market has hit local resistance NEAR the $3.2 trillion total capitalization level. 

The market recovery in early December also stalled at around these levels, which is why the current level is attracting some cautious sellers. For now, the recovery is being stifled by intense selling pressure, which calls for caution about the near-term outlook.

In the same light, CryptoQuant stated that the sentiment that crypto whales are aggressively buying up Bitcoin is not true. Instead, their activity is overestimated due to distortions associated with the work of crypto exchanges. According to analysts, the inflow of crypto may be linked to holders’ desire to sell their assets.

However, over the past week, the Binance exchange has recorded the most significant inflow of Bitcoin and ethereum in a month, amounting to nearly $2.4 billion. Also, a rare buy signal has appeared on the weekly Bitcoin chart according to the McMillan Volatility Band indicator. In the entire history of BTC, such a signal has appeared only three times, and each time it coincided with successful buying points.

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