Bitwise Chief Investment Officer Matt Hougan says crypto has shifted from a momentum-led trade into a contrarian investment as capital and attention flow toward AI stocks, robotics companies and other high-growth equity narratives. The argument is not that crypto has lost its long-term case, but that it has lost its position as the market’s default risk-on trade.
In his June 2 memo, Hougan pointed to Bitcoin’s 21% decline this year, deeper losses in Ethereum, Solana and XRP, ETF outflows and weak spot trading volumes. He contrasted that with the Nasdaq-100’s 43% year-over-year rise, arguing that AI has “sucked all the oxygen” out of speculative markets. That reallocation has changed the type of investor crypto now rewards.
Fundamentals Replace Broad Momentum
Hougan’s central point is that contrarian markets require patience, valuation discipline and stronger attention to fundamentals. Crypto investors are moving away from trend-chasing and toward protocols with clearer revenue, usage and business models, a shift he linked directly to rising interest in projects such as Hyperliquid.
That rotation showed up in May performance. Bitwise cited Hyperliquid up 72%, Zcash up 50%, Stellar up 44% and BNB up 17%, even as larger assets remained under pressure. The green pockets were not broad beta rallies, but idiosyncratic moves tied to assets with specific stories the market was willing to reward.
For traders, that creates a two-speed market. Large-cap crypto may remain constrained by ETF outflows, weak volumes and uncertain policy, while smaller or more fundamentally differentiated assets can still attract capital. Passive exposure becomes less effective when liquidity is selective, making token-level research more important.
Regulatory Uncertainty Keeps Institutions Waiting
Hougan also identified the CLARITY Act as a major drag on large-cap crypto performance. The bill is intended to create a market-structure framework for digital assets, but he argued that its uncertain path through Congress is keeping institutional investors on the sidelines. The problem is not only whether the bill passes, but that the market cannot price the outcome cleanly.
Bitwise noted that Polymarket placed the odds of approval by year-end at 55%, while Washington insiders cited by Hougan gave lower estimates ranging from 5% to 30%. That spread in expectations reinforces defensive positioning, especially when investors can allocate to AI-linked equities with clearer short-term momentum.
The near-term implication is a more demanding environment for crypto allocators. Futures and options markets may stay volatile as conviction weakens, while spot demand could remain uneven until regulatory uncertainty clears or equity-market leadership broadens beyond AI.
Still, Hougan framed the current market as a transition rather than a terminal decline. When selective winners begin to look like real growth, the market may be closer to the end of the downturn than the beginning, but that recovery would likely reward fundamentals before broad speculation returns.
