GuShiio.com All short-term news is negative, while all long-term news is positive.
Author: Matt Hougan, Chief Investment Officer of Bitwise
Compiled by: Luffy, Foresight News
In July last year, I wrote an investment memorandum titled “Short-term Pain, Long-term Benefit”. At that time, the cryptocurrency market was in a bad situation. Bitcoin rose above $73000 in March 2024, but by July it had fallen to about $55000, a 24% correction. Ethereum fell 27% over the same period.
I wrote at the time that the cryptocurrency market was facing a peculiar state. All short-term news is negative, while all long-term news is positive.
On the positive side, I see long-term catalysts such as ETF inflows, Bitcoin halving, and a shift in attitude in Washington. On the negative side, I see things such as Mt. Short-term challenges such as Gox payments and government sales of Bitcoin.
I concluded that this contradiction between short-term negatives and long-term positives creates an excellent potential opportunity for long-term investors.
Facts have proved that this judgment is very prescient. Shortly after I wrote that memo, Bitcoin hit bottom and then soared all the way to $100,000.
The current market situation is very similar to that at that time, with short-term negative factors competing with long-term positive factors. For investors with a long enough investment period, I think this is also a rare opportunity.
Bad news: The end of the Memecoin craze
First, let’s take a look at the bad news.
When I wrote this memo on the morning of February 25, the cryptocurrency market was falling sharply. Bitcoin fell 8%, its price fell below $90000, Ethereum fell 10%, and Solana fell 12%.
The direct cause is the subsequent impact of the hacking attack on Bybit, a cryptocurrency exchange based in Singapore last weekend. Hackers used classic phishing scams to steal $1.5 billion worth of Ethereum from the exchange. Although Bybit was able to use its own funds to make up for the losses of all its customers, the hacking still severely damaged the crypto market and triggered a series of forced liquidations.
However, the hacking of Bybit was not an isolated incident. In the past few weeks, a series of Memecoin-related scams have also occurred, including:
- Libra incident: Argentine President and cryptocurrency enthusiast Javier Millay once launched a platform for a Memecoin called Libra, which turned out to be a multi-billion-dollar scam.
- Melania-related token incident: Memecoin related to U.S. First Lady Melania Trump also went wrong, costing investors billions of dollars.
- Trump-related token incident: To some extent, a similar situation has occurred in Memecoin related to President Trump.
News reports said Bybit’s hackers were linked to the North Korean government and tried to clean up stolen Ethereum through the Memecoin platform. The Bybit fraud incident also has Memecoin factors, and is likely to face regulatory investigation in the future.
Taken together, these events are likely to mean the end of the recent Memecoin craze.
While this may comfort “serious” cryptocurrency investors, over the past year, Memecoin has been the hottest sector in the cryptocurrency space outside Bitcoin. Removing Memecoin activity from the crypto ecosystem will have an impact, and that’s what you see today.
Good news: Favorable regulations, institutional investors, stablecoin boom, and more
The impact of short-term news will eventually end. With a few exceptions, Memecoin will no longer matter, and that’s how it is.
Fortunately, the long-term prospects of cryptocurrencies do not depend on Memecoin.
On the other hand, I think there are many long-term trends that will persist for years, including:
- Favorable crypto regulatory policies: Washington’s attitude towards cryptocurrencies is undergoing a major shift, and we are currently in the early stages of this shift. In the past few weeks alone, we have seen the U.S. Securities and Exchange Commission drop high-profile lawsuits against companies such as Coinbase, and lawmakers have reached consensus on pro-cryptocurrency bills related to stablecoins and market structure. These developments will allow cryptocurrencies to enter the mainstream and reshape the financial landscape in the coming years.
- Institutional adoption: Institutions, governments and businesses are buying bitcoin in large quantities. So far this year, investors have invested $4.3 billion in Bitcoin ETFs. We expect this figure to reach US$50 billion by the end of the year, with hundreds of billions of dollars in inflows in the next few years.
- stablecoins: The asset management scale of stablecoins has reached a record high of US$220 billion, an increase of nearly 50% in the past year. But we think this is just the beginning. As legislation related to stablecoins advances in Congress, the size of the stablecoin market may surge to US$1 trillion by 2027.
- The rebirth of decentralized finance and the rise of tokenization: Decentralized financial applications are receiving renewed attention, with areas such as lending, trading, forecasting markets and derivatives all becoming increasingly active. At the same time, the scale of asset management for real-world asset tokenization is reaching record highs every day.
Where will the market go?
I think this analytical framework is very helpful because, to some extent, it makes investment decisions simple and clear. On the one hand, we are facing the decline of Memecoin and the negative situation of Bybit being hacked; on the other hand, it is conducive to the regulation of cryptocurrencies, large-scale institutional adoption, the trillion-dollar stablecoin boom, decentralized finance The rebirth and the rise of tokenization.
This is what I call decisions that can be made without using your brain.
However, I should caution that this market correction is more serious than the one I mentioned in July 2024. The pullbacks at the time were short-lived, driven by one-time asset sales, and those sales were meant to be over from the beginning.
The Memecoin craze is large, and its negative impact may be even greater. It may take days, weeks or even months to absorb these effects.
But our overall conclusion is the same: short-term news is bad, long-term news is good. When this happens, I am more optimistic about long-term investment opportunities.
