Bitwise Declares Crypto Winter May Be Nearing Its End
Is the deep freeze finally thawing? A major player in digital asset management just signaled a potential shift in the market's glacial conditions.
The Thaw Begins
Bitwise Asset Management points to key on-chain metrics and institutional flows suggesting the prolonged downturn—the so-called 'crypto winter'—could be losing its bite. Their analysis highlights a quiet accumulation phase, often a precursor to broader market momentum.
Beyond the Headlines
This isn't about cheering for a line on a chart to go up. It's about recognizing the infrastructure being built while everyone was distracted by the price action—or lack thereof. Real-world asset tokenization, regulatory clarity in major jurisdictions, and scaled layer-2 solutions didn't pause for the bear market; they accelerated.
The Institutional Whisper
Quiet capital is moving. The smart money isn't waiting for a CNBC segment to announce the all-clear; it's positioning based on protocol development and adoption curves, not yesterday's social media sentiment. It's a classic play—build when others are fearful, even if that fear is dressed up as sophisticated macroeconomic analysis from traditional finance pundits.
A Cynical Note from Finance
Let's be real—Wall Street loves a cycle. It creates the volatility needed to sell hedging products and generate fees from both fear and greed. A perpetual bull market is terrible for business.
The message is clear: prepare, don't just predict. The seasons are changing.
A bear market propped up by institutional investment
Despite new highs being hit by Bitcoin, Solana, and ethereum in 2025, Bitwise CIO Matt Hougan argued in a blog post on Monday that crypto has been in a bear market since January 2025. Excess leverage and widespread profit-taking by early investors are two prevailing factors that he believes have been detrimental to crypto markets recently. Notably, Bitcoin is down nearly 40% from its October 2025 high, and Ethereum is down over 50%.
Hougan believes that continued institutional purchase of major cryptocurrencies throughout 2025 via ETF flows and Digital Asset Treasuries (DATs) created the illusion of a bull market for the average investor. Between January 2025 and January 2026, a Bitwise chart of 10 large-cap crypto index constituent returns further supports this theory.
The chart breaks the top 10 crypto assets of the last year into 3 groups. Group 1 is composed of Bitcoin, Ethereum, and XRP. Group 2 is composed of assets like Solana, Litecoin, and Link, and group 3 is composed of assets like Cardano, AVAX, and Sui.
Group 1 assets did alright in the past year, largely backed by widespread institutional investment. However, group 2 assets experienced a standard bear market, falling 37-47%, while group 3 assets endured a bloodbath, falling 60-75%. The standout here is group 3, which never got widespread institutional exposure in 2025, while the other two groups did. This signals that without institutional investment, Bitcoin and crypto markets would have been in a clear and progressive freefall between last January and now.
Hope on the horizon?
Hougan, who has been a long-time industry veteran, stated in his Monday blog post that historically, crypto winters have only lasted around 13 months. If that is the case, then conditions should start to improve in March of this year. He also states that the recent market crash and negative sentiment have largely overshadowed much of the good news that has come out.
Regulatory progress with the CLARITY and GENIUS Acts in the U.S. and institutional adoption have been huge for the industry, and the potential gains from this may yet be realized. As Hougan points out, in bear markets, good news largely does not get translated into positive price action.
Other industry leaders have pointed out that markets are showing signs of stabilization despite the madness. For example, long-term holder selling has notably slowed down, and fundamentals continue to improve. Raoul Pal stated in a post on X that while total global liquidity has been a driver for past bull markets, U.S. total liquidity (USTLI) is more dominant this cycle, and it is currently dried up. USTLI is sitting at around 3%, down significantly from its 30% high in 2021.
However, Pal believes the resolution of the current U.S. government shutdown will be the catalyst that allows liquidity to return to crypto markets, sending prices higher. He expects that rate cuts from Trump’s Fed chair pick, Kevin Warsh, Treasury cash (TGA) being spent back into markets, and fiscal stimulus ahead of the U.S. midterm elections will all generate conditions for a liquidity flood in 2026. If all of this goes as planned, the current market conditions may be nothing more than a setback in what could be a booming year for crypto markets.
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