Bitwise CIO: Crypto Becoming Contrarian Bet as AI Stocks Dominate
In brief
- Bitcoin down 21% YTD; Ethereum, Solana, XRP fell 33%, 37%, 31% respectively
- Investors rotating toward AI stocks, robotics, and private markets instead of crypto
- Clarity Act approval odds at 55% per Polymarket; insiders estimate 5-30% chance
- Smaller assets like Hyperliquid, BNB, Zcash outperforming major cryptocurrencies
- Hougan identifies green spots, suggesting crypto may near end of current downturn
The Shift Away From Momentum
The market has lost momentum as investors rotate toward AI stocks, robotics companies, and private market names such as SpaceX. This rotation is forcing crypto to move from a momentum-driven market into a contrarian trade, making investors more focused on revenue, fundamentals, and protocols with clearer business models, such as Hyperliquid.
The change marks a departure from earlier bear markets, when capital typically flowed into Bitcoin as a safer asset. This time, smaller assets with stronger individual stories are attracting the rotation instead.
Regulatory Uncertainty Keeps Capital Sidelined
Regulatory uncertainty around the Clarity Act is keeping investors on the sidelines while fundamentals gain importance. The Clarity Act is aimed at creating a market structure framework for digital assets, but its path through Congress remains far from certain.
Polymarket currently places the odds of Clarity Act approval by year end at 55%, while several Washington insiders gave lower estimates, ranging from 5% to 30%. Large cap crypto assets are unlikely to see a sustainable rally until that uncertainty clears.
Signs of Recovery Emerging
Hyperliquid, BNB, Zcash, and Stellar have outperformed over the past month while Bitcoin, Ethereum, and Solana have struggled. The next few weeks could remain difficult as crypto faces continued regulatory uncertainty and competition from AI-related market narratives, including SpaceX's planned public listing and Anthropic's confidential IPO filing.
Still, the emergence of green spots in the market suggests crypto may be closer to the end of the current downturn than the beginning. That positioning could shift quickly once clarity emerges on both the regulatory front and the broader market's appetite for risk assets beyond AI.
