Crypto is turning into a “contrarian bet” as institutional investors are being drawn to artificial intelligence stocks, says Bitwise chief investment officer Matt Hougan.
“The crypto market is brutal right now,” Hougan wrote in a market note on Tuesday. “One major reason is that crypto is no longer the belle of the ball. AI stocks, robotics companies, SpaceX … who needs crypto when the Nasdaq-100 is up 43% year-over-year?”
“With AI sucking all the oxygen out of the room, crypto is being forced to go through a painful metamorphosis: from momentum trade to contrarian bet.”
Stocks linked to companies involved in AI have skyrocketed as the technology has captured investor attention after OpenAI launched ChatGPT to the public in late 2022. Shares in Nvidia, which makes computing components key to AI, have gained nearly 1,500% since ChatGPT’s launch.
Hougan argued that contrarian bets can be great investments, but their payoff pattern is “usually spotty.”
“Momentum investments are fun. They surf along waves of excitement. Contrarian bets, by comparison, are a grind, requiring patience, a long-term orientation, and a focus on fundamentals,” he added.
“Investors still believe in crypto, but now that it’s a contrarian bet, they favor fundamentals over vibes.”
LVRG Research director Nick Ruck told Cointelegraph that while AI continues to dominate institutional portfolios, “crypto is quietly emerging as the true contrarian bet for sophisticated investors seeking directional upside in a maturing market.”
“This shift away from hype toward fundamentals is being fueled by real adoption metrics, regulatory clarity, and on-chain utility rather than speculative bets.”
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Hougan said that this bear market is different because, unlike past crypto cycles where Bitcoin was the safe haven, money is moving into smaller assets with strong fundamentals such as Hyperliquid, Zcash and Stellar.
This is how the contrarian bet is playing out, he said. “When crypto stops being a momentum trade, fundamentals start to matter — and this rotation is proof it’s already underway.”
Hougan also argued that it is a sign that we are closer to the end of the bear market than the beginning.
“In the heart of a crypto winter, everything’s red. When the green starts to look like real growth, the season is changing.”
That bear market end seems a long way off at the moment, with markets dumping a further 5.3% on the day, sending total market capitalization down to $2.38 trillion, 46% below its October peak.
Total crypto capitalization tanks to a two-month low. Source: TradingView
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