The main pressure on Bitcoin recently comes from the U.S. interest rate environment. Due to a strong job market and higher-than-expected inflation, market expectations for Fed rate cuts have been continuously pushed back, and some have even begun to discuss the possibility of rate hikes. High interest rates typically dampen investors’ appetite for high-risk assets. However, Anthony Pompliano, Chairman and CEO of ProCap Financial, believes these factors are more short-term disturbances. He is bullish on the long-term prospects of Bitcoin and gold, citing the persistent expansion of the U.S. fiscal deficit and the continuous rise in government debt, which will ultimately lead to a long-term decline in the purchasing power of the U.S. dollar. Large institutions, including Strategy (MSTR), still hold ample cash reserves and do not need to raise funds by selling Bitcoin.
Recently, Bitcoin has remained under pressure, dropping more than 50% from its October high, with its price once falling below the $60,000 mark. As of now, Bitcoin is trading at approximately $61,800, down more than 30% for the year. For coin-holding investors, this pullback is undoubtedly very painful. Pompliano believes that this adjustment may be one of the “healthiest bear markets” in Bitcoin’s history, with the market bottom potentially approaching.
Pompliano stated that compared with multiple previous cycles, this bear market exhibits distinctly different characteristics. In the past, Bitcoin bear markets often saw crashes of more than 80%, but this time, although the decline has exceeded 50%, the overall market performance is more stable. He believes that as institutional investors continue to enter the market, Bitcoin’s volatility is gradually decreasing. In recent years, the approval of spot Bitcoin ETFs and the accelerated participation of traditional financial institutions in the cryptocurrency market are considered important factors driving market maturation.
Pompliano specifically mentioned an indicator regarded by on-chain analysts as an important reference—the current number of Bitcoin holdings in a loss-making state. Citing research by cryptocurrency analyst Benjamin Cohen, he noted that the number of Bitcoins currently in unrealized loss exceeds the number in profit. Historically, when most holders begin to see losses, it often means the market is nearing the bottom of a bear market. Additionally, a growing number of long-term investors are gradually increasing their Bitcoin holdings in the current price range rather than continuing to sell.
For a long time, the “four-year cycle” theory has existed in the Bitcoin market, which suggests that prices typically move around halving cycles. As the proportion of institutional investors has increased, the market has questioned whether this pattern remains valid. However, Pompliano believes that the current market trend has further validated the existence of this cycle. In his view, current market movements have actually led more investors to believe again that the four-year cycle is still at play.
Pompliano expects that over the coming decades, regardless of short-term market fluctuations, capital will continue to flow into inflation-resistant assets such as Bitcoin and gold. The current adjustment seems more like normal fluctuation within a new cycle.
