Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiler: Shaw, Golden Finance

When I usually write weekly memos, I usually only focus on the most core thing in the market at the moment. However, there have been many variables in the market recently, and it is impossible to focus on a single main line.

I think there are three market changes worth paying attention to right now.

1. Cryptocurrency is becoming a contrarian investment

The current crypto market is bleak: Bitcoin fell by 21% during the year, and mainstream currencies such as Ethereum, Solana, and XRP fell even deeper, falling by 33%, 37%, and 31% respectively. Meanwhile, ETF outflows continued and spot trading volumes fell to multi-year lows.

The core reason is that crypto assets are no longer the focus of market enthusiasm. The Nasdaq 100 Index rose by 43% during the year. AI concept stocks, robotics industry, and SpaceX related assets are in hot market. Naturally, funds no longer favor the encryption track.

In an environment where AI themes are siphoning funds from the entire market, the encryption industry is undergoing a painful transformation: From momentum trading to contrarian investing.

This is a critical turning point.

Contrarian investment has considerable long-term return potential, but the realization of returns is often unstable; momentum investing has a comfortable experience and can ride on the boom of the market. On the contrary, the reverse investment process is painful and tests investors' patience, long-term thinking and fundamental analysis and judgment capabilities.

This is why more and more crypto investors are beginning to value project returns and pursue protocols with clear fundamentals such as Hyperliquid. The market has not given up on the encryption track, but in the context of reverse investment, investors have shifted from following the trend and speculating on themes to anchoring on fundamentals.

The crypto industry isn’t dying, it’s just changing the types of investors (and projects) it attracts. Only by understanding this can we seize profits in the next bull market.

2. The market is waiting for the regulatory bill to be implemented, but the probability is low

The second major factor in the downturn in the crypto market:The CLARITY Act brings huge regulatory uncertainty. This bill is the basic legislation for the encryption market promoted by the U.S. Congress and is intended to establish a complete framework of encryption regulatory rules.

Although the bill recently passed a vote in the Senate, the prediction market Polymarket gave only a 55% probability of being implemented within the year. My personal view is more pessimistic: according to the probability range given by Washington industry insiders who have communicated recently, Democrats estimate that it is only 5%, and Republicans estimate that it is as high as 30%. Whether the odds are 5%, 30% or 50%, one thing is for sure, the bill is anything but safe.

Uncertainty directly causes investors to wait and see. From the perspective of institutional investors, there are two options at the moment:

• Place in AI stocks, and the underlying stock prices hit record highs one after another; or

• Invest in crypto assets However, the probability of the bill encountering setbacks in the next two months is close to 50%, and regulatory risks are high.

Obviously, the second option is difficult to attract funds to enter.

Therefore, before the regulatory dust settles, it will be difficult for the top crypto assets to experience a sustained rise. Compared with whether the bill is finally passed or invalidated, the elimination of uncertainty itself is more critical. If the bill is implemented, crypto will benefit; if the bill aborts, the industry will be able to slowly absorb the negative effects; only the pending transition period will make it difficult for the industry to strengthen.

3. Find new generation potential assets with funds

The third point I observed is that this bear market is completely different from previous cycles. In the previous crypto bear market, safe-haven funds would flock to Bitcoin, and small and medium-sized altcoins fell across the board; however, this round of funds did not flock to safe-haven assets, but instead turned to smaller, immature, but fundamentally sound emerging currencies.

The following is a heat map of the rise and fall of mainstream cryptocurrencies in the past month:

Crypto asset returns in May 2026

The most eye-catching thing is not the red, but the green.

It is true that Bitcoin, Ethereum, and Solana are all weakening, but Hyperliquid rose 72% in a single month, BNB rose 17%, Zcash rose 50%, and Stellar rose 44%. None of the above-mentioned currencies are considered mainstream assets in the market, but each relies on its unique fundamental logic to gain the favor of funds.

This is exactly the concrete manifestation of the contrarian investment strategy mentioned above. Whencrypto assets bid farewell to momentum trading, fundamental values ​​returned to the core of pricing, and this round of fund rotation is the best evidence.

In my opinion, this also indicates that this bear market is coming to an end rather than just beginning. In the true deep bear market stage, the entire market falls; when a group of assets go out of an independent upward trend based on real performance, the market cycle has switched.

Conclusion

To be honest, the crypto market is likely to remain under pressure in the next few weeks. The implementation of the CLARITY Act has been delayed, SpaceX is about to IPO, Anthropic has just submitted its S-1 prospectus for U.S. stock listings, and the AI ​​theme continues to dominate major financial headlines.

The current feeling of adding positions and allocating crypto assets is destined to be bad, but this is precisely the essence of reverse investment: if you want to make profits from reverse investment, you have to dig into the low spots in the market that no one is paying attention to, and make reverse moves when others hesitate.

This is the crypto market right now: patience and resilience will eventually pay off. As long as you explore high-quality assets based on fundamentals and intrinsic value, the long-term returns will be considerable.