• Bitwise estimates that long-term crypto investors sold over $100 billion worth of Bitcoin last year in anticipation of a potential cyclical market crash.
• The firm also outlined a surge in AI stocks and metals, quantum fears, the October 10 leverage flush and concerns over Fed Chair nominee Kevin Warsh as potential reasons for the market crash.
• Bitwise says the current pullback could prove a good buying opportunity.

The crypto market crash since October isn't down to a single factor but a combination of several, according to Bitwise CIO Matt Hougan.

In a note to investors on Friday, Hougan outlined six key factors that potentially contributed to the crash that pushed down nearly every top crypto by more than 50% from prices seen over four months ago.

Hougan highlighted that long-term crypto investors are estimated to have sold more than $100 billion in Bitcoin (BTC) in a bid to front-run the four-year crypto cycle.

The crypto market has historically followed a four-year cycle pattern in which prices appreciate for three years, followed by one year of downturn, as evidenced by pullbacks in 2014, 2018 and 2022. Several experts had earlier predicted that the introduction of Bitcoin and Ethereum (ETH) exchange-traded funds (ETFs) would alter the cyclical pattern, but uncertainty from long-term holders is reinforcing the narrative.

"It sounds too simple, and it is a self-fulfilling prophecy, but one of the major reasons for the current pullback is that long-term crypto investors have been worried the cycle would repeat," Hougan wrote.

The Bitwise CIO also highlighted how the surge in AI-related stocks and precious metals has sapped the interest of "attention investors" from crypto, which once benefited from being the volatile and exciting sector of the financial market.

Other reasons Hougan cited include the October 10 leverage flush, hawkish views surrounding Federal Reserve (Fed) Chair nominee Kevin Warsh, a broader market risk-off sentiment over the past week, and fears about quantum computing.

In the past few months, several notable BTC advocates have been sounding the alarm over the community's lack of urgency about the future threat of quantum computing to Bitcoin. Some of these OG investors could remain on the sidelines until the Bitcoin community doubles down on its efforts to address quantum concerns, according to Hougan.

A market bottom on the horizon?

Bitcoin posted one of its largest single-day declines on Thursday, dropping 14% to $60,000, as top cryptos crashed across the board. Liquidations have crossed $10 billion in the past few weeks.

Notably, Bitcoin has lost more than 50% of its value since clocking an all-time high in October. While investors are wary of a further decline similar to the 70-80% drops in previous cycles, Hougan noted that crypto is now a more mature asset class than in previous times.

He stated that Bitwise's internal models show that the odds of a market bottom are rising with the recent pullback, adding that it could prove a good buying opportunity.

Hougan concludes by highlighting key events that could lead to a recovery, including the passage of the Clarity Act, AI-crypto breakthroughs, increasing rate-cut expectations, progress in eliminating the quantum threat, and a shift to risk-on markets.

"If we get a positive shock, great. If not, we'll grind out a bottom. In the meantime, I'd prescribe two things: patience and an eye on the destination," Hougan added.

Bitcoin is approaching $70,000, up more than 9% over the past 24 hours at the time of publication on Friday.