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Bitwise CIO predicts Bitcoin volatility will fall 50% as institutional adoption rises

Bitwise CIO predicts Bitcoin volatility will fall 50% as institutional adoption rises

In a recent investor note, Bitwise CIO Matt Hougan provided a comprehensive outlook on Bitcoin’s trajectory towards the 2028 halving, predicting a 50% decrease in volatility and heightened institutional investor engagement.

Bitcoin (BTC) hit a new all-time high weeks before the 2024 halving in an unprecedented surge. Hougan believes this trend will continue post-halving and cause Bitcoin’s price to escalate dramatically, as it has in the past since its $13 valuation at the time of its first halving in 2012.

Hougan reaffirmed previous price predictions and said Bitcoin is still on track to hit $250,000 in the coming years.

He added that this consistent growth in value points to Bitcoin’s increasing acceptance within the financial sector, especially after the launch of spot Bitcoin ETFs, which have seen record-breaking performance in the first three months of trading.

Institutional money

Hougan emphasized the transformative impact of spot Bitcoin ETFs on the market, as these instruments have been crucial in attracting a new wave of institutional investors, such as financial advisors and large financial entities, who bring a more disciplined trading approach to the volatile market.

According to the Bitwise CIO, this shift is expected to contribute significantly to the predicted 50% reduction in Bitcoin’s volatility by the next halving.

Hougan said the entry of institutional investors through Bitcoin ETFs is introducing a stabilizing force to the market. These investors tend to employ strategic rebalancing and steady, incremental investments, which differ markedly from the speculative actions of retail investors that have characterized Bitcoin trading in the past.

He also predicted that by 2028, Bitcoin will become a standard component in diversified investment portfolios, with allocations potentially reaching or exceeding 5%. The projection is supported by a growing comfort with and recognition of Bitcoin’s maturing market and reduced price swings.

$200 billion AUM

Further bolstering Bitcoin’s appeal, Hougan forecasts that institutional capital inflows into Bitcoin ETFs could exceed $200 billion, spurred by broader market access and deeper financial integration.

He noted that this would promote market stability and solidify Bitcoin’s position as a mainstream financial asset. The optimistic outlook for Bitcoin is tempered by reminders of the inherent risks associated with crypto investments, such as market volatility and regulatory…

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