Grayscale: After being halved, BTC is approaching the bottom of this cycle.

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By: Zach Pandl (Head of Research at Grayscale)

Compiled by: Deep Tide TechFlow

Deep Tide Introduction: Bitcoin fell below $60k this week, hitting a new low for this cycle, and has already halved from its October high of $125k. Grayscale Research Head Zach Pandl places this pullback within historical cycles, viewing it as just another cyclical correction in an uptrend rather than a trend reversal. He outlines two scenarios for exiting the bear market: in an optimistic case, Bitcoin may already be near its bottom; in a pessimistic case, it could fall further. The key variables are whether the Fed will raise rates and whether the CLARITY bill will pass the Senate. This is an analyst report perspective, serving holders' judgment on direction.

This week, Bitcoin fell below $60k, refreshing the low for this cycle. From its peak of $125k in October, Bitcoin has now fallen more than 50%. In our view, this pullback is yet another cyclical correction within Bitcoin's long-term uptrend (Figure 1).

Figure 1: Bitcoin's pullback is just another cycle within its uptrend. The dark line is Bitcoin price (log scale, left axis), the orange line is the statistical trend based on HP filtering, and the light purple line is the cyclical deviation of price from trend (right axis). Cycle lows in 2012, 2014, 2018, and 2022 are marked, showing that the current cyclical deviation has once again fallen below zero.

Source: Coin Metrics, Grayscale Investments, as of monthly averages through June 26, 2026. Past performance does not guarantee future results.

Several factors have pressured Bitcoin's price in recent months. Most critically, changes in market expectations for Fed policy have directly undermined the "currency debasement trade." Late last year, prediction markets widely expected Trump to nominate the relatively dovish Kevin Hasset as Fed chair. Instead, he nominated the relatively hawkish Kevin Warsh, who officially took office this month. Due to persistent inflation, the market now expects the Fed to raise rates this year rather than cut them (Figure 2). Spot gold prices, also competing with fiat currencies (like the dollar), have fallen about 25% from their highs; after adjusting for volatility, the decline is similar to Bitcoin's.¹

Figure 2: The market now expects the Warsh-led Fed to raise rates. The orange line is the Fed's target rate, and the dark line is the 2-year swap rate. In the left half, the swap rate is below the target rate (market expects rate cuts); after March 2026, the swap rate surpasses the target rate and continues to rise (market expects rate hikes).

Source: Bloomberg, Grayscale Investments, as of June 26, 2026. Past performance does not guarantee future results.

Beyond the shift in Fed expectations, the crypto market is currently grappling with three other issues: uncertainty over whether the CLARITY bill will pass; pressure on Strategy's leveraged balance sheet; and investor concerns about digital asset security risks posed by quantum computing.

At the same time, improving regulatory conditions continue to drive institutional adoption of public blockchain technology. We view this as the most important structural trend in the digital asset market. Just this month, the CFTC approved the first perpetual futures in the US market, and the growth of stablecoins and tokenized assets will support major public blockchains. The broader social and political foundations underlying crypto assets remain intact: unchecked government debt expansion, declining public trust in intermediaries, and the rise of AI. AI may spur demand for alternative payment systems and technologies that preserve human sovereignty.

Broadly, we see two paths for Bitcoin to exit this bear market (Figure 3). The base case is: the CLARITY bill passes the Senate, Strategy takes steps to shore up its balance sheet, and the Fed holds rates steady. If upcoming news moves in this direction, Bitcoin's price may already be close to the bottom. The downside case is: the CLARITY bill fails to pass this year, Strategy and other DAT (Digital Asset Treasury) companies further deleverage, and the Fed is forced to raise rates due to persistent inflation. If downside risks materialize, Bitcoin could still see a modest decline. Historically, Bitcoin has fallen about 80% in some cycles, but we do not think the top-to-bottom decline this time will be as severe because this bull run was relatively restrained and institutional demand for digital assets is stickier.

Figure 3: Two scenarios for Bitcoin exiting the latest bear market. Historical cycle price paths are aligned to a common starting point (cycle end day = 100), with the horizontal axis representing days after cycle end. Gray is Jun-11, orange is Dec-13, purple is Dec-17, green is Nov-21, and dark green is this cycle's Oct-25. The two dashed lines on the right are 80th and 20th percentile option-implied paths, corresponding to the optimistic and downside scenarios above. The worst historical cycles (e.g., Jun-11, Dec-17) fell to just 10-20.

Source: Bloomberg, Coin Metrics, Grayscale Investments, Bitcoin priced in BTC/USD spot, cycles defined as periods exceeding 100 days with declines over 50%, as of June 25, 2026. Past performance does not guarantee future results; for illustrative purposes only.

Grayscale Research remains extremely optimistic about the medium-to-long-term prospects of crypto assets. It has been the best-performing asset class over the past decade², and we believe it will be over the next decade as well. Investors will manage their portfolio risk around short-term catalysts to meet their needs. But in our view, this bear market offers long-term investors an excellent opportunity to position early, betting on the structural growth of public blockchain technology and digital asset valuations over the next decade.

Key takeaway: Whether Bitcoin's price has bottomed for this cycle depends on upcoming catalysts, including the Fed's interest rate decision and the progress of the CLARITY bill in the US Senate. We see many structural positives for crypto assets and believe current valuations represent an attractive entry point for long-term investors.

¹ Considering the relative volatility differences between the two (gold 22%, Bitcoin 47% over the past two years), gold's 25% decline roughly corresponds to a 40-50% decline in Bitcoin.

² Asset classes represented by the following indices: S&P 500 Total Return Index (US stocks), Dow Jones Real Estate Total Return Index (real estate), S&P GSCI Total Return Index (commodities), Bloomberg US Aggregate Bond Index (US bonds), MSCI Emerging Markets Total Return Index (emerging market stocks), Bloomberg US Treasury Index (US Treasuries).