Author: Zach Pandl (Research Director at Grayscale)
DeepChain TechFlow
Deep潮 Summary: Bitcoin fell below $60,000 this week, hitting a new low for this cycle—a 50% decline from its peak of $125,000 on October 12. Grayscale’s Research Head, Zach Pandl, views this pullback within the context of historical cycles, suggesting it is merely a cyclical correction within an ongoing uptrend, not a reversal of the trend. He outlines two possible scenarios for exiting the bear market: in the optimistic case, Bitcoin may already be near its bottom; in the pessimistic case, it could decline further. The key variables for determining the direction are whether the Federal Reserve raises interest rates and whether the CLARITY Act passes the Senate. This report provides insight to help holders assess the market’s trajectory.
This week, Bitcoin fell below $60,000, setting a new low for this cycle. Since its peak of $125,000 on October 12, Bitcoin has now declined by more than 50%. In our view, this pullback is another cyclical correction within Bitcoin’s long-term upward trend (Figure 1).
Figure 1: Bitcoin’s drawdown is just another cycle within an uptrend. The dark line represents Bitcoin’s price (logarithmic, left axis), the orange line is the statistical trend line based on the HP filter, and the light purple line shows the cyclical deviation between price and trend (right axis). Cycle lows in the years 2012, 2014, 2018, and 2022 are marked, showing that the current cyclical deviation has once again returned below the zero line.
Data sources: Coin Metrics, Grayscale Investments; monthly averages as of June 26, 2026. Past performance is not indicative of future results.
Several factors have suppressed Bitcoin’s price over the past few months. The most critical is a shift in market expectations regarding Federal Reserve policy, which directly undermines the logic behind "currency debasement trades." At the end of last year, the market widely anticipated that Trump would nominate the relatively dovish Kevin Hassett 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). Gold, which also competes with fiat currencies like the U.S. dollar, has dropped approximately 25% from its peak—after adjusting for volatility, the decline is similar to Bitcoin’s.¹
Figure 2: The market now expects a Fed under Warsh to raise rates. The orange line represents the Fed’s target rate, and the dark line represents the 2-year swap rate. For the first half, the swap rate is below the target rate (indicating market expectations of rate cuts); after March 2026, the swap rate exceeds the target rate and continues to rise (indicating market expectations of rate hikes).
Data sources: Bloomberg, Grayscale Investments, as of June 26, 2026. Past performance is not indicative of future results.
In addition to expectations of a policy shift by the Federal Reserve, the crypto market is currently grappling with three key issues: first, it remains uncertain whether the CLARITY Act will pass; second, Strategy’s leveraged balance sheet is under pressure; and third, investors are concerned about security risks to digital assets posed by quantum computing.
Meanwhile, improvements in the regulatory environment continue to drive institutional adoption of public blockchain technology. We view this as the most significant structural trend in the digital asset market. Just this month, the CFTC approved the first perpetual futures on the U.S. market, and the growth of stablecoins and tokenized assets provides further support for leading public blockchains. The broader social and political underpinnings behind crypto assets remain intact: unchecked government debt expansion, declining public trust in intermediaries, and the rise of AI. AI may generate demand for alternative payment systems and for technologies that safeguard human sovereignty.
Overall, we see two potential paths for Bitcoin as it emerges from this bear market (Figure 3). In the base case: the CLARITY bill passes the Senate, Strategy takes steps to strengthen its balance sheet, and the Fed holds off on further rate hikes. If subsequent developments align with this scenario, Bitcoin’s price may already be nearing its bottom. In the downside case: the CLARITY bill fails to pass this year, Strategy and other DATs (Digital Asset Treasury companies) further deleverage, and the Fed is forced to raise rates due to persistent inflation. If these downside risks materialize, Bitcoin could still experience a modest further decline. Historically, Bitcoin has dropped by approximately 80% in previous cycles, but we do not expect this downturn to be as deep, as this bull run was relatively restrained in its ascent, and institutional demand for digital assets has become more resilient.
Figure 3: Two possible scenarios for Bitcoin’s recovery from the latest bear market. The chart aligns historical price cycles from the same starting point (cycle end day = 100), with the horizontal axis showing days after cycle end. Gray represents Jun-11, orange represents Dec-13, purple represents Dec-17, green represents Nov-21, and dark green represents the current cycle, Oct-25. The two dashed lines on the right show the 80th and 20th percentile paths implied by option pricing, corresponding to the optimistic and downside scenarios discussed above. The most severe historical cycles (e.g., Jun-11, Dec-17) declined to levels of only 10–20.
Data sources: Bloomberg, Coin Metrics, Grayscale Investments; Bitcoin priced in BTC/USD spot; cycles defined as periods in history with durations exceeding 100 days and drawdowns greater than 50%, as of June 25, 2026. Past performance is not indicative of future results and is provided for illustrative purposes only.
Grayscale’s research team remains extremely bullish on the long- and medium-term prospects of crypto assets. Over the past decade, it has been the best-performing asset class², and we believe it will remain so over the next decade. Investors will manage portfolio risk around short-term catalysts to meet their individual needs. However, in our view, this current bear market presents a compelling opportunity for long-term investors to position themselves ahead of the structural growth in blockchain technology and digital asset valuations over the coming decade.
Key takeaway: Whether Bitcoin has reached the low point of this cycle depends on several upcoming catalysts, including the Federal Reserve’s interest rate decisions and the progress of the CLARITY Act in the U.S. Senate. We observe numerous structural tailwinds for crypto assets and believe current valuations present an attractive entry point for long-term investors.
Given the difference in relative volatility between the two assets (gold at 22% and Bitcoin at 47% over the past two years), a 25% decline in gold would roughly correspond to a 40–50% decline in Bitcoin.
² Asset classes are represented by the following indices: S&P 500 Total Return Index (U.S. equities), Dow Jones Real Estate Total Return Index (real estate), S&P/GSCI Total Return Index (commodities), Bloomberg U.S. Aggregate Bond Index (U.S. bonds), MSCI Emerging Markets Total Return Index (emerging market equities), and Bloomberg U.S. Treasury Index (U.S. Treasuries).