- Grayscale’s four-year cycle model suggests Bitcoin could reach its market bottom in September or October, with milder losses than past cycles.
- Zach Pandl said Bitcoin may have already bottomed if the Federal Reserve keeps rates unchanged and economic growth remains stable.
- Grayscale said Strategy’s larger cash reserve eases financing concerns, though Fed hikes and CLARITY Act delays remain downside risks.
Bitcoin could avoid another sharp decline if the Federal Reserve keeps interest rates unchanged, according to Grayscale Head of Research Zach Pandl. However, the asset manager said its traditional four-year cycle model still points to a possible market bottom in September or October. Grayscale outlined both views in its latest research while assessing Bitcoin’s recent decline from its $125,000 cycle peak.
Four-Year Cycle And Macro Views Diverge
According to Grayscale, Bitcoin investors remain divided between two market frameworks. One follows the historical four-year cycle tied to Bitcoin halving events. The other focuses on macroeconomic conditions, including economic growth and real interest rates.
The cycle model suggests Bitcoin typically reaches its lowest point about one year after a market peak. It also places the bottom roughly two and a half years after each halving. Notably, previous bear markets recorded average drawdowns of about 80%.
Based on that history, Grayscale said Bitcoin could still decline before reaching a low in September or October. However, the firm said it does not expect losses to match earlier cycles because institutional participation has increased.
Fed Policy Remains The Key Focus
Pandl said Bitcoin has increasingly traded like a mature financial asset instead of following halving cycles alone. According to him, previous downturns often coincided with slowing economic growth or rising real interest rates.
The current decline has also unfolded alongside changing Federal Reserve policy expectations. Therefore, Grayscale believes Bitcoin may have already reached its bottom if economic growth remains stable and the Fed avoids further rate increases.
However, Pandl said additional rate hikes driven by persistent inflation could extend the downturn. Grayscale also identified progress on the CLARITY Act as another factor affecting the market outlook.
Strategy Sale Reduced Financing Concerns
Grayscale also revisited Strategy’s recent treasury actions while discussing Bitcoin’s market structure. On July 6, the firm examined Strategy’s sale of 3,588 Bitcoin for about $216 million.
Strategy used the proceeds to meet preferred-share dividend obligations and increase its dollar reserve to about $2.55 billion. The firm said that balance could cover nearly 17 months of dividend payments.
Grayscale added that the stronger cash position reduced concerns about emergency funding or additional Bitcoin sales during periods of market volatility. However, Pandl said downside risks remain if the CLARITY Act stalls, treasury companies continue deleveraging, or the Federal Reserve resumes raising interest rates.