Grayscale calls Bitcoin’s 30% drop “business as usual,” targets fresh highs in 2026
Bitcoin’s recent 30% retracement may look alarming on the chart, but for Grayscale Research it is simply another chapter in a very familiar story. In its latest report, released on Dec. 1, the asset manager argues that the move is entirely in line with Bitcoin’s historical behavior and is unlikely to signal the start of a deep, multi‑year bear market. On the contrary, Grayscale expects Bitcoin (BTC) to set new all‑time highs in 2026, even as short‑term indicators remain mixed.
A 30% drop that fits Bitcoin’s “normal”
According to Grayscale, the latest pullback is the ninth significant correction since the current bull cycle began. From early October through November, Bitcoin slid roughly 32% from peak to trough before stabilizing. For seasoned BTC traders, that kind of move is almost routine.
Since 2010, Bitcoin has experienced around 50 drawdowns of at least 10%. The “average” meaningful decline, Grayscale notes, has been on the order of 30%—almost exactly where the latest drop landed. The firm stresses that long‑term investors have historically been compensated for their patience, but only after enduring “tough drawdowns along the way.”
Despite the volatility, Bitcoin has bounced more than 6% from its recent lows and is trading back in the $90,000 range, reinforcing Grayscale’s view that the market is consolidating rather than collapsing.
Pushing back on the “four‑year cycle” crash narrative
Much of the market still treats Bitcoin as if it is locked into a rigid four‑year boom‑and‑bust cycle tied to its halving events. Historically, halvings — which cut the new supply of BTC in half — have coincided with powerful bull markets, followed by steep bear phases roughly a year or two later.
Grayscale challenges the idea that this automatic pattern guarantees a severe downturn in 2026. The firm argues that the current cycle differs from prior ones in several important ways:
– No parabolic “blow‑off” top so far, which in past cycles preceded brutal reversals.
– A greater share of demand coming from institutions via exchange‑traded products and corporate digital asset treasuries.
– A more supportive macroeconomic backdrop, with interest‑rate cuts on the horizon and growing political will to clarify digital asset regulation.
Taken together, these factors point to a more mature and structurally different Bitcoin market, where historical cycles are a guide—but not a destiny.
Signs a short‑term bottom may be forming
Grayscale also highlights a series of short‑term signals that, in its view, point to a potential local bottom rather than a new downtrend:
– Options markets are heavily skewed toward put contracts, suggesting traders have aggressively hedged downside risk and may already have “priced in” further losses.
– Several listed digital asset treasuries are trading at notable discounts to their underlying net asset values, a sign that speculative excess is being flushed out.
These conditions tend to emerge when fear is elevated and leveraged positions have been largely cleaned out, historically setting the stage for more constructive price action.
Sector divergence: privacy coins surge, AI tokens skid
Beyond Bitcoin, November was a month of sharp dispersion across the crypto landscape. Privacy‑focused tokens led the performance tables, while projects associated with artificial intelligence struggled.
Coins such as Zcash (ZEC) and Monero (XMR) were among the strongest gainers earlier in the month, reflecting renewed interest in on‑chain privacy as regulators and corporations expand their oversight of digital money. However, the rally proved fragile: Zcash plunged 24% on a single Tuesday as traders took profits and analysts warned of the potential for deeper short‑term downside, even while maintaining that its long‑term privacy thesis remains intact.
Privacy themes were not limited to standalone tokens. In the Ethereum ecosystem, privacy‑enhancing initiatives accelerated as well. Ethereum co‑founder Vitalik Buterin unveiled a new conceptual framework for user privacy at Devcon, emphasizing techniques that could make transactions more confidential without sacrificing security or compliance. At the same time, Aztec advanced its own roadmap by launching the Ignition Chain, aiming to blend zero‑knowledge privacy with programmable DeFi.
Meanwhile, Grayscale’s Artificial Intelligence Crypto Sector index slumped about 25% in November. This decline came despite steady progress by some AI‑linked protocols in terms of user adoption and real‑world integration. The sell‑off suggests that valuations in this corner of the market may have run ahead of fundamentals earlier in the year and are now undergoing a healthy reset.
Infrastructure and payments: quiet momentum beneath the surface
While token prices swung violently, underlying crypto infrastructure continued to attract users. Near Protocol’s “Intents” product, designed to automate complex cross‑chain transactions, saw rapidly climbing adoption. By simplifying how users and applications interact with multiple blockchains, Intents has boosted the practical utility of assets such as Zcash and could gradually reduce the friction that still keeps many potential users out of DeFi.
On the payments front, Coinbase’s x402 open payments protocol registered a massive jump in throughput, rising from roughly 50,000 to more than 2 million daily transactions in November. That surge hints at a growing appetite for cheaper, programmable alternatives to traditional card networks and bank rails.
These developments underscore a key theme often missed when the narrative focuses only on price: the crypto stack continues to evolve, with more scalable, user‑friendly infrastructure gradually being built under the hood.
Expansion of crypto ETPs: XRP and Dogecoin join the club
November also marked another step in the mainstreaming of digital assets through traditional financial channels. The first exchange‑traded products (ETPs) tracking XRP and Dogecoin began trading after U.S. regulators approved broader, generic listing standards that made such launches easier.
For institutional and retail investors alike, the growing range of crypto ETPs lowers operational hurdles. They can now gain exposure to a wider spectrum of tokens through familiar brokerage accounts, without managing wallets, private keys or on‑chain transactions. Over time, this trend could deepen liquidity and make crypto markets more resilient, although it also raises questions about concentration risk and the influence of large issuers.
Macro tailwinds: Fed policy and politics line up for 2026
Grayscale sees macroeconomic conditions turning increasingly constructive for Bitcoin and other scarce assets heading into year‑end and beyond. Two main factors stand out: monetary policy and U.S. legislation.
On the monetary front, attention is fixed on the Federal Reserve’s Dec. 10 meeting, where a potential interest‑rate cut is on the table. Markets are also starting to price in additional easing in the following year. Lower rates typically weaken the U.S. dollar and reduce the opportunity cost of holding non‑yielding assets such as Bitcoin and gold. In that environment, the narrative of BTC as “digital gold” often gains renewed traction.
Adding to this dynamic are reports that National Economic Council Director Kevin Hassett has emerged as a leading contender to replace Jerome Powell as Fed Chair. Hassett has previously praised the central bank’s September rate cut as “a good first step” toward “much lower rates,” fueling speculation that a leadership change could lock in a more dovish policy stance.
On the political side, Grayscale points to bipartisan movement on digital asset market‑structure legislation. The Senate Agriculture Committee released a joint draft bill in November that could lay the groundwork for clearer rules governing trading venues, custody and disclosures. If crypto avoids becoming a polarizing campaign issue ahead of the 2026 midterm elections, this kind of legislation could unlock a new wave of institutional participation by reducing regulatory uncertainty.
What this means for long‑term Bitcoin investors
For long‑term Bitcoin holders, Grayscale’s message is straightforward: the path to outsized returns has historically run through periods of uncomfortable volatility. The current 30% drawdown, in the firm’s view, looks more like noise within a larger bullish structure than a signal of systemic breakdown.
Grayscale argues that over extended horizons, fundamentals—scarce supply, rising adoption, growing institutional integration—and valuations eventually align. Investors who position themselves with a multi‑year outlook, rather than attempting to time every short‑term fluctuation, have historically been those who benefited most from Bitcoin’s asymmetric return profile.
How this cycle could differ from previous ones
The key question for many market participants is whether this cycle will simply repeat past halving‑driven patterns or break out into something new. Grayscale leans toward the latter scenario, highlighting several structural shifts:
– Institutionalization of demand. A greater share of BTC is now held in institutional vehicles, from ETFs and ETPs to corporate balance sheets. This can dampen extreme retail‑driven bubbles, but it may also reduce the severity of subsequent crashes.
– Regulated access channels. As more banks, brokers and asset managers integrate Bitcoin into their offerings, the asset becomes less of a fringe trade and more of a recognized macroinstrument.
– Macro integration. Bitcoin is increasingly traded as part of a broader macro framework, reacting to interest‑rate expectations, inflation data and geopolitical risk, rather than purely to crypto‑native events.
If these trends continue, the four‑year boom‑and‑bust rhythm may gradually smooth into a pattern of more frequent, moderate corrections within longer, secular uptrends—closer to how high‑beta tech assets behaved in their maturing phases.
The role of sector rotation in the next cycle
The strong divergence between privacy coins, AI tokens and other niches underscores another emerging feature of the crypto market: sector rotation. Rather than moving in a single direction as one monolithic asset class, digital assets are starting to trade more like a collection of distinct sectors, each with its own fundamentals, narratives and risk cycles.
For investors, this opens the door to more nuanced strategies. Instead of only deciding whether to be “in or out” of crypto, they can ask:
– Which themes are likely to benefit most from upcoming regulation?
– How will lower interest rates impact yield‑bearing DeFi tokens versus pure‑play L1s or privacy coins?
– Which projects are building infrastructure that will still matter in five years, regardless of short‑term hype?
Grayscale’s report hints that, as the next phase of adoption unfolds, relative performance within crypto sectors may become as important as the direction of Bitcoin itself.
Looking ahead to 2026: consolidation now, potential breakout later
Pulling these threads together, Grayscale’s base case is that the current environment represents a mid‑cycle shakeout rather than the onset of a bear market. The combination of:
– Historically typical drawdowns,
– The absence of a speculative blow‑off top,
– Growing institutional rails and ETP access,
– Emerging regulatory clarity, and
– A shift toward easier monetary policy,
leads the firm to project that Bitcoin can establish new highs in 2026.
In the meantime, investors should expect continued volatility as markets digest macro headlines, regulatory developments and the natural growing pains of an asset class still in its adolescence. For those with a long‑term horizon, Grayscale concludes, staying focused on fundamentals rather than reacting to every 30% swing remains the most rational strategy.
“Eventually fundamentals and valuations will converge,” the report states, adding that the firm remains “optimistic about the outlook into year‑end and 2026,” even as the market works through its latest bout of turbulence.