Bitcoin Set to End Four-Year Cycle, Anticipated to Surge to New Highs in 2026: Insights from Grayscale

Grayscale, an asset management firm, suggests that Bitcoin is approaching the bottom of its latest pullback and may break the traditional four-year halving cycle. They predict that Bitcoin could achieve new all-time highs by 2026. Indicators suggest that the current dip might not last long, even though Bitcoin has experienced a significant decline recently.

Key Takeaways

Bitcoin is potentially on the verge of a breakout from its traditional four-year halving cycle.
Despite a 32% decline, some market indicators suggest a local bottom rather than a prolonged downturn.
U.S. Federal Reserve's interest rate decisions and legislative developments could significantly impact Bitcoin's recovery and institutional investment in 2026.

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Grayscale's recent analysis indicates that Bitcoin's latest pullback could be stabilizing, hinting that the cryptocurrency market is primed to break from the established four-year halving cycle. The firm forecasts that it may reach new all-time highs by 2026. Indicators such as Bitcoin's elevated options skew, now exceeding 4, imply that investors have proactively hedged against further declines.

Although Bitcoin has experienced a 32% decrease, Grayscale contends in a report released on Monday that the conventional four-year cycle may not hold true this time. "The outlook is uncertain," they stated, "but we believe the four-year cycle thesis may be proven wrong, and we expect Bitcoin prices could climb to new highs in the upcoming year."

Bitcoin’s pullback compared to previous declines. Source: research.grayscale.com

However, Grayscale notes that Bitcoin's short-term recovery may be limited until certain key flow indicators, such as futures open interest, ETF inflows, and selling behavior from long-term holders, show signs of improvement. According to Farside Investors, U.S. spot Bitcoin ETFs faced substantial downward pressure in November, resulting in a hefty $3.48 billion in net outflows—marking the second-worst month recorded.

Bitcoin ETF Flow in USD, millions. Source: Farside Investors

Recent trends, however, indicate a potential shift; funds have displayed four consecutive days of inflows, including a minor $8.5 million on Monday. This uptick suggests that appetite among ETF buyers is gradually rekindling after a recent sell-off.

A pivotal question remains, as noted by Iliya Kalchev, a dispatch analyst at Nexo, whether Bitcoin can regain the low-$90,000 range to steer clear of falling to the mid-to-low-$80,000 support levels.

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Fed Policy and U.S. Crypto Legislation as Potential Catalysts for 2026

Market analysts are keeping an eye on a significant factor— the U.S. Federal Reserve's interest rate announcement scheduled for December 10. Grayscale highlighted that this decision will likely serve as a critical catalyst for the market in 2026.

Currently, market forecasts predict an 87% likelihood of a 25 basis point rate cut, increasing from 63% a month ago, according to the CME Group’s FedWatch tool.

Probabilities of interest rate cuts. Source: CMEgroup.com

Furthermore, Grayscale noted that ongoing advancements toward the Digital Asset Market Structure bill could foster greater “institutional investment” within the industry later in 2026. However, this necessitates that cryptocurrency remains a bipartisan matter, steering clear of political division leading up to the midterm elections.

Efforts to this end commenced with the House of Representatives' passage of the CLARITY Act, which advanced in July during the Republicans' "crypto week." Senate leaders plan to expand on this legislation under the Responsible Financial Innovation Act, aimed at establishing a more comprehensive framework for digital asset markets.

The Senate Agriculture and Banking Committees are currently reviewing the bill. Senate Banking Chair Tim Scott mentioned in November that the committee aims to finalize the bill for signing into law by early 2026.

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