Grayscale Predicts Bitcoin Recovery: A Historical Perspective

In the wake of Bitcoin’s recent 30% decline, Grayscale Research remains confident, asserting that this retreat is in line with historical trends and will not signal an extended downturn.

Key Takeaways

Bitcoin's recent 30% drop is consistent with its historical price fluctuations.
Grayscale predicts that Bitcoin will reach new all-time highs in 2026.
The firm challenges the notion of a market downturn based on the four-year cycle, citing significant differences today.
Privacy tokens outperformed during a sector-wide split in November, while AI-related cryptocurrencies declined.
Macroeconomic conditions and bipartisan legislation may support a rally in 2026.

Grayscale: Bitcoin slide is ‘typical,’ sees new highs in 2026 - 1

Historical Trends in Bitcoin’s Price Movements

Grayscale released a report on December 1, anticipating that Bitcoin could achieve new highs next year, notwithstanding mixed signals in the short term. This recent decline, marked as the ninth substantial drop since the current bull market began, fits within Bitcoin’s typical market behavior. Since 2010, Bitcoin has experienced around 50 pullbacks of 10% or greater, with an average peak-to-trough decline of approximately 30%.

“Bitcoin investors have been rewarded for holding long-term, but they’ve endured significant downturns along the way,” Grayscale noted. The latest slump commenced in early October and lasted through November, reaching as low as 32%. Currently, Bitcoin has rebounded over 6%, trading around the $90,000 mark.

Grayscale: Bitcoin slide is ‘typical,’ sees new highs in 2026 - 2
Source: CoinGecko

Addressing the Four-Year Cycle Myth

Grayscale disputes the commonly held belief that Bitcoin is poised for a downturn in 2026 based on its halving cycle. They point out that this time, the market looks notably different: there is no rapid price spike, increased participation from institutions through exchange-traded products and digital asset treasuries, and favorable macroeconomic conditions.

The firm suggests that the market may be nearing a short-term bottom, evidenced by an imbalance in put options and digital asset treasuries trading below their net asset values—indicators of a decline in speculative behavior.

Performance of Privacy Tokens Amid Sector Divergence

In November, the performance of the crypto markets varied widely across different sectors. Privacy coins, such as Zcash and Monero, saw significant gains, although it's uncertain whether this trend will persist. For instance, Zcash experienced a 24% drop recently, leading analysts to predict further potential declines while also noting the persistence of its long-term fundamentals.

Additionally, privacy initiatives related to Ethereum accelerated recently, with Vitalik Buterin unveiling a new privacy framework at Devcon and Aztec launching its Ignition Chain.

In contrast, Grayscale’s Artificial Intelligence Crypto Sector suffered a 25% decline, even as the adoption of some AI technologies grew. Meanwhile, Near Protocol’s (NEAR) “Intents” product, which streamlines cross-chain transactions and enhanced Zcash’s utility, gained traction. Coinbase’s new x402 open payments protocol also surged, increasing from 50,000 to over 2 million daily transactions in November.

The landscape for crypto exchange-traded products expanded in November, as the first XRP and Dogecoin ETPs commenced trading following U.S. regulatory approval of new generic listing standards.

Factors Supporting a 2026 Rally

Grayscale believes that current macroeconomic factors could provide significant support towards the end of the year. An anticipated interest rate cut during the Federal Reserve’s meeting on December 10 could weaken the U.S. dollar, boosting demand for assets like Bitcoin and gold. Expectations for lower rates are reinforced by reports that National Economic Council Director Kevin Hassett may be the next Fed Chair, having previously indicated that the Fed's September rate cut was a positive move towards lower rates.

Additionally, ongoing bipartisan efforts on crypto market-structure legislation in Congress could serve as another catalyst. A bipartisan draft bill was unveiled by the Senate Agriculture Committee in November. If the crypto space can avoid becoming a divisive topic before the 2026 midterms, this legislation might enhance institutional engagement in the crypto market.

Despite short-term volatility, Grayscale remains firm in its view that substantial returns will favor long-term investors. “Eventually, fundamentals and valuations will align,” the firm stated, expressing optimism for the market's outlook as we approach the end of the year and into 2026.