Grayscale Predicts Bitcoin Will Reach New Highs by 2026, Challenges Cycle Theory

Grayscale Research is questioning the popular belief in Bitcoin's four-year cycle theory, asserting that the cryptocurrency is poised to achieve new highs in 2026, even after experiencing a 30% decline since early October.

Key Takeaways

Grayscale Research predicts Bitcoin will reach new highs by 2026, rejecting the traditional four-year cycle theory.
Recent market dynamics point to a potential bottom formation despite the recent 30% drawdown.
Accumulation by large holders continues, while Strategy’s cash reserve raises questions about corporate Bitcoin accumulation.
The upcoming MSCI decision may lead to significant market impacts, with potential forced selling from institutions.
Investors should remain cautious as market recovery may take time, particularly if regulatory concerns persist.

Grayscale Predicts Bitcoin Will Reach New Highs by 2026, Challenges Cycle Theory

According to their recent analysis, Grayscale explains that Bitcoin's current market structure is largely underpinned by exchange-traded funds and corporate treasuries instead of retail exchanges, indicating a shift from past cycles that typically saw significant and lasting downturns.

Grayscale Predicts Bitcoin Will Reach New Highs by 2026, Challenges Cycle Theory

This report arrives as Bitcoin approaches crucial support levels below $90,000, coinciding with Strategy’s unprecedented move to create a $1.44 billion cash reserve.

Despite institutional entities like BlackRock, Vanguard, and JPMorgan selling off $5.38 billion in Strategy shares during the third quarter, venture capital investment in crypto projects reached an all-time high of $14.48 trillion in November.

Market Dynamics Indicate Potential Bottom

Bitcoin's recent downturn aligns with historical trends, although it may seem alarming to newer investors.

Since 2010, Bitcoin has seen approximately 50 declines exceeding 10%, with the average peak-to-trough drop being around 30%, nearly paralleling the current 32% decline from recent peaks.

Grayscale Predicts Bitcoin Will Reach New Highs by 2026, Challenges Cycle Theory

Since its low point in November 2022, Bitcoin has decreased by at least 10% on nine separate occasions, marking this as the ninth significant pullback in the ongoing bull market.

Grayscale differentiates between “cyclical drawdowns” lasting two to three years and “bull market drawdowns”, which average 25% and last two to three months, categorizing the current situation as the latter.

Several technical indicators hint that capitulation might be complete. Bitcoin put option skew has reached high levels across both three- and six-month durations, suggesting widespread hedging against potential losses.

Data from CryptoQuant shows that on-chain traders, those holding Bitcoin for a period of one to three months, are facing significant losses this cycle, with a realized price around $113,692 representing a 20-25% drop over two weeks.

Grayscale Predicts Bitcoin Will Reach New Highs by 2026, Challenges Cycle Theory

Historically, such phases have been linked to the formation of market bottoms, as traders must decide between selling and holding.

Meanwhile, accumulation by major holders continues. One whale bought 2,612 Bitcoin valued at $227 million last week, while significant corporate treasuries are trading below the net asset value of their Bitcoin assets.

However, futures open interest diminished further in November, and the inflow into exchange-traded products remained negative until late in the month, indicating that demand recovery is still in progress.

Grayscale Predicts Bitcoin Will Reach New Highs by 2026, Challenges Cycle Theory

A recent increase in Coin Days Destroyed in late November suggests another wave of selling from long-term holders, echoing trends seen in July.

Challenges Arise from Strategy’s Reserve

The announcement from Strategy significantly changes the narrative around corporate Bitcoin accumulation that has influenced markets throughout 2025.

Currently, the company possesses 650,000 Bitcoin, which accounts for about 3.1% of the total supply of 21 million Bitcoins. Yet, its market cap of $49.26 billion is lower than the $55.9 billion value of its Bitcoin holdings.

CEO Phong Le has stated that this reserve covers 21 months of dividend and interest payments, which amount to roughly $689 million annually, funded through sales of common stock.

The firm holds $8.2 billion in debt and must pay $800 million in annual preferred dividends, while its software segment continues to encounter cash flow issues.

“The establishment of a USD Reserve alongside our BTC Reserve is the next phase in our evolution,” remarked Michael Saylor, emphasizing that this strategy aims to manage short-term volatility while striving to become the leading issuer of digital credit.

The company has adjusted its fiscal 2025 outlook, projecting operating incomes ranging from a loss of $7 billion to a profit of $9.5 billion, depending on Bitcoin price fluctuations between $85,000 and $110,000 at the year's end.

This situation arises amid increasing scrutiny ahead of the MSCI’s decision set for January 15, 2026, regarding whether to exclude companies with over half of their assets in cryptocurrency from its global indices.

JPMorgan estimates this could lead to enforced institutional sell-offs between $2.8 billion and $8.8 billion, affecting entities with over $137 billion in digital assets, including around 5% of all existing Bitcoin.

In an interview with Cryptonews, Farzam Ehsani, CEO of VALR, warned that Bitcoin might test the $60,000-$65,000 range if the market continues to decline.

Nonetheless, recovery may begin once Strategy addresses its regulatory challenges, and index firms clarify their stances.

“Strategy holds a crucial role in the crypto space, and any issues they face could prompt Bitcoin’s price to fall by as much as 30%,” Ehsani noted.

Ray Youssef, CEO of NoOnes, also emphasized that record inflows of venture capital suggest institutions are strategically buying in at lower levels.

“Selling BTC to retail investors at $200,000 per coin is an attractive prospect,” Youssef concluded, hinting that significant asset price recovery may be delayed until the first quarter of 2026 following the successful institutionalization of the market.