Grayscale’s Head of Research, Zach Pandl, has suggested that Bitcoin may have already reached its cyclical bottom if the Federal Reserve refrains from additional interest rate hikes and the U.S. economy continues to show resilience. The analysis, presented in a report titled ‘Bitcoin: 4-year cycle or macro asset?’, challenges the widely held ‘four-year cycle’ theory of Bitcoin’s price movements.
According to Pandl, market participants generally fall into two camps. The first adheres to the four-year cycle theory, which ties Bitcoin’s boom-and-bust patterns to its halving events. Under this view, the current bear market could still see further downside, with historical data showing an average cumulative drawdown of around 80% and a potential bottom forming in September or October. The second camp, which Grayscale endorses, sees Bitcoin as a mature asset increasingly influenced by macroeconomic conditions. From this perspective, Bitcoin behaves more like traditional risk-on assets, responding to monetary policy, inflation, and economic growth.
The key conditions for Bitcoin to have found a floor are twofold: the Federal Reserve must not deliver additional rate hikes beyond what is already priced in, and the U.S. economy must continue to show solid growth without slipping into a recession. If these conditions hold, Grayscale argues the worst of the selling pressure may be over. However, Pandl cautioned that a renewed increase in borrowing costs, persistent inflation forcing the Fed to keep policy restrictive, or a failure of the CLARITY Act to pass could still extend pressure on the cryptocurrency.
Grayscale also highlighted the importance of Strategy’s (formerly MicroStrategy) financial management. The company sold 3,588 Bitcoin for about $216 million, which Grayscale views as strengthening its balance sheet rather than indicating distress. This sale replenished Strategy’s dollar reserve to approximately $2.55 billion, covering nearly 17 months of preferred-share dividend obligations and reducing the risk of forced Bitcoin sales during market volatility. Pandl believes this improved cash position could help Bitcoin establish a more durable floor by alleviating fears of large-scale liquidation from its largest corporate holder.
Bitcoin has fallen over 50% from its $125,000 cycle peak, dipping below $60,000 amid spot ETF outflows and leveraged liquidations. Grayscale’s analysis suggests that if the macro environment stabilizes, the current price levels might represent a buying opportunity. However, the outlook remains contingent on unresolved factors, including Fed policy, economic data, and legislative progress on the CLARITY Act. As always, investors should consider the inherent uncertainty in these forecasts.
