Stop Believing in the 4-Year Cycle! Grayscale Research: Bitcoin May Have Hit Bottom, All Eyes on the Fed

Digital asset management firm Grayscale has released a new research report, presenting a shocking perspective to the market: as long as the Federal Reserve (Fed) does not raise interest rates again, the Bitcoin bear market is likely coming to an end.

Grayscale's research director, Zach Pandl, analyzed two prevailing narratives in the Bitcoin market. The first is the long-held "4-year cycle" theory; the other is a new pricing logic driven by macroeconomic factors. He leans towards the latter, believing that Bitcoin's current price trend is increasingly influenced by interest rates and the economic environment, suggesting that traditional market cycle patterns may have broken down.

In the report, Zach Pandl pointed out that according to the 4-year cycle theory, there is still room for Bitcoin's price to decline further, predicting that it may not hit bottom until September or October this year. Based on the current price of around $65,000, this implies that the market could still face a drop of about 15%.

However, the reality of capital momentum tells a different story. Bitcoin has rebounded over 10% from its low of $57,717 in early July, and spot ETFs have attracted capital for seven consecutive trading days, with net inflows approaching $1 billion. Nevertheless, from a monthly perspective, the market remains in a weak bearish pattern, potentially facing several more months of downward pressure.

Zach Pandl explained that the traditional 4-year cycle model shows that Bitcoin typically bottoms out about a year after reaching a bull market peak or about two and a half years after a "halving," with historical average retracement levels as high as 80%. If history repeats itself, Bitcoin could drop to $50,000 in the coming months before entering the next major upward phase.

Zach Pandl is skeptical of this old narrative and proposes a more current perspective: Bitcoin is maturing and is no longer an asset driven by retail speculation; rather, it is becoming more akin to gold or tech stocks that are highly sensitive to interest rates.

The Grayscale report notes that past bear markets have often been accompanied by slowing economic growth and rising real interest rates (the yield on bonds adjusted for inflation). Zach Pandl wrote:

This bear market also reflects a significant shift in expectations regarding Fed monetary policy and rising real interest rates. Since the market is now driven by macroeconomic factors, once these macro headwinds reverse, Bitcoin will find its true bottom.

Looking back to October 2025, Bitcoin soared to a record high of $126,000, currently down about 49% from that peak. The previous sharp decline was largely attributed to the hawkish nomination of Kevin Warsh as Fed chair, which weakened market expectations for monetary easing and dollar depreciation, ending the narrative that had previously driven Bitcoin's rise, leading to a drop below $58,000 in early July before a precarious rebound.

From another perspective, once the macroeconomic environment improves, the speed of the market rebound could be astonishing. Zach Pandl said:

As long as the Fed does not raise interest rates again and economic growth remains robust, Bitcoin may have already hit bottom.

Therefore, Grayscale believes that while the "4-year cycle" theory predicts a deeper trough, the "macroeconomic perspective" suggests that the worst may be over.

On the other hand, the market is also paying attention to the progress of the U.S. "Digital Asset Market Clarity Act (CLARITY Act)." The market generally believes that if the bill successfully passes the Senate and becomes law, it will help enhance regulatory transparency and further improve investment confidence in Bitcoin and the overall cryptocurrency market, leading to a strong rebound.

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