Bitcoin’s path out of its bear market might hinge less on its usual four-year cycle and more on what the Federal Reserve does with interest rates, according to Grayscale. The asset manager’s head of research, Zach Pandl, laid out two scenarios that could determine how deep the current downturn goes and when it might finally bottom.
Traditionally, bitcoin’s price swings have followed a pattern tied closely to its halving events: major cuts in new coin supply every four years. Past bear markets saw nearly 80% losses, typically bottoming about a year after the cycle’s peak. If this pattern holds, bitcoin may not find a bottom until September or October, implying more room to fall.
Changing Market Dynamics and Fed Policy
However, Grayscale cautions that this historic cycle might be losing its grip. The rise of institutional investors, listed investment products, and shifts in the broader monetary environment are reshaping bitcoin’s demand fundamentals. These factors could dilute the halving’s influence, making macroeconomic drivers more decisive.
Grayscale suggests watching the Federal Reserve’s moves closely. Previous crypto bear markets have often coincided with slowing economic growth or rising real interest rates. Right now, bitcoin’s decline has tracked tighter Fed policies and higher inflation-adjusted yields. If the Fed halts rate hikes and the U.S. economy holds steady through 2026, bitcoin could have already hit its bottom.
"If the Fed avoids another rate increase and economic growth remains solid, bitcoin’s price may have found its floor," Pandl said.
This view frames bitcoin more like a traditional asset class, reacting to monetary policy shifts rather than just its own internal cycles. It also aligns with broader market trends where economic data and central bank signals dominate investor behavior.
The coming months will test which narrative prevails. Should the Fed ease up, bitcoin might rebound sooner and with less pain than past cycles suggest. But if rate hikes continue or growth falters, the path to recovery could stretch into the fall.
This material is for informational purposes only and does not constitute financial advice.
