Grayscale Research released a report on Monday challenging the widely accepted four-year cycle theory for Bitcoin. The firm argues that prices will continue to reach new peaks in 2025, rather than following the traditional pattern of dramatic crashes after each halving event.
The cryptocurrency has experienced significant turbulence since early October. Bitcoin declined 32% from its peak through late November. Monday saw prices dip to $84,000 before recovering to $86,909 by early Tuesday morning.
Latest pullback consistent with historical average. Source: Grayscale Research
The research firm acknowledged that long-term holders typically achieve profits. However, these investors must endure substantial price corrections during bull markets. Drawdowns exceeding 25% occur regularly and do not necessarily indicate the start of extended downturns.
Institutional Investment Reshapes Market Dynamics
Several factors distinguish the current market cycle from previous patterns. The explosive price surges that typically precede major reversals have not materialized this time. Market participation has shifted dramatically toward institutional investors.
Exchange-traded products and digital asset treasuries now attract significant capital flows. This contrasts sharply with earlier cycles, which were dominated by retail traders on conventional exchanges. The change in investor composition may alter traditional price behavior patterns.
Macroeconomic conditions appear favorable for continued growth. Interest rate reductions could provide additional support. Bipartisan momentum behind cryptocurrency legislation in the United States adds another positive element to the outlook.
Market Strategists See Strong December Performance Ahead
Tom Lee of Fundstrat Capital forecasts robust market performance through the end of the year. The research chief projects the S&P 500 could reach 7,300, representing a potential 10% increase from current levels.
Lee highlighted a crucial development affecting market liquidity. The Federal Reserve concluded its quantitative tightening program, a policy that has reduced the central bank's balance sheet since April 2022. Historical precedent suggests significant upside potential following similar shifts.
The strategist referenced September 2019 as a comparable scenario. Markets surged over 17% within three weeks after quantitative tightening ended during that period. Current conditions mirror several aspects of that environment.
November's volatility created what Lee describes as a healthy position reset. Many fund managers capitulated during the turbulence, potentially setting up favorable conditions for a rally.
Bitcoin and Ethereum have underperformed expectations in recent weeks. Prices took substantial hits in mid-October and faced additional pressure subsequently. Lee maintains that neither cryptocurrency has reached its final peak level for this cycle.
Non-Bitcoin currency assets outperformed in November. Source: Grayscale Research
