Grayscale's Latest Prediction: Bitcoin Price to Hit New Highs in 2026, Four-Year Cycle Theory Invalidated

Grayscale Research recently stated that Bitcoin prices could reach all-time highs in 2026, while dismissing concerns that the market is entering a multi-year bear cycle. In a report released earlier this week, Grayscale disagreed with the “four-year cycle” narrative—a popular view that Bitcoin prices always peak and then drop sharply according to the halving cycle.

The Four-Year Bitcoin Cycle Theory Is Failing

The Grayscale analyst team believes that the current market landscape is fundamentally different from previous cycles. While they acknowledge that the market remains full of uncertainty, they argue that the four-year cycle theory will soon become outdated and that Bitcoin prices could even peak as early as next year before continuing to rise into 2026.

The four-year cycle theory originates from Bitcoin’s halving mechanism. Every four years, Bitcoin’s block rewards are halved, and historically, this supply shock has often triggered price surges. The past three halvings (2012, 2016, 2020) followed a similar pattern: within 12 to 18 months after the halving, prices peaked, followed by a long bear market with declines typically over 80%. This regularity has made the four-year cycle theory a mainstream narrative within the crypto community.

However, Grayscale points out that the current cycle’s market structure has fundamentally changed. Previous cycles were driven by retail investors, with price swings mostly fueled by sentiment, resulting in parabolic rises and crashes. The 2025 market, by contrast, is dominated by institutional capital, with these investors following very different behavioral patterns—they focus more on fundamentals, risk management, and long-term allocation rather than short-term speculation.

This structural change reduces the likelihood of the parabolic surges and crashes seen in the past. Institutional capital inflows are more stable and continuous; institutions don’t collectively chase highs at price peaks like retail investors, nor do they panic sell en masse. This shift in behavior may result in a smoother, more sustained upward trend in Bitcoin prices, rather than the sharp spikes and drops of previous cycles.

Three Major Pieces of Evidence the Four-Year Cycle Is Failing

Institutional Dominance: ETFs and corporate holdings have replaced retail as the main sources of buying, with more rational behavior patterns

Liquidity Structure: Digital vaults and custodial services make it harder for tokens to flow to spot exchanges for selling

Regulatory Maturity: Clear regulatory frameworks reduce policy uncertainty-driven crashes

Grayscale’s view has important implications for investors. If the four-year cycle truly fails, it means the strategy of waiting for a “bear market bottom” may no longer work. Prices may not experience 80%+ deep corrections like in the past, but instead consolidate within higher bottom ranges. This requires investors to adjust expectations and strategies, rather than simply applying historical experience.

32% Correction Doesn’t Change Bull Market Structure

From early October to late November, Bitcoin experienced significant volatility, dropping over 32% from recent highs. This level of pullback in the early stage of a bull market triggered panic among many investors, who worried it signaled the start of a bear market. However, Grayscale points out that large corrections during bull markets are not uncommon. In past bull markets, drops of 25% or even more have occurred frequently and do not necessarily signal a long-term reversal.

Historical data supports this view. In the 2017 bull market, Bitcoin rose from around $3,000 to nearly $20,000, but experienced several corrections of over 30% along the way. During the 2021 bull run, Bitcoin went from $10,000 to $69,000, with multiple corrections of roughly 40%. These pullbacks were often driven by excessive short-term leverage, negative news, or profit-taking, but as long as the bullish fundamentals remained intact, prices eventually hit new highs.

In fact, long-term Bitcoin holders have often seen substantial returns during market rebounds. Grayscale’s data shows that investors who have held Bitcoin for more than four years have nearly a 100% chance of profiting. Even those who bought at local highs were able to turn a profit with a long enough holding period. This statistical reality reinforces the investment philosophy that “time in the market” is more important than “timing the market.”

The current 32% correction was mainly caused by macro uncertainty and short-term leverage unwinding. Trump’s tariff policies triggered global market turmoil, and as a risk asset, Bitcoin was affected as well. Additionally, excessive leverage in the futures market led to cascading liquidations, amplifying price swings. However, these are short-term factors and do not alter the long-term bullish logic for Bitcoin prices.

More importantly, this correction has provided buying opportunities for institutional investors. Multiple on-chain analytics firms reported that during the correction, Bitcoin ETFs continued to see net inflows, indicating that institutions are buying the dip. This “smart money” flow is an important signal for the continuation of the bull market.

Institutional Capital Reshaping Bitcoin Price Logic

The difference between the current cycle and the old model lies in the new cash flow structure. Unlike previous retail-driven growth phases centered on spot exchanges, the 2025 market will be dominated by institutional capital. These funds come from ETFs, companies holding digital assets in digital vaults, and professional institutional investors.

The launch of Bitcoin ETFs marks a turning point in this structural shift. Since the approval of US spot Bitcoin ETFs in early 2024, over $30 billion has flowed in. This capital mainly comes from traditional financial institutions, pension funds, and high-net-worth individuals who previously couldn’t or wouldn’t hold Bitcoin directly but can now allocate via ETFs. This new funding channel provides consistent buying support for Bitcoin prices.

Corporate holdings have also become a key source of demand. Publicly traded companies like MicroStrategy and Tesla have added Bitcoin to their balance sheets as a hedge against inflation and for asset diversification. These enterprise buyers typically employ long-term holding strategies and are unlikely to sell due to short-term price swings. Data shows that Bitcoins held by companies rarely flow to exchanges, reducing circulating supply and providing structural price support.

The maturity of digital vaults and custodial services has also changed market dynamics. Institutional investors store Bitcoin with professional custodians like Coinbase Custody and Fidelity Digital Assets, making it much harder for these tokens to be quickly sold on spot exchanges. In contrast, retail investors used to keep Bitcoin in exchange wallets and could sell at any time. This change in liquidity structure has made Bitcoin prices less sensitive to short-term sentiment swings.

Macro Environment and Regulatory Tailwinds

Beyond internal factors, Grayscale also emphasized the supportive macro environment for risk assets. Many institutions expect the US to cut interest rates next year, and as bipartisan legislation advances in Congress, the policy environment for crypto is gradually improving. Reportedly, under President Donald Trump’s leadership, regulatory proposals related to crypto are more likely than ever to make progress.

Rate cut expectations are an important macro factor supporting Bitcoin prices. When rates fall, the opportunity cost of holding cash and bonds decreases, making investors more willing to allocate to risk assets like stocks, gold, and Bitcoin. Historical data shows that Bitcoin performs well in a loose monetary policy environment and struggles during tightening cycles. If the Fed cuts rates as expected in 2026, it will provide strong macro support for Bitcoin prices.

Improvement in the regulatory environment is equally crucial. The Trump administration has taken a relatively friendly approach to crypto, firing SEC Chair Gensler, who was critical of crypto, and pushing to establish a national Bitcoin reserve. This policy shift has removed the regulatory uncertainty that hung over the market in recent years, giving institutional investors more confidence to enter.

Tom Lee’s Optimistic Forecast

BitMine CEO Tom Lee shares a similar view. He believes Bitcoin prices have become detached from fundamentals. Lee points out that metrics such as wallet user numbers, on-chain activity, network fees, and tokenization rates are all growing steadily, while prices continue to face selling pressure. This makes the risk-reward profile of Bitcoin and Ethereum outstanding—more attractive than most traditional assets.

In a recent US TV interview, Tom Lee maintained his optimistic outlook. He predicted that if major fund inflows pick up strongly, Bitcoin could hit new highs as early as January next year. This statement further reinforces the view that the current cycle will not follow the four-year rhythm of the past, but is instead entering a completely new growth model due to institutional capital inflows, gradual policy easing, and significant changes in the digital asset ecosystem.

Key Catalysts for New Bitcoin Highs in 2026

Continuous ETF Inflows: Institutional capital provides stable buying support

Start of Rate Cut Cycle: Loose monetary policy pushes risk assets higher

Regulatory Clarity: Friendlier policy environment removes uncertainty

Strong Fundamentals: On-chain activity and adoption rates continue to grow