Exhibit 1: Crypto now a mid-sized alternative asset class
Along the journey from crypto’s early beginnings, token valuations have experienced four large cyclical drawdowns, or about one every four years (Exhibit 2). In three of these examples, the cyclical peak in valuations occurred 1 to 1.5 years after a Bitcoin halving event, which also happens once every four years. The current bull market has lasted more than three years, and the most recent Bitcoin halving was in April 2024, more than 1.5 years ago. Therefore, conventional wisdom among certain market participants says that Bitcoin’s price likely peaked in October, and 2026 will be a challenging year for crypto returns.#crypto
Exhibit 2: Rising valuations in 2026 will mark the end of the “four-year cycle” theory
Grayscale believes that the crypto asset class is in a sustained bull market, however, and that 2026 will mark the end of the apparent four-year cycle. We expect rising valuations across all six Crypto Sectors in 2026, and we think the price of Bitcoin could exceed its previous high in the first half of the year.
There are two main pillars to our optimistic outlook:
First, there will be ongoing macro demand for alternative stores of value. Bitcoin and Ether, the two largest cryptocurrencies by market cap[1], can be considered scarce digital commodities and alternative monetary assets. Fiat currencies (and assets denominated in fiat currencies) face additional risks due to high and rising public sector debt and its potential implications for inflation over time (Exhibit 3). Scarce commodities — whether physical gold and silver or digital Bitcoin and Ether — can potentially serve as a ballast in portfolios for fiat currency risks. As long as the risk of fiat currency debasement keeps rising, portfolio demand for Bitcoin and Ether will likely continue rising as well, in our view.