Grayscale: The four-year cycle theory has failed, and Bitcoin's price is expected to reach a new all-time high next year
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Grayscale: The four-year cycle theory has failed, and Bitcoin's price is expected to reach a new all-time high next year
Grayscale Research believes that Bitcoin will not fall into a deep and prolonged cyclical correction.
Navigating Web3 tides with focused insightsAuthor: Grayscale
Translation: Luffy, Foresight News
TL;DR
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Bitcoin investors have achieved high returns but also experienced multiple sharp corrections. The approximately 30% decline since early October aligns with historical averages, marking the ninth significant pullback in this bull cycle.
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Grayscale Research believes bitcoin will not enter a deep and prolonged cyclical downturn, and expects prices to reach new highs next year. Tactically, some indicators suggest a short-term bottom, though overall sentiment remains mixed. Potential year-end catalysts include another Fed rate cut and progress on cryptocurrency-related legislation.
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Besides major cryptocurrencies, privacy-focused crypto assets have performed strongly; meanwhile, the first exchange-traded products (ETPs) for Ripple (XRP) and Dogecoin have begun trading.
Historically, investing in bitcoin has typically delivered substantial returns, with annualized gains of 35%-75% over the past 3-5 years. At the same time, bitcoin has undergone numerous sharp drawdowns—its price usually falls more than 10% at least three times per year. Like all assets, bitcoin's potential investment return can be viewed as compensation for its risk. Long-term holders (HODLers) have been richly rewarded, but they must endure periodic severe corrections along the way.
The bitcoin correction that began in early October continued through most of November, reaching a maximum decline of 32% (see Figure 1). So far, this pullback is close to the historical average. Since 2010, bitcoin has seen around 50 instances where its price dropped more than 10%, with an average drawdown of 30%. Since bitcoin's bottom in November 2022, there have already been nine declines exceeding 10%. Despite the volatility, such movements are not unusual during bitcoin bull markets.
Figure 1: This correction is consistent with the historical average
Bitcoin corrections can be measured by depth and duration, and fall mainly into two categories (see Figure 2): "cyclical corrections," which involve deep and prolonged price declines lasting 2–3 years and occur roughly every four years; and "bull market corrections," which average a 25% drop and last 2–3 months, typically occurring 3–5 times per year.
Figure 2: Bitcoin has experienced four major cyclical corrections
Debunking the Four-Year Cycle Narrative
Bitcoin's supply follows a four-year halving cycle, and historically, major cyclical price corrections have also occurred roughly every four years. As a result, many market participants believe bitcoin prices follow a four-year cycle—rising for three consecutive years before falling in the fourth.
Despite uncertainty ahead, we believe the four-year cycle theory will prove incorrect, and bitcoin prices are poised to reach new highs next year. First, unlike previous cycles, this bull market has not seen a parabolic price surge that might signal overheating (see Figure 3). Second, bitcoin’s market structure has changed: new capital is flowing in primarily through exchange-traded products (ETPs) and digital asset treasuries (DATs), rather than retail investors. Finally, as discussed below, the broader macro environment remains favorable for bitcoin.
Figure 3: No parabolic price rise in this cycle
There are already signs suggesting bitcoin and other crypto assets may have bottomed. For example, bitcoin put option skew is extremely high—especially for 3-month and 6-month options—indicating widespread hedging against downside risk (see Figure 4). The largest digital asset treasuries now trade below the value of their on-balance-sheet crypto assets (i.e., their “modified net asset values” or mNAVs are below 1.0), suggesting light speculation (often a precursor to recovery).
Figure 4: High put skew indicates downside risk is hedged
At the same time, several capital flow indicators show weak demand: futures open interest declined further in November, ETP flows only turned positive late in the month, and there may have been additional selling from early bitcoin holders. Regarding the latter, on-chain data shows a renewed spike in Coin Days Destroyed (CDD) at the end of November (see Figure 5). CDD is calculated by multiplying the number of bitcoins transacted by the number of days since their last transaction. Thus, CDD rises when large volumes of long-dormant coins are moved. Similar to the CDD spike in July, the late-November increase likely reflects large, long-term holders selling bitcoin. For near-term outlooks, investor confidence in a bottom will only strengthen once these capital flow metrics—futures open interest, ETP inflows, and early holder selling—show sustained improvement.
Figure 5: More long-dormant bitcoins moving on-chain
Privacy Assets Stand Out
According to our Crypto Sectors index, bitcoin’s performance in November was mid-tier among investable crypto assets. The best-performing sector was the “currency-type crypto assets” segment (see Figure 6), which rose during the month when excluding bitcoin. Gains were driven by several privacy-focused cryptocurrencies: Zcash (+8%), Monero (+30%), and Decred (+40%). There was also growing interest in privacy technologies within the Ethereum ecosystem: Vitalik Buterin unveiled a privacy framework at Devcon, and Aztec, a privacy-focused Ethereum Layer 2 network, launched its Ignition Chain. As we discussed in our previous monthly report, we believe blockchain technology cannot reach its full potential without privacy features.
Figure 6: Non-bitcoin currency-type assets outperformed in November
The worst-performing sector was “AI crypto assets,” which fell 25% during the month. Despite price weakness, the sector saw several notable fundamental developments.
In particular, Near Protocol—the second-largest asset in the AI crypto sector—continued to see rising adoption of its Near Intents product (see Figure 7). Near Intents eliminates cross-chain complexity by connecting users’ desired outcomes with a “network of solution providers” who compete to deliver optimal execution paths across chains. This functionality has already enhanced Zcash’s utility—users can spend ZEC privately while recipients receive ETH or USDC on other chains. Still in early stages, we believe such integrations could play a key role in enabling privacy-preserving payments across crypto ecosystems.
Figure 7: Near’s Intents product finds market fit
Additionally, developer attention has shifted toward the x402 protocol. Developed by Coinbase, x402 is a new open payment standard enabling AI agents to directly drive stablecoin payments over the internet. The standard requires no account creation, manual approval steps, or custodial payment processor fees, enabling frictionless, autonomous microtransactions executed by AI agents with blockchains serving as settlement layers. Recently, x402 adoption accelerated, with daily transactions increasing from fewer than 50,000 in mid-October to over 2 million by the end of November.
Finally, thanks to a new universal listing standard approved by the U.S. Securities and Exchange Commission (SEC) in September, the crypto ETP market continues to expand. Last month, issuers launched ETPs for Ripple and Dogecoin, and more single-asset crypto ETPs are expected before year-end. According to Bloomberg data, there are now 124 crypto-related ETPs listed in the U.S., managing a total of $145 billion in assets.
Rate Cuts and Bipartisan Legislation
In many ways, 2025 has been a landmark year for the crypto industry. Most importantly, regulatory clarity has driven a wave of institutional investment, laying the foundation for sustained growth in the coming years. However, valuations have not kept pace with improving long-term fundamentals: our market-cap-weighted Crypto Sectors index is down 8% year-to-date. Although 2025 has seen volatile crypto markets, fundamentals and valuations will eventually converge. We remain optimistic about the crypto market outlook heading into year-end and into 2026.
In the near term, a key variable may be whether the Federal Reserve cuts rates at its December 10 meeting and what guidance it provides on next year’s policy rates. Recent media reports indicate Kevin Hassett, director of the National Economic Council, is a leading candidate to succeed Fed Chair Powell. Hassett may favor lower policy rates: in a September CNBC interview, he described the Fed’s 25-basis-point cut as a “good first step” toward “much larger cuts.” All else equal, lower real interest rates typically weigh on the dollar’s value and benefit dollar-competing assets, including physical gold and certain cryptocurrencies (see Figure 8).
Figure 8: Fed rate cuts could support bitcoin prices
Another potential catalyst could be ongoing bipartisan efforts on crypto market structure legislation. In November, the Senate Agriculture Committee—which oversees the Commodity Futures Trading Commission—released a bipartisan draft text. If cryptocurrencies maintain bipartisan consensus and avoid becoming partisan issues in midterm elections, market structure bills could make further progress next year, potentially unlocking more institutional investment into the sector and ultimately lifting valuations. While we are optimistic about the short-term outlook, the most substantial gains may still come from long-term holding.
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