Grayscale Sees Bitcoin Bottoming, Predicts Cycle-Breaking Highs by 2026 Amid ETF Inflows

Bitcoin’s recent correction may be stabilizing, with Grayscale analysts pointing to a potential local bottom and a divergence from the historical four-year halving cycle that could propel the cryptocurrency to new all-time highs by 2026, fueled by shifting ETF flows and key macro catalysts.

The cryptocurrency market is navigating a period of significant transition. After a sharp retracement from its 2025 peaks, Bitcoin is showing early signs of stabilization, according to a new analysis from digital asset manager Grayscale. In a research report published on Monday, the firm posits that Bitcoin may be forming a local bottom and could be on track to break its traditional four-year halving cycle pattern, potentially setting fresh record highs in 2026. This outlook emerges alongside a notable shift in U.S. spot Bitcoin exchange-traded fund (ETF) flows—from substantial outflows to consecutive days of inflows—suggesting buyer interest may be returning. Furthermore, Grayscale highlights two critical catalysts on the horizon: impending U.S. Federal Reserve interest rate decisions and the potential passage of landmark U.S. crypto legislation, both of which are poised to shape Bitcoin’s trajectory in the coming year.

Analyzing the Potential Local Bottom: Indicators Point to Stabilization

Bitcoin’s performance in recent weeks has been marked by volatility, with prices declining approximately 32% from recent highs. This pullback prompted concerns about a prolonged bearish phase. However, Grayscale’s analysis suggests the current drawdown may be closer to a local bottom than the beginning of a deep downturn.

One of the key technical signals cited in the report is the elevated Bitcoin options skew, which had risen above 4. In derivatives markets, a high skew indicates that investors are paying a significant premium for put options (which profit from price declines) relative to call options. Grayscale interprets this as a sign that investors have already hedged extensively against further downside risk, which can often signal that aggressive selling pressure is thinning out. The firm argues that while broader market uncertainty remains, these dynamics support the case for a potential cyclical shift.

Nevertheless, Grayscale and other analysts caution that a sustained recovery is not yet guaranteed. They note that a meaningful reversal hinges on positive turns in several critical flow metrics that have recently pressured prices. These include futures market open interest, the net flow direction of U.S. spot Bitcoin ETFs, and selling activity from long-term Bitcoin holders. Monitoring these factors will be essential for confirming whether the current stabilization evolves into a robust bullish trend.

The Halving Cycle Thesis Under Scrutiny: A Path to New Highs in 2026?

A central pillar of Grayscale’s report challenges a long-held belief in the cryptocurrency community: the four-year halving cycle thesis. This theory suggests Bitcoin’s price tends to follow a predictable pattern around its block reward halving events, which reduce the rate of new coin issuance approximately every four years, often leading to bull markets in the year following the halving.

Grayscale believes this thesis is "likely to prove incorrect" in the current market cycle. The firm points out that Bitcoin’s price action in 2025 has already displayed characteristics that diverge from typical post-halving trends observed in previous cycles. Instead of adhering to the old model, Grayscale presents an analysis suggesting Bitcoin could reach new all-time highs as soon as 2026. This prediction implies a accelerated or altered market cycle, potentially driven by new fundamental factors like institutional adoption via ETFs and evolving regulatory landscapes, which were not present in previous cycles.

This perspective invites a comparison to historical data. Previous cycles, such as those following the 2016 and 2020 halvings, saw major bull runs peak roughly 12-18 months after the event. A surge to new highs in 2026 would represent a different temporal structure, underscoring how maturation and new investor classes can fundamentally change market dynamics.

ETF Flows: From Outflow Pressure to Tentative Inflow Recovery

U.S. spot Bitcoin ETFs have been a dominant narrative and liquidity driver for Bitcoin throughout 2025. However, in November, they became a source of significant selling pressure. According to data from Farside Investors, these products collectively experienced net outflows of $3.48 billion during the month, marking their second-worst monthly performance on record.

This trend has shown clear signs of abating in recent days. The funds have posted four consecutive days of net inflows, including a modest $8.5 million on Monday. While these initial inflows are relatively small, they represent a crucial directional shift. This change suggests that investor appetite, which waned during the sell-off, may be gradually recovering.

Market observers are interpreting this shift carefully. Iliya Kalchev, an analyst at Nexo, characterized the recent market repositioning as a “leverage reset rather than a sentiment break.” This view implies that the downturn was more about flushing out over-leveraged positions than a fundamental loss of faith in Bitcoin’s long-term value proposition. Kalchev added that Bitcoin’s near-term trajectory depends on its ability to reclaim price levels in the low-$90,000 range; failure to do so could see it test stronger support zones in the mid-to-low $80,000 levels.

Macro Catalysts: Fed Policy and Crypto Legislation Take Center Stage

Looking beyond technicals and ETF flows, Grayscale identifies two major external catalysts that could define Bitcoin’s path into 2026: monetary policy and regulatory clarity.

The immediate focus for investors is the U.S. Federal Reserve’s upcoming interest rate decision on December 10. Market expectations have shifted dramatically, with futures data currently assigning an 87% probability to a 25-basis-point rate cut—a significant increase from the 63% odds priced just one month ago. Grayscale notes that the Fed’s decision and, critically, its forward guidance on the future path of rates will play an important role in shaping investor risk appetite and capital flows into assets like Bitcoin.

Later in 2025 and into 2026, progress on U.S. digital asset regulation is poised to be another major catalyst. Grayscale specifically highlights the potential impact of comprehensive market structure legislation. Momentum for such laws began earlier this year with the passage of the CLARITY Act in the House of Representatives during a coordinated Republican “crypto week” initiative.

Attention is now focused on broader bills like the Responsible Financial Innovation Act (RFIA), which aims to establish a clearer regulatory framework for digital asset markets. This legislation is under review in both the Senate Agriculture Committee and the Senate Banking Committee. Senate Banking Chair Tim Scott has stated that lawmakers aim to finalize and sign such legislation into law by early 2026.

Grayscale argues that maintaining bipartisan support for these bills ahead of midterm elections could help accelerate institutional adoption by providing regulatory certainty—a development that could align perfectly with their projected timeline for Bitcoin’s next phase of growth.

Strategic Conclusion: Navigating a Transitional Phase

Grayscale’s analysis paints a picture of a Bitcoin market at an inflection point. The combination of potential bottoming indicators, a break from historical cycle patterns, recovering ETF inflows, and looming macro-regulatory catalysts creates a complex but potentially bullish setup for 2026.

For crypto readers and investors, the current environment demands close observation of several key signals:

1. Flow Metrics: Sustained positive net inflows into spot Bitcoin ETFs will be crucial for validating renewed institutional and retail interest.
2. Price Action: Bitcoin’s ability to hold above potential support levels and reclaim higher price ranges will indicate whether selling pressure has truly subsided.
3. Macro Developments: The Federal Reserve’s December decision and subsequent commentary will immediately impact market liquidity conditions.
4. Legislative Progress: Tracking the advancement of bills like the Responsible Financial Innovation Act through Congress will provide insight into the future regulatory landscape and its potential to unlock further institutional capital.

While Grayscale’s prediction of cycle-breaking highs by 2026 offers an optimistic long-term vision, it is contingent upon these factors unfolding favorably. The easing of ETF outflows provides a tangible first step toward stabilization, but the broader outlook remains intertwined with traditional finance policies and governmental action. As such, the coming months will likely see Bitcoin’s narrative influenced as much by Washington D.C. and Federal Reserve meetings as by on-chain metrics and technical analysis, highlighting its continued integration into the global financial system