Grayscale Research put out a report Monday saying Bitcoin will likely avoid what many call the four-year cycle. This popular idea suggests BTC prices climb to a top and then crash hard once every four years, matching up with its halving events.
“Although the outlook is uncertain, we believe the four-year cycle thesis will prove to be incorrect, and that bitcoin’s price will potentially make new highs next year,” analysts at Grayscale wrote.
The world’s biggest cryptocurrency has been through rough trading since early October. Prices fell 32% from their highest point through most of November. On Monday, Bitcoin dropped to $84,000 before climbing back to $86,909 by 2:20 a.m. ET Tuesday.
Grayscale said investors who hold for the long haul usually see gains, but they have to “stomach sometimes challenging drawdowns” along the way. Price drops of 25% or more happen pretty regularly during bull markets and don’t always signal a long decline is starting, the firm said.
Why this cycle looks different
The research company laid out several reasons why Bitcoin might break from its usual four-year pattern this time.
One big difference: this market run hasn’t seen the explosive price jump that normally shows up before a major reversal. Things also look different now because institutional investors are putting money into exchange-traded products and digital asset treasuries instead of retail buyers trading on regular exchanges, according to the report.
Economic conditions look fairly good too, Grayscale noted. Possible rate cuts and bipartisan support for U.S. crypto laws could help prices.
Industry leaders agree on bullish outlook
Tom Lee, head of research and CIO at Fundstrat Capital, thinks December will be strong for markets. He’s calling for the S&P 500 to potentially reach 7,300 by year-end, a possible 10% gain from current levels.
“7,000 is only 2% for S&P. From here, I think 5% or maybe even 10% is possible in December,” he said on CNBC.
This comes even after a rocky start to December. Lee pointed to the Federal Reserve ending quantitative tightening as a major boost.
“Today is the day that quantitative tightening ends. And as you know, the Fed’s been shrinking its balance sheet since April 2022,” Lee said. He compared things now to September 2019, when markets rallied more than 17% within three weeks after quantitative tightening ended.
November’s volatility created a healthy reset in positions, Lee thinks. “And I think many fund managers we talked to in November, in the midst of all that, kind of threw in the towel,” he said.
On cryptocurrencies, Lee stays optimistic despite recent disappointments. “Bitcoin (BTC-USD) and crypto have been disappointing because they really took it in the gut in mid-October and then kind of got hit again,” he said.
But he thinks the highs aren’t in place yet for Bitcoin or Ethereum, suggesting a recovery could happen alongside equity market gains.
Lee expects the Fed’s dovish stance will keep supporting both equities and crypto. “If we have a dovish Fed, that’s really a tailwind,” he said, noting the bond market looks “more dovish than the Fed” right now.
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