• Grayscale says Bitcoin may bottom and could break the halving cycle with new highs in 2026.
• ETF outflows ease with four days of inflows, signaling buyer interest returning.
• Fed rate decisions and US crypto legislation may drive Bitcoin’s 2026 outlook.

Bitcoin’s latest retracement may already be stabilizing, with asset manager Grayscale arguing that the market is on track to break its traditional four-year halving cycle and could set fresh all-time highs in 2026.

Despite uncertainty following a 32% decline from recent peaks, emerging indicators suggest the current drawdown may be closer to a local bottom than the start of a prolonged downturn.

Market indicators point to a local bottom

According to Grayscale’s Monday research report, Bitcoin’s performance in 2025 has already shown characteristics that diverge from the typical post-halving trend.

The firm believes the long-held four-year cycle thesis is likely to prove incorrect and that Bitcoin may reach new highs next year.

One of the key signals cited is the elevated Bitcoin option skew, which has risen above 4.

This level indicates investors have already hedged extensively against additional downside, often a sign that selling pressure may be thinning out.

Grayscale argues that although the broader outlook remains uncertain, current dynamics support the case for a cyclical shift.

Still, analysts warn that a sustained recovery hinges on meaningful reversals in several major flow metrics.

These include futures open interest, ETF inflows, and selling activity from long-term Bitcoin holders—all of which have pressured prices in recent weeks.

ETF outflows ease as buyer appetite slowly returns

US spot Bitcoin ETFs, a major driver of the asset’s momentum throughout 2025, placed substantial downward pressure on the market in November.

The products recorded $3.48 billion in net outflows during their second-worst month on record, according to data from Farside Investors.

However, the trend has begun to reverse.

The funds have now posted four consecutive days of inflows, including a modest $8.5 million on Monday.

While early, the shift suggests investor interest may be gradually recovering following the recent sell-off.

Market positioning reflects what Nexo analyst Iliya Kalchev calls a “leverage reset rather than a sentiment break.”

He adds that the near-term trajectory depends on whether Bitcoin can reclaim the low-$90,000 range to avoid slipping toward stronger support in the mid-to-low $80,000 levels.

Fed policy and US crypto legislation emerging as key catalysts

Investors now turn to the next major macro catalyst: the U.S. Federal Reserve’s interest rate decision on December 10.

Markets currently assign an 87% probability to a 25-basis-point rate cut, sharply higher than the 63% odds priced in one month ago.

Grayscale notes that the Fed’s decision and its forward guidance could play an important role in shaping Bitcoin’s trajectory into 2026.

Later in the year, continued progress on US digital asset regulation may offer another catalyst.

Attention has focused on the Digital Asset Market Structure bill, which Grayscale says could help accelerate institutional adoption if it maintains bipartisan support ahead of the midterm elections.

Momentum began with the passage of the CLARITY Act in the House earlier this year, part of a broader Republican “crypto week” initiative.

Senate leaders from both parties have expressed interest in building on the legislation through the Responsible Financial Innovation Act, which aims to establish a clearer regulatory framework for digital asset markets.

The bill 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 the legislation into law by early 2026, a timeline that could align with what Grayscale sees as a pivotal year for Bitcoin’s next phase of growth.

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• Bitcoin drops 31% as investor belief weakens and risk sentiment fades.
• Fed uncertainty, regulation stalls, and ETF outflows deepen BTC’s slide.
• Long-term holders take profits, marking a shift from prior Bitcoin crashes.

Bitcoin has tumbled sharply from its recent record highs, with strategists at Deutsche Bank pointing to a weakening in investor conviction as a key force behind the cryptocurrency’s downturn.

The world’s largest digital asset, which suffered its worst weekly loss since February, continues to face pressure from shifting market conditions, regulatory uncertainty, and profit-taking across both institutional and long-term holders.

Bitcoin edged higher over the weekend but remained down 0.79% at $85,933 at the time of writing.

The cryptocurrency is now 31% below its all-time high of $126,272 reached on Oct. 6.

According to Deutsche Bank strategists Marion Laboure and Camila Siazon, the most significant factor driving the selloff is that “investor belief is crucial for continued gains — and right now the faithful are wavering.”

The strategists revived their “Tinkerbell effect” theory from 2021, which argues that bitcoin’s valuation is driven heavily by sentiment and what investors collectively believe it is worth.

In their view, sentiment-driven selling has re-emerged, shaking confidence in bitcoin’s ability to remain a stable part of diversified portfolios.

They noted that bitcoin’s “portfolio integration is being tested,” adding that the shift could be temporary or persist depending on broader financial conditions.

The bank shared 5 reasons behind the cryptocurrency’s sell-off.

Broader decline in stocks and risk appetite

The first major factor weighing on Bitcoin is a pullback in global risk sentiment.

Deutsche Bank notes that the cryptocurrency continues to behave like a risk asset rather than a safe-haven hedge, despite some investors hoping it would evolve into a defensive store of value.

The broader selloff in equities has spilled into digital assets, reinforcing that Bitcoin’s performance remains tethered to overall market mood.

Uncertainty over the Federal Reserve’s next moves

The second pressure point comes from uncertainty surrounding US monetary policy.

Investors have become less confident that the Federal Reserve will continue easing this year.

This shift has introduced volatility into multiple asset classes, including cryptocurrencies, as traders reassess risk-taking amid the possibility of a more restrictive policy stance.

Deutsche Bank strategists warn that further hesitation or hawkish signals from the Fed could deepen Bitcoin’s decline.

Regulatory momentum has stalled

Regulatory uncertainty is also contributing to the downturn.

According to Laboure and Siazon, momentum behind crypto-related regulatory progress has slowed since the summer.

This stagnation has complicated Bitcoin’s “portfolio integration,” making institutions more cautious about increasing exposure.

The lack of clear, forward-moving regulatory frameworks has left investors in a holding pattern, weakening one of the key drivers of Bitcoin’s mainstream financial adoption story.

Institutional outflows and thinning liquidity

A fourth driver of the selloff is rising institutional outflows.

Deutsche Bank notes that several Bitcoin exchange-traded funds have experienced withdrawals, reducing liquidity across the market.

Thinner liquidity amplifies price declines and increases volatility.

This dynamic marks a significant difference from previous crashes, many of which were predominantly driven by retail traders rather than institutions.

Long-term holders taking profits

Finally, long-term Bitcoin holders — often referred to as the most steadfast participants in the market — have begun taking profits.

This behavior, the strategists say, has not been observed in earlier downturns and underscores the unusual nature of the current correction.

Selling from such investors adds to market pressure and signals that even committed holders are reassessing their positions.

While the strategists say it remains unclear when or whether Bitcoin will stabilize, they emphasize that this year’s pullback is distinct.

Unlike prior crashes fueled by retail speculation, the current slump is unfolding amid a complex mix of institutional activity, shifting macroeconomic conditions, and evolving policy landscapes — leaving the market’s next move uncertain.

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• Metaplanet issues $135M in preferred shares to scale its Bitcoin treasury strategy.
• Saylor defends Bitcoin treasury models despite volatility and possible index exclusions.
• Treasury firms face premium compression as adoption slows and valuations slip below reserves.

Tokyo-listed Metaplanet has approved a ¥21.25 billion ($135 million) perpetual preferred share issuance as part of its ongoing effort to scale its Bitcoin-focused corporate treasury strategy, even as sector volatility intensifies.

The move comes amid heightened scrutiny of publicly traded firms with digital asset-heavy balance sheets and follows renewed defence of such strategies by Strategy founder Michael Saylor.

Metaplanet raises capital through perpetual preferred shares

The Japanese company’s board approved the issuance of 23.61 million Class B preferred shares on November 20 through a third-party allotment to overseas institutional investors.

Net proceeds are estimated at ¥20.41 billion ($130 million) after expenses, with payments scheduled for December 29, pending shareholder approval at an extraordinary general meeting on December 22.

The preferred shares—branded “MERCURY” (Metaplanet Convertible for Return & Yield)—carry a 4.9% fixed dividend and a conversion price of ¥1,000 per share.

Each preferred share entitles holders to annual dividends of ¥12.25 ($0.08), distributed quarterly, although the initial period ending December 31 will pay only ¥0.40 ($0.003) per share.

With the conversion price set well above Metaplanet’s November 19 closing price of ¥375 ($2.40), near-term dilution concerns remain limited.

Representative Director Simon Gerovich said the structure is designed to “minimize dilution from common share issuances while continuing to expand BTC holdings,” calling the offering a significant step in scaling Metaplanet’s Bitcoin treasury strategy.

Despite trading below the value of its Bitcoin reserves, Metaplanet has continued to build its digital asset position and recently deployed a ¥75 billion share repurchase program backed by a $500 million credit facility.

Saylor reaffirms commitment to Bitcoin treasury model

Meanwhile, Strategy founder and executive chairman Michael Saylor dismissed concerns about market turbulence during a November 14 CNBC interview.

He said Strategy “can withstand an 80%–90% drawdown and keep operating,” citing minimal leverage of just 1.15 times and long-dated debt maturities of 4.5 years.

Saylor argued that Bitcoin’s historical performance—averaging 50% annual returns over the past five years despite multiple major drawdowns—supports its role as a corporate treasury asset.

He highlighted that Strategy’s five-year performance of 71% outpaced Nvidia, asserting that no S&P 500 company has matched its returns.

However, Strategy faces potential removal from the MSCI USA and Nasdaq 100 indexes after index providers proposed excluding companies whose digital asset holdings exceed 50% of total assets.

JPMorgan estimates that MSCI exclusion alone could trigger up to $2.8 billion in passive outflows, with decisions expected by January 15.

Strategy’s stock has dropped more than 60% from its November 2024 peak but remains up over 1,300% since it began acquiring Bitcoin in August 2020.

Bitcoin treasury firms navigate premium compression

The broader Bitcoin treasury sector has entered what Coinbase Research describes as a “player-versus-player” environment.

Premiums to net asset value have compressed from 3.76 times in April to 2.8 times, while corporate Bitcoin adoption has fallen 95% since July.

Of 168 listed treasury companies, 26 now trade below the value of their digital assets.

Metaplanet was the first major firm to consistently trade below its reserves, a trend that accelerated its capital restructuring efforts.

The company plans to cap preferred share issuance at 25% of its Bitcoin net asset value, aiming to build credibility in the preferred equity market while expanding its treasury.

Strategy continues to accumulate aggressively, purchasing 8,178 Bitcoin this week at an average price of $102,171, raising its holdings to 649,870 BTC.

Saylor maintains Bitcoin will continue to outperform traditional assets, describing it as “digital capital” suited for long-term investors.

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• JPMorgan sets Bitcoin’s support price near $94K, citing rising mining costs.
• Analysts project Bitcoin could climb to $170K based on gold market parity.
• Bitcoin’s downside seen as limited after network difficulty raises production cost.

JPMorgan analysts said Bitcoin’s downside risk appears to be minimal at current levels, citing the cryptocurrency’s rising production cost as a key technical support.

In a note published Wednesday, the bank’s team led by Nikolaos Panigirtzoglou, managing director at JPMorgan, placed Bitcoin’s estimated support price around $94,000, suggesting the cryptocurrency has limited room to fall from its recent level of roughly $102,300.

Rising production costs set new support level

According to JPMorgan, the estimated cost to produce one bitcoin — often viewed as a proxy for the cryptocurrency’s “floor” price — has risen from about $92,000 to approximately $94,000.

This increase, the analysts said, is largely driven by a sharp rise in Bitcoin network difficulty, which measures how much computing power is required to mine new blocks.

As network difficulty climbs, miners must deploy more energy and hardware resources to maintain output, effectively increasing the marginal cost of producing new coins.

The analysts noted that Bitcoin’s price-to-production cost ratio now sits just above 1.0, placing it near the lower end of its historical range.

“The bitcoin production cost has empirically acted as a floor for bitcoin,” the analysts wrote, adding that “a $94,000 production cost implies very limited downside to the current bitcoin price.”

Historically, production costs have correlated closely with Bitcoin’s longer-term valuation trends, as mining profitability often influences both network participation and supply dynamics.

The current alignment, JPMorgan said, supports the view that downside risk is constrained unless broader market sentiment deteriorates further.

Upside scenario points to $170,000 target

While downside appears limited, JPMorgan reiterated its 6–12 month upside projection of about $170,000 for Bitcoin, based on a volatility-adjusted comparison to gold.

The analysts explained that Bitcoin currently consumes around 1.8 times more risk capital than gold, implying that its market capitalization could rise substantially to reach parity with gold’s level of private-sector investment.

At present, Bitcoin’s market cap stands near $2.1 trillion, while approximately $6.2 trillion is invested in gold via exchange-traded funds, bars, and coins.

“On that basis,” the note said, “Bitcoin’s market capitalization would need to rise by about 67%, implying a theoretical price close to $170,000.”

The analysts said this valuation framework reflects long-term potential rather than a near-term forecast.

Market sentiment, regulatory conditions, and liquidity factors will continue to influence how quickly Bitcoin might approach such levels.

Market context and sentiment shift

Last month, JPMorgan’s analysts issued a similar analysis, calling Bitcoin undervalued relative to gold and suggesting a possible year-end target around $165,000.

However, in a Block report, Panigirtzoglou said that recent liquidations and negative market sentiment made such a near-term rally unlikely.

Earlier in August, the same team projected a year-end target of about $126,000, which Bitcoin briefly surpassed on October 6, hitting an all-time high above $126,200 before a major liquidation event on October 10.

Despite recent volatility, JPMorgan’s latest note underscores a cautiously optimistic outlook.

With network fundamentals strengthening and production costs rising, analysts view current prices as near structural support levels — leaving room for long-term appreciation if broader market confidence returns.

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