Grayscale Pushes Back On The 80% Crash Calls — Says Bitcoin's Bottom Hinges On The Fed And CLARITY Act

• Grayscale's Zach Pandl said Bitcoin's cycle low depends largely on Federal Reserve policy and whether the CLARITY Act passes the Senate.
• The firm attributed Bitcoin's drop below $60,000 to the unwinding of the "debasement trade" after markets shifted toward expecting higher interest rates.
• Grayscale's base case assumes the CLARITY Act passes, Strategy stabilizes its balance sheet, and the Fed avoids rate hikes, suggesting Bitcoin may already be near a bottom.

Whether Bitcoin (BTC) has already reached the low of its current cycle depends largely on two catalysts, the Federal Reserve's next policy moves and the fate of the CLARITY Act in the US Senate, according to Grayscale Head of Research Zach Pandl.

In Grayscale’s "The Stack" note published this week, Pandl laid out two scenarios for Bitcoin after it slipped below $60,000 to make new cycle lows, leaving it down more than 50% from its peak of about $125,000 in October. The report characterized the drawdown as another cyclical pullback around Bitcoin's rising longer-term trend rather than a break in that trend.

Fed Expectations Drove The Selloff

Pandl pinned the decline largely on a shift in Fed expectations that unwound “debasement trade,” bets on hard assets such as Bitcoin, gold, and silver as a hedge against currency debasement. He noted that prediction markets had late last year expected President Trump to nominate the relatively dovish Kevin Hassett as Fed chair, but Trump instead chose the more hawkish Kevin Warsh, and that with inflation still stubborn, markets now expect the Fed to raise rates this year rather than cut. 

The Grayscale report framed the move as a broad repricing of hard assets, noting spot gold was also down about 25% from its highs.

Bitcoin’s price was down by 0.5% during the past 24 hours. On Stocktwits, the retail sentiment around BTC moved to ‘neutral’ from the ‘bearish’ zone, while chatter around it stayed in the ‘normal’ levels over the past day.

CLARITY Act And Strategy Are The Key Risks

Beyond the Fed, Pandl cited three additional pressures on crypto, including uncertainty over whether the CLARITY Act will pass, strain on the balance sheet of Bitcoin treasury company Strategy (MSTR), and investor caution about the digital-security risks posed by quantum computing.

In Grayscale's baseline scenario, the CLARITY Act will clear the Senate, Strategy will shore up its balance sheet, and the Fed will hold off on rate hikes, a mix that would suggest Bitcoin's price may already be near its low. In the downside scenario, the CLARITY Act may fail to pass this year, Strategy and other digital-asset treasury companies could deleverage further, and persistent inflation might force the Fed to hike, which Pandl said could push Bitcoin moderately lower.

Why Grayscale Remains Constructive

Notably, Grayscale also argued that the drawdown was unlikely to reach the roughly 80% peak-to-trough declines seen in prior Bitcoin cycles, citing a more muted bull market and stickier institutional demand for digital assets, a more measured view than some of the bleaker takes circulating around treasury companies.

Pandl also pointed to structural positives that he said continue to support the asset class, including an improving regulatory backdrop driving institutional adoption, the recent arrival of US-regulated perpetual futures, and growth in stablecoins and tokenized assets. He added that the longer-term tailwinds behind crypto, rising government debt, declining trust in intermediaries, and the rise of AI, remain in place, and said current valuations offer compelling entry points for investors with longer-term horizons.

Read also: Galaxy CEO Mike Novogratz Says A Turn In Alibaba Could Signal Bitcoin Has Bottomed

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