Key Takeaways
- • Grayscale research indicates Bitcoin is currently undervalued according to on-chain valuation metrics, but has not reached the deeper capitulation lows seen in previous cycles (e.g., post-FTX collapse in late 2022 when Bitcoin bottomed near $16,000).
- • Bitcoin's near-term trajectory depends critically on two short-term catalysts: passage of the CLARITY Act in the U.S. Senate to establish clearer crypto regulatory rules, and the performance of leveraged Bitcoin holders in the short run.
- • Bitcoin fell below $60,000 in June 2026, triggering valuations below its long-term average, but institutional adoption through ETFs and broader market structure changes suggest this bear market cycle may not need to match the 80% declines seen in previous cycles.
- • Galaxy Digital downgraded the probability of CLARITY Act passage to 60% from 75%, citing limited remaining Senate calendar time and unresolved controversies as headwinds to legislation that could clarify the regulatory environment for digital assets.
- • Zach Pandl, head of research at Grayscale, argued in a June 9 research note that whether Bitcoin has hit bottom depends on the regulatory outlook and leverage dynamics, rather than on-chain valuation signals alone.
Summary
Grayscale's research team has concluded that Bitcoin appears undervalued by standard on-chain metrics but has not yet reached the distressed pricing levels characteristic of previous market cycles. In a June 9 research note, Zach Pandl, head of research at Grayscale, assessed Bitcoin's valuation using the firm's composite on-chain indicator—a composite of three separate valuation measures—and found the asset trading below its long-term valuation average following its June decline below $60,000. However, Pandl emphasized that current price levels do not match the capitulation lows observed after major market dislocations, such as the FTX collapse in November 2022, when Bitcoin bottomed near $16,000.
The critical distinction Grayscale draws is between valuation cheapness and cycle bottoming. While on-chain metrics suggest Bitcoin is cheap relative to historical norms, the firm argues that whether the current period represents a true cycle low depends on factors beyond pure valuation: specifically, the regulatory landscape and short-term leverage dynamics. Pandl noted that "whether we have hit bottom this time depends on the regulatory outlook and on how large leveraged BTC holders perform in the short run," indicating that technical valuation signals alone are insufficient to predict market bottoms.
Grayscale identified two primary near-term catalysts that could influence Bitcoin's price trajectory. The first is progress on the CLARITY Act in the U.S. Senate, legislation designed to establish clearer regulatory rules for cryptocurrency markets. However, Galaxy Digital, the crypto-focused investment firm owned by Mike Novogratz, recently downgraded the probability of CLARITY Act passage to 60% from 75%, citing constraints on the Senate calendar and unresolved policy controversies. This regulatory uncertainty creates a potential headwind for the asset class in the near term.
The second catalyst involves the behavior of leveraged Bitcoin holders. The unwinding or stability of leveraged positions could significantly influence price volatility and potentially mark a cycle bottom if large positions are liquidated without triggering further cascades. Grayscale suggested this bear market cycle may ultimately be shallower than previous ones, pointing to the structural changes in Bitcoin's market composition—particularly the growth of Bitcoin ETFs and broader institutional adoption—as reasons why extreme drawdowns may not be necessary to clear the market of weak hands.
The critical distinction Grayscale draws is between valuation cheapness and cycle bottoming. While on-chain metrics suggest Bitcoin is cheap relative to historical norms, the firm argues that whether the current period represents a true cycle low depends on factors beyond pure valuation: specifically, the regulatory landscape and short-term leverage dynamics. Pandl noted that "whether we have hit bottom this time depends on the regulatory outlook and on how large leveraged BTC holders perform in the short run," indicating that technical valuation signals alone are insufficient to predict market bottoms.
Grayscale identified two primary near-term catalysts that could influence Bitcoin's price trajectory. The first is progress on the CLARITY Act in the U.S. Senate, legislation designed to establish clearer regulatory rules for cryptocurrency markets. However, Galaxy Digital, the crypto-focused investment firm owned by Mike Novogratz, recently downgraded the probability of CLARITY Act passage to 60% from 75%, citing constraints on the Senate calendar and unresolved policy controversies. This regulatory uncertainty creates a potential headwind for the asset class in the near term.
The second catalyst involves the behavior of leveraged Bitcoin holders. The unwinding or stability of leveraged positions could significantly influence price volatility and potentially mark a cycle bottom if large positions are liquidated without triggering further cascades. Grayscale suggested this bear market cycle may ultimately be shallower than previous ones, pointing to the structural changes in Bitcoin's market composition—particularly the growth of Bitcoin ETFs and broader institutional adoption—as reasons why extreme drawdowns may not be necessary to clear the market of weak hands.
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