Grayscale warns Bitcoin slump could deepen on policy risks

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Bitcoin could fall further

Highlights

Bitcoin fell below $60,000 after peaking at $125,000 in October.
Grayscale says the token is down more than 50% in this cycle.
Higher Fed rate expectations have weakened the Bitcoin trade.
CLARITY Act uncertainty remains a key regulatory risk.

A bear market driven by rates and policy risk

Bitcoin is now down more than 50% from its peak, a steep drop even by crypto standards. Grayscale described the move as another cyclical pullback around Bitcoin’s longer-term upward trend, rather than a break in the broader digital-asset story.

The biggest pressure point has been the shift in Federal Reserve expectations. Late last year, markets had expected President Donald Trump to nominate Kevin Hassett, seen as more dovish, to lead the Fed. Instead, Kevin Warsh took the role this month, and investors now expect the central bank to raise rates this year because inflation remains stubborn.

That matters for Bitcoin because higher rates make speculative and non-yielding assets less attractive. Grayscale also linked the move to a weakening “debasement trade,” the idea that investors buy assets such as Bitcoin and gold to protect against declining purchasing power in fiat currencies. Spot gold has also fallen sharply from its highs, showing that the pressure is not limited to crypto.

CLARITY, strategy and quantum fears

Grayscale pointed to three additional sources of uncertainty: the fate of the CLARITY Act in the U.S. Senate, pressure on Strategy’s leveraged balance sheet and investor concern about potential digital-security risks from quantum computing.

The CLARITY Act is important because it could provide a clearer legal framework for crypto markets in the United States. If it stalls, investors may remain cautious about digital assets, especially after a year in which regulatory progress helped support institutional adoption.

Strategy remains another focus because of its large Bitcoin exposure and use of leverage. If the company or other digital-asset treasury firms are forced to reduce positions, that could add selling pressure to the market.

The path out of the Bitcoin slump

Grayscale outlined two broad scenarios. In its baseline case, the CLARITY Act passes the Senate, Strategy strengthens its balance sheet and the Fed avoids rate hikes. If those conditions hold, Bitcoin may already be near its low.

The downside case is less favorable. If CLARITY fails this year, leveraged crypto holders sell more assets and the Fed raises rates, Bitcoin could fall further. Grayscale does not expect an 80% peak-to-trough collapse like in some prior cycles, partly because this bull market was less extreme and institutional demand appears more stable.

For ordinary investors, the message is simple: Bitcoin’s next move depends less on crypto headlines alone and more on Washington. Interest rates, regulation and balance-sheet stress are now central to whether this bear market stabilizes or deepens.

We also reported Bitcoin falls below $59,000 amid macro pressure.

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