Author: Grayscale Compiled by: Luffy, Foresight News TL;TR While Bitcoin investors have reaped substantial returns, they have also experienced several significant pullbacks. The approximately 30% drop since early October is in line with historical averages, marking the ninth significant retracement in this bull market. Grayscale Research believes Bitcoin will not experience a deep and prolonged cyclical correction, and expects its price to reach a new all-time high next year. From a tactical perspective, some indicators point to a short-term bottom, but the overall picture remains mixed. Potential catalysts before the year-end include another interest rate cut by the Federal Reserve and the advancement of cryptocurrency-related legislation. Besides mainstream cryptocurrencies, privacy-focused crypto assets performed exceptionally well; meanwhile, the first exchange-traded products (ETPs) for Ripple and Dogecoin have begun trading. Historically, investing in Bitcoin has typically yielded substantial returns, with annualized returns ranging from 35% to 75% over the past 3-5 years. However, Bitcoin has also experienced several significant corrections: its price has generally seen at least three drops of over 10% annually. Like all assets, Bitcoin's potential returns can be seen as compensation for its risks. Long-term (HODL) Bitcoin investors have reaped substantial rewards, but they have also had to withstand the pressure of occasional severe pullbacks. The Bitcoin correction that began in early October continued to unfold for most of November, with a maximum drop of 32% (see Figure 1). As of now, this pullback is approaching its historical average. Since 2010, there have been approximately 50 instances of Bitcoin prices falling by more than 10%, with these corrections averaging 30%. Since Bitcoin bottomed out in November 2022, there have been nine instances of declines exceeding 10%. Despite the volatility, this is not unusual in a Bitcoin bull market. Figure 1: This pullback is in line with the historical average level. Bitcoin pullbacks can be measured in terms of magnitude and duration. Data shows that they are mainly divided into two categories (see Figure 2): one is "cyclical pullbacks", which are characterized by deep and persistent price declines lasting 2-3 years and occur about once every four years in history; the other is "bull market pullbacks", which have an average drop of 25% and last for 2-3 months and usually occur 3-5 times a year. Figure 2: Bitcoin has experienced four major cyclical corrections. Downplaying the four-year cycle theory Bitcoin's supply follows a four-year halving cycle, and historically, major cyclical price corrections have also occurred approximately every four years. Therefore, many market participants believe that Bitcoin's price will also follow a four-year cycle—after three consecutive years of increases, the price will likely fall next year. Despite the uncertainties surrounding the outlook, we believe the four-year cycle theory will prove wrong, and Bitcoin prices are poised to reach new all-time highs next year. Our reasons are as follows: First, unlike previous cycles, this bull market has not seen the parabolic price surge that could have foreshadowed overvaluation (see Figure 3); second, Bitcoin's market structure has changed, with new funds primarily flowing in through exchange-traded products (ETPs) and crypto asset treasuries (DATs), rather than retail investors; and finally, as discussed below, the overall macroeconomic environment remains favorable for Bitcoin. Figure 3: No parabolic price increase occurred in this cycle. There are already some signs that Bitcoin and other crypto assets may have bottomed out. For example, Bitcoin put option skew is at an extremely high level (Note: Option skew is an indicator of the asymmetry of the implied volatility curve, reflecting the difference in market expectations regarding the future price movement of the underlying asset), especially for 3-month and 6-month options, indicating that investors have widely hedged downside risk (see Figure 4); the largest crypto asset treasuries are trading below the value of their crypto assets on their balance sheets (i.e., their adjusted net asset value (mNAVs) is below 1.0), indicating relatively light speculative positions (often a precursor to a recovery). Figure 4: Higher put option skewness indicates that downside risk has been hedged. Meanwhile, several fund flow indicators show that demand remains weak: November futures open interest declined further, ETP fund flows only turned positive at the end of the month, and there may have been more selling activity from early Bitcoin holders. Regarding the latter, on-chain data shows that "dormant coin activation (CDD)" surged again at the end of November (see Figure 5) (Note: CDD is calculated by multiplying the number of Bitcoins traded by the number of days since the last transaction). Therefore, CDD rises when a large number of long-dormant tokens are transferred simultaneously. Similar to the surge in CDD in July, this increase at the end of November may indicate that large long-term holders are selling Bitcoin. For the short-term outlook, investors can only have more confidence in judging that Bitcoin has bottomed out when these fund flow indicators (futures open interest, net ETP inflows, and early holder selling) improve. Figure 5: More long-term stagnant Bitcoins are being transferred on-chain. Privacy-related assets are unique. According to our Crypto Sectors index, Bitcoin's decline in November was moderate among investable crypto assets. The best-performing market sector was the "Crypto Crypto Assets" sector (see Figure 6), which rose during the month excluding Bitcoin. The gains were primarily driven by several privacy-focused cryptocurrencies: Zcash (+8%), Monero (+30%), and Decred (+40%). There was also widespread interest in privacy technologies within the Ethereum ecosystem: Vitalik Buterin announced a privacy framework at Devcon, and Aztec, an Ethereum Layer 2 network focused on privacy, launched its Ignition Chain. As discussed in the previous monthly report, we believe that blockchain technology cannot reach its full potential without privacy elements. Figure 6: Non-Bitcoin monetary assets performed exceptionally well in November. The worst-performing market sector was the "Artificial Intelligence (AI) Crypto Assets" sector, which fell 25% during the month. Despite the weak prices, the sector saw several significant positive developments in its fundamentals. Specifically, Near's Near Intents product, the second-largest asset by market capitalization in the AI crypto asset sector, continues to see rising adoption (see Figure 7). Near Intents eliminates cross-chain complexity by connecting users' desired outcomes to a "solution provider network," where providers compete to execute the optimal implementation path across chains. This feature has already enhanced the usability of Zcash—users can spend ZEC privately, while recipients can receive assets like Ethereum or USDC on other chains. While still in its early stages, we believe this integration could play a significant role in driving privacy-preserving payments across the crypto ecosystem. Figure 7: Near's Intents product finds a market fit. Furthermore, developers have turned their attention to the x402 protocol. This is a new open payment protocol developed by Coinbase that allows AI agents to drive stablecoin payments directly over the internet. This payment standard eliminates the need for account creation, manual approval, and custodial payment processor fees, enabling frictionless, autonomous microtransactions executed by AI agents, with blockchain as the settlement layer. Recently, x402 adoption has accelerated, with daily transaction volume increasing from less than 50,000 in mid-October to over 2 million by the end of November. Finally, the crypto ETP market continues to expand thanks to the new general listing standards approved by the U.S. Securities and Exchange Commission (SEC) in September. Last month, issuers launched ETP products for Ripple and Dogecoin, and more single-token crypto ETPs are expected to be listed before the end of the year. According to Bloomberg data, there are currently 124 crypto-related ETPs listed in the U.S., with total assets under management of $145 billion. Interest rate cuts and bipartisan legislation In many ways, 2025 is a landmark year for the crypto asset industry. Most importantly, regulatory clarity has fueled a wave of institutional investment, which is expected to form the basis for continued growth in the coming years. However, valuations have not kept pace with the improvement in long-term fundamentals: our market capitalization-weighted crypto sector index has fallen 8% since the beginning of the year. Despite the volatility in the crypto market in 2025, fundamentals and valuations will eventually converge, and we remain optimistic about the crypto market outlook for year-end and 2026. In the short term, key variables likely lie in whether the Federal Reserve will cut interest rates at its December 10 meeting and its guidance on policy rates for next year. Recent media reports indicate that Kevin Hassett, director of the National Economic Council, is a leading candidate to succeed Jerome Powell as chairman of the Federal Reserve. Hassett is likely to support lowering policy rates: in a September interview with CNBC, he stated that the Fed's 25-basis-point rate cut was a "good first step" towards "significant rate cuts." All else being equal, a decline in real interest rates typically has a negative impact on the value of the dollar and benefits assets that compete with the dollar, including physical gold and some cryptocurrencies (see Figure 8). Figure 8: Fed rate cuts may support Bitcoin prices. Another potential catalyst could be the continued bipartisan effort on crypto market structure legislation. The Senate Agriculture Committee (which oversees the Commodity Futures Trading Commission) released a bipartisan draft text in November. If cryptocurrencies can maintain bipartisan consensus and avoid becoming a partisan issue in the midterm elections, market structure legislation could make further progress next year, potentially attracting more institutional investment to the industry and ultimately driving up valuations. While we are optimistic about the short-term market outlook, truly substantial gains may come from long-term holding.Author: Grayscale Compiled by: Luffy, Foresight News TL;TR While Bitcoin investors have reaped substantial returns, they have also experienced several significant pullbacks. The approximately 30% drop since early October is in line with historical averages, marking the ninth significant retracement in this bull market. Grayscale Research believes Bitcoin will not experience a deep and prolonged cyclical correction, and expects its price to reach a new all-time high next year. From a tactical perspective, some indicators point to a short-term bottom, but the overall picture remains mixed. Potential catalysts before the year-end include another interest rate cut by the Federal Reserve and the advancement of cryptocurrency-related legislation. Besides mainstream cryptocurrencies, privacy-focused crypto assets performed exceptionally well; meanwhile, the first exchange-traded products (ETPs) for Ripple and Dogecoin have begun trading. Historically, investing in Bitcoin has typically yielded substantial returns, with annualized returns ranging from 35% to 75% over the past 3-5 years. However, Bitcoin has also experienced several significant corrections: its price has generally seen at least three drops of over 10% annually. Like all assets, Bitcoin's potential returns can be seen as compensation for its risks. Long-term (HODL) Bitcoin investors have reaped substantial rewards, but they have also had to withstand the pressure of occasional severe pullbacks. The Bitcoin correction that began in early October continued to unfold for most of November, with a maximum drop of 32% (see Figure 1). As of now, this pullback is approaching its historical average. Since 2010, there have been approximately 50 instances of Bitcoin prices falling by more than 10%, with these corrections averaging 30%. Since Bitcoin bottomed out in November 2022, there have been nine instances of declines exceeding 10%. Despite the volatility, this is not unusual in a Bitcoin bull market. Figure 1: This pullback is in line with the historical average level. Bitcoin pullbacks can be measured in terms of magnitude and duration. Data shows that they are mainly divided into two categories (see Figure 2): one is "cyclical pullbacks", which are characterized by deep and persistent price declines lasting 2-3 years and occur about once every four years in history; the other is "bull market pullbacks", which have an average drop of 25% and last for 2-3 months and usually occur 3-5 times a year. Figure 2: Bitcoin has experienced four major cyclical corrections. Downplaying the four-year cycle theory Bitcoin's supply follows a four-year halving cycle, and historically, major cyclical price corrections have also occurred approximately every four years. Therefore, many market participants believe that Bitcoin's price will also follow a four-year cycle—after three consecutive years of increases, the price will likely fall next year. Despite the uncertainties surrounding the outlook, we believe the four-year cycle theory will prove wrong, and Bitcoin prices are poised to reach new all-time highs next year. Our reasons are as follows: First, unlike previous cycles, this bull market has not seen the parabolic price surge that could have foreshadowed overvaluation (see Figure 3); second, Bitcoin's market structure has changed, with new funds primarily flowing in through exchange-traded products (ETPs) and crypto asset treasuries (DATs), rather than retail investors; and finally, as discussed below, the overall macroeconomic environment remains favorable for Bitcoin. Figure 3: No parabolic price increase occurred in this cycle. There are already some signs that Bitcoin and other crypto assets may have bottomed out. For example, Bitcoin put option skew is at an extremely high level (Note: Option skew is an indicator of the asymmetry of the implied volatility curve, reflecting the difference in market expectations regarding the future price movement of the underlying asset), especially for 3-month and 6-month options, indicating that investors have widely hedged downside risk (see Figure 4); the largest crypto asset treasuries are trading below the value of their crypto assets on their balance sheets (i.e., their adjusted net asset value (mNAVs) is below 1.0), indicating relatively light speculative positions (often a precursor to a recovery). Figure 4: Higher put option skewness indicates that downside risk has been hedged. Meanwhile, several fund flow indicators show that demand remains weak: November futures open interest declined further, ETP fund flows only turned positive at the end of the month, and there may have been more selling activity from early Bitcoin holders. Regarding the latter, on-chain data shows that "dormant coin activation (CDD)" surged again at the end of November (see Figure 5) (Note: CDD is calculated by multiplying the number of Bitcoins traded by the number of days since the last transaction). Therefore, CDD rises when a large number of long-dormant tokens are transferred simultaneously. Similar to the surge in CDD in July, this increase at the end of November may indicate that large long-term holders are selling Bitcoin. For the short-term outlook, investors can only have more confidence in judging that Bitcoin has bottomed out when these fund flow indicators (futures open interest, net ETP inflows, and early holder selling) improve. Figure 5: More long-term stagnant Bitcoins are being transferred on-chain. Privacy-related assets are unique. According to our Crypto Sectors index, Bitcoin's decline in November was moderate among investable crypto assets. The best-performing market sector was the "Crypto Crypto Assets" sector (see Figure 6), which rose during the month excluding Bitcoin. The gains were primarily driven by several privacy-focused cryptocurrencies: Zcash (+8%), Monero (+30%), and Decred (+40%). There was also widespread interest in privacy technologies within the Ethereum ecosystem: Vitalik Buterin announced a privacy framework at Devcon, and Aztec, an Ethereum Layer 2 network focused on privacy, launched its Ignition Chain. As discussed in the previous monthly report, we believe that blockchain technology cannot reach its full potential without privacy elements. Figure 6: Non-Bitcoin monetary assets performed exceptionally well in November. The worst-performing market sector was the "Artificial Intelligence (AI) Crypto Assets" sector, which fell 25% during the month. Despite the weak prices, the sector saw several significant positive developments in its fundamentals. Specifically, Near's Near Intents product, the second-largest asset by market capitalization in the AI crypto asset sector, continues to see rising adoption (see Figure 7). Near Intents eliminates cross-chain complexity by connecting users' desired outcomes to a "solution provider network," where providers compete to execute the optimal implementation path across chains. This feature has already enhanced the usability of Zcash—users can spend ZEC privately, while recipients can receive assets like Ethereum or USDC on other chains. While still in its early stages, we believe this integration could play a significant role in driving privacy-preserving payments across the crypto ecosystem. Figure 7: Near's Intents product finds a market fit. Furthermore, developers have turned their attention to the x402 protocol. This is a new open payment protocol developed by Coinbase that allows AI agents to drive stablecoin payments directly over the internet. This payment standard eliminates the need for account creation, manual approval, and custodial payment processor fees, enabling frictionless, autonomous microtransactions executed by AI agents, with blockchain as the settlement layer. Recently, x402 adoption has accelerated, with daily transaction volume increasing from less than 50,000 in mid-October to over 2 million by the end of November. Finally, the crypto ETP market continues to expand thanks to the new general listing standards approved by the U.S. Securities and Exchange Commission (SEC) in September. Last month, issuers launched ETP products for Ripple and Dogecoin, and more single-token crypto ETPs are expected to be listed before the end of the year. According to Bloomberg data, there are currently 124 crypto-related ETPs listed in the U.S., with total assets under management of $145 billion. Interest rate cuts and bipartisan legislation In many ways, 2025 is a landmark year for the crypto asset industry. Most importantly, regulatory clarity has fueled a wave of institutional investment, which is expected to form the basis for continued growth in the coming years. However, valuations have not kept pace with the improvement in long-term fundamentals: our market capitalization-weighted crypto sector index has fallen 8% since the beginning of the year. Despite the volatility in the crypto market in 2025, fundamentals and valuations will eventually converge, and we remain optimistic about the crypto market outlook for year-end and 2026. In the short term, key variables likely lie in whether the Federal Reserve will cut interest rates at its December 10 meeting and its guidance on policy rates for next year. Recent media reports indicate that Kevin Hassett, director of the National Economic Council, is a leading candidate to succeed Jerome Powell as chairman of the Federal Reserve. Hassett is likely to support lowering policy rates: in a September interview with CNBC, he stated that the Fed's 25-basis-point rate cut was a "good first step" towards "significant rate cuts." All else being equal, a decline in real interest rates typically has a negative impact on the value of the dollar and benefits assets that compete with the dollar, including physical gold and some cryptocurrencies (see Figure 8). Figure 8: Fed rate cuts may support Bitcoin prices. Another potential catalyst could be the continued bipartisan effort on crypto market structure legislation. The Senate Agriculture Committee (which oversees the Commodity Futures Trading Commission) released a bipartisan draft text in November. If cryptocurrencies can maintain bipartisan consensus and avoid becoming a partisan issue in the midterm elections, market structure legislation could make further progress next year, potentially attracting more institutional investment to the industry and ultimately driving up valuations. While we are optimistic about the short-term market outlook, truly substantial gains may come from long-term holding.

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