MarketsBitcoin
|8 min ReadBitcoin’s 32% Drawdown: Painful, But Still A Bull Market Test
Carter Hayes
Senior Analyst
Published
Jan 16, 2026
Alpha Briefing: Bitcoin has dropped about 32% from its early October high, the ninth 10% plus pullback since the November 2022 bottom, yet Grayscale argues this is a standard bull market drawdown, not the start of a new multi-year winter. With put skew elevated, OG coins moving, privacy assets rallying, new XRP and DOGE ETPs live, and a dovish Fed pivot plus bipartisan US legislation in play, the firm expects new Bitcoin highs in 2026 for investors who can actually HODL through the noise.
Bitcoin holders just got another reminder of what “digital gold” really costs emotionally. Since early October, BTC has fallen about 32% peak to trough. For newer investors in Brazil or the Gulf, that may feel like the start of something ugly. For anyone who has studied Bitcoin’s history, it looks like business as usual for a bull market.
Grayscale’s research team digs through the data and lands on a simple message. Bitcoin’s long term reward has always been the compensation for stomaching brutal, frequent drawdowns. Since 2010, BTC has dropped at least 10% about 50 times, with an average decline of roughly 30%. Since the November 2022 bottom alone, there have been nine such pullbacks. This latest one is big, but not abnormal.
A “Normal” 30% Hit And The Two Types Of Bitcoin Crashes
Grayscale splits Bitcoin selloffs into two buckets.
First are the deep cyclical drawdowns. These are the horror stories everyone tweets about. Price collapses that last two to three years and leave BTC down 70 to 80 percent or more. Historically they show up about once every four years, roughly around the halving cycle.
Second are the bull market drawdowns. These are sharp, nasty hits in the middle of an uptrend. They tend to run around 25% on average and last two to three months. In strong cycles you can see three to five of these per year.
On those definitions, the current move fits the bull market pattern. Roughly 32% down, a few months in, and coming after a powerful run from the 2022 lows rather than a late-cycle blow-off. That framing matters for traders in São Paulo or Dubai who are trying to decide whether this is the end of the story or just another test of conviction.
Why Grayscale Thinks The Four Year Script Breaks Here
A lot of Bitcoin commentary still revolves around the “four year cycle.” Supply halves, price rips for three years, then collapses for one. If you believe that mechanical script, 2026 should be a down year.
Grayscale pushes back hard. They expect Bitcoin to make new highs next year for three main reasons.
First, there has been no true parabolic blow-off in this cycle. Previous tops were obvious in hindsight. Vertical charts, retail mania, everyone’s cousin shilling coins at barbecues in Rio and Riyadh. This time, price has moved up aggressively, but without that final insane leg that usually signals an overshoot begging for a multi-year mean reversion.
Second, the market structure has changed. New capital is now coming in primarily through exchange traded products and corporate or institutional digital asset treasuries, not just offshore retail exchanges. That means different hands, different time horizons and a more disciplined base of holders. For big funds in Brazil or Middle Eastern sovereign wealth vehicles, Bitcoin now sits alongside gold and equities in an allocation grid, not as a pure casino chip.
Third, the macro backdrop is shifting in Bitcoin’s favor. The Federal Reserve has already started cutting, and all the focus is on the December 10 meeting and the path for 2026. Kevin Hassett is widely viewed as the frontrunner to replace Jerome Powell, and he has openly argued for “much lower rates.” If real yields grind down from here, that is usually negative for the US dollar and positive for scarce, non-sovereign assets like BTC.
Layer in the growing probability of bipartisan US crypto market structure legislation progressing in 2026, and you get a macro and regulatory mix that looks far more constructive than prices imply.
Skew, OG Selling And What A Bottom Looks Like
Short term, the picture is more mixed. Some indicators scream “late stage flush.” Others still look cautious.
On the positive side, Bitcoin put skew is very elevated, especially on three and six month maturities. That tells you investors have already paid up aggressively to hedge downside. The big listed digital asset treasuries are also trading below the value of the coins they hold. When mNAVs sit under 1.0, speculative positioning is usually pretty light. Nobody feels like a hero.
On the negative side, positioning and flows still show a cautious market. Futures open interest kept sliding through November. ETP flows were net negative for most of the month. On chain, Coin Days Destroyed spiked again in late November, echoing a jump seen in July.
High CDD means old coins are moving. That often lines up with selling from long time holders or “OG” entities. Whether that is a family office in São Paulo or an early miner cashing out in the Gulf, those flows can weigh on price until they clear.
Grayscale’s message here is straightforward. A durable bottom is more convincing once three things happen together. Futures open interest stabilizes or grows, ETPs flip back to steady net inflows, and on chain data shows OG selling fading. Until then, buyers are fighting a steady stream of supply, even if the bigger cycle picture looks bullish.
Privacy, AI Tokens And Quiet Structural Progress
Zooming out beyond Bitcoin, November performance was all over the map. Privacy-focused currencies quietly outperformed. Zcash gained roughly 8%, Monero about 30%, and Decred around 40%. At the same time, Vitalik Buterin unveiled a new privacy framework at Devcon, and Aztec launched its Ignition Chain as a privacy-centric Ethereum Layer 2.
For Grayscale, this is not a niche curiosity. Their thesis is that blockchains cannot reach full potential without robust privacy. In regions like Latin America or the Middle East, where financial privacy and capital controls are live issues, the idea of private, programmable money is not just ideological. It is practical.
The AI-linked crypto sector was the laggard, down about 25%. Even there, fundamentals moved forward. Near’s “Intents” product is starting to find product market fit by letting users specify outcomes while solvers handle the cross chain routing in the background. One concrete result is private Zcash spending that settles as ETH or USDC on other chains, a beautiful example of privacy and UX converging.
On another front, Coinbase’s x402 protocol is rapidly scaling. It lets AI agents send stablecoin payments directly over the internet without account creation or human approval in the loop, using blockchains as the settlement layer. Daily transactions reportedly jumped from under 50,000 in mid October to more than two million by late November. That is the kind of quiet exponential that matters more than price charts.
Meanwhile, the ETP wrapper continues to spread. New US listed products for XRP and Dogecoin went live under the SEC’s generic listing standards. In total, there are now 124 US crypto focused ETPs with about 145 billion dollars in assets. For allocators in São Paulo, Dubai, Riyadh or Abu Dhabi, that is the plumbing that makes crypto a standard part of the portfolio tool kit.
Put it all together and the message is simple, if uncomfortable. 2025 has been choppy and frustrating. Market cap indexes are slightly down on the year even as regulation, infrastructure and institutional participation step forward. For traders looking only at this month’s candles, that disconnect is maddening. For real HODLers, it is exactly the kind of gap between fundamentals and price that long term returns are built on.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.