Grayscale Report: Four-Year Crypto Cycle Ends, US Dollar Depreciation Drives Currency Substitutes

Grayscale releases the 2026 Digital Asset Outlook Report, predicting that cryptocurrencies will bid farewell to the four-year cycle theory, with Bitcoin potentially reaching new highs in the first half of the year. The report highlights two main drivers: the risk of US dollar depreciation fueling demand for alternative stores of value, and increased regulatory clarity attracting institutional capital. The top ten investment themes include dollar depreciation-driven currency substitutes, regulatory clarity supporting adoption, the GENIUS Act promoting stablecoins, asset tokenization inflection points, and more.

Three Major Pieces of Evidence for the End of the Four-Year Cycle

(Source: Grayscale)

Over the past fifteen years, cryptocurrencies have experienced four major cyclical corrections, roughly every four years. In three of these cases, valuation peaks occurred 1 to 1.5 years after Bitcoin halving events. The current bull market has lasted over three years, with the most recent halving in April 2024, over 1.5 years ago. Some market participants believe Bitcoin’s price may have peaked in October 2025, making 2026 a challenging year.

However, Grayscale believes this logic is outdated. The first piece of evidence is the structural change in institutional capital inflows. In previous cycles, Bitcoin’s annual gains were at least 1000%, driven by retail FOMO. In this cycle, Bitcoin’s maximum annual gain is about 240% (as of March 2024). This difference reflects more stable buying behavior from institutional investors, rather than retail chasing and selling off. Institutional capital does not withdraw just because the “four-year cycle” has arrived; they base their decisions on long-term allocation logic rather than technical cycles.

The second piece of evidence comes from the fundamental improvement in the regulatory environment. Past cycle collapses were often accompanied by regulatory crackdowns or major scandals. The environment in 2026 is completely different. The US has passed the GENIUS Act to regulate stablecoins, with market structure legislation expected to pass, and the SEC settling with the industry rather than suing. This regulatory clarity provides a long-term confidence foundation for institutions to allocate.

The third piece of evidence is the diversification of capital inflow channels. Past cycles mainly relied on retail buying on exchanges, with funds quickly retreating when sentiment reversed. In 2026, capital continues to flow through spot ETPs, wealth management advisors incorporating crypto assets into model portfolios, and institutions like Harvard Management Company and Abu Dhabi Sovereign Fund allocating to crypto ETPs. This structural inflow will not be interrupted by technical cycle theories.

Institutional Logic Behind the Top Ten Investment Themes

(Source: Grayscale)

The ten themes listed by Grayscale reflect the transformation of cryptocurrencies from speculative assets to institutional-grade asset classes. The primary theme is dollar depreciation risk, as US debt issues could weaken the dollar’s role as a store of value. Bitcoin’s supply is capped at 21 million coins, with the 20 millionth coin expected to be mined in March 2026. This transparent, predictable, and ultimately scarce digital currency system becomes increasingly attractive as fiat currency risks rise.

Grayscale 2026 Cryptocurrency Investment Themes

Dollar Depreciation Driving Currency Substitutes: BTC, ETH, ZEC benefit from hedge demand against fiat risk

Regulatory Clarity Enhancement: Bipartisan market structure legislation expected to pass, benefiting nearly all assets

Stablecoin Influence Growth: Driven by the GENIUS Act, ETH, SOL, TRX, BNB earn transaction fee revenues

Asset Tokenization Inflection Point: Currently only 0.01% of global equity and bond markets, potentially growing 1000x by 2030

Privacy Solutions Rise: ZEC, AZTEC, RAIL meet institutional privacy needs

AI Decentralization Demand: TAO, WORLD, NEAR address AI centralization risks

DeFi Lending Boom: AAVE, MORPHO, UNI, HYPE lead growth

Next-Generation Infrastructure: SUI, MON, NEAR, MEGA support high-performance applications

Sustainable Revenue Models: High-income blockchains like SOL, ETH, BNB, HYPE favored by institutions

Staking Becomes Default: LDO, JTO and other liquidity staking protocols benefit from ETP staking openings

Stablecoins are the most certain growth area in 2026. With a circulating supply of $300 billion, a monthly trading volume of $1.1 trillion, and the GENIUS Act prompting institutional capital inflows, Grayscale expects stablecoins to be integrated into cross-border payments, derivatives collateral, corporate balance sheets, and online payments. The growth in stablecoin trading volume will generate fee revenue for blockchains recording these transactions.

Asset tokenization is the most explosive theme. Currently only 0.01% of global equity and bond markets, it could grow 1000x by 2030. Driven by more mature blockchain technology and clearer regulatory frameworks, tokenized assets will create enormous value for ETH, SOL, LINK, and others.

Why Quantum Threats and DATs Are Pseudo Hot Topics

Grayscale clearly states that these two topics will have limited impact in 2026. Although quantum computing poses a long-term threat, experts estimate that quantum computers will still lack the capability to crack Bitcoin’s encryption algorithms before 2030. While post-quantum cryptography research will continue, this topic will not significantly influence prices in 2026.

Digital Asset Vaults (DATs) are another overhyped topic. The corporate token-holding strategy pioneered by MicroStrategy sparked dozens of imitators in 2025, but demand has declined since peaking mid-year. The market cap net asset multiples of the largest DATs are close to 1.0, indicating the premium has disappeared. Grayscale estimates that DAT holdings account for 3.7% of BTC supply, 4.6% of ETH, and 2.5% of SOL. Most DATs are not overly leveraged, so they won’t be forced to sell even in a market downturn. Strategy recently raised USD reserves to pay dividends even if Bitcoin declines, indicating DATs will operate like closed-end funds and will not be a primary source of new token demand or selling pressure in 2026.

Grayscale concludes that cryptocurrencies are entering a new institutionalized era, but not all tokens will successfully transition. Those capable of attracting institutional adoption will be platforms with clear use cases, sustainable revenue streams, and access to regulated trading venues.