The short-term crypto bear cycle is about to end, Bernstein expects a reversal in 2026

Analysts at Bernstein believe that the current downturn in the crypto market could pave the way for a recovery cycle in 2026, even though Bitcoin is still trading about 40% below its all-time high of around $75,000 at the start of Monday.

In a client report, the research team led by Gautam Chhugani stated that the market may still be in a “short-term crypto bear cycle.” However, they expect this trend to reverse within this year, with Bitcoin potentially bottoming out near the previous cycle’s peak, around $60,000 in the first half of the year, before forming a higher base.

Bernstein places this recent correction in the context of Bitcoin’s relative weakness compared to gold over the past year — a period coinciding with a strong gold-buying wave from central banks. According to the firm, Bitcoin’s market capitalization has fallen to about 4% of gold’s, close to a two-year low, as central banks including China and India ramp up gold accumulation, increasing gold’s share in global reserves to approximately 29% by the end of 2025.

The Most Significant Cycle

Despite this relative weakness, Bernstein argues that the past two years still mark a “structural cycle” for Bitcoin. The highlight is the strong growth of spot Bitcoin ETF funds, with total assets under management reaching around $165 billion, along with a trend of companies adding Bitcoin to their balance sheets.

According to the firm, these developments have contributed to a strong rally before the market correction, making the current cycle different from previous boom-and-bust phases primarily driven by retail investors.

The analysts also point to US policy factors as a potential catalyst. They mention the establishment of a strategic Bitcoin reserve based on the government’s seized digital assets, and suggest that changes in the Federal Reserve leadership under nominee Kevin Warsh, along with broader political consensus around the crypto industry, could open scenarios where Bitcoin is taken more seriously as a national reserve asset — though this remains uncertain.

“We do not believe the US government will stay on the sidelines if the digital asset market continues to decline,” the analysts wrote.

Regarding capital flows and market structure, Bernstein notes that institutional participation remains quite resilient. The amount of capital withdrawn from ETFs since the peak of assets is relatively small compared to total holdings, and there has been no wave of sell-offs driven by leverage from miners as seen in previous cycles.

Large holders like Strategy continue to buy during downturns, adding about $3.8 billion worth of Bitcoin since the start of the year, even though the company’s market value has at times been below its cost basis. Meanwhile, mining companies are diversifying revenue streams into AI data centers.

According to Bernstein, these factors reinforce the view that the current weakness may be just a late-cycle correction rather than the start of a prolonged “crypto winter.” While short-term volatility may persist, the firm expects a turnaround in 2026 to lay the foundation for what could be considered Bitcoin’s “most meaningful cycle,” with long-term impacts potentially surpassing traditional four-year market models.

Thach Sanh