Bitcoin Looks Undervalued, Grayscale Says, as CLARITY Act and Leverage Reset Emerge as Near‑Term Catalysts

Meta Description: Bitcoin trades below long‑term averages, Grayscale says. CLARITY Act progress and leverage stabilization eyed as catalysts; Fidelity flags 200‑week breach.

Bitcoin’s latest downdraft to a new cycle trough—briefly under $60,000—has sharpened the debate over whether the world’s largest digital asset has become attractively priced for long‑term buyers. Grayscale Research argues that, on several on‑chain measures rolled into a composite valuation indicator, BTC screens as undervalued relative to its long‑term average. The firm stops short of calling conditions a definitive bottom, noting they are less extreme than the washout that followed the FTX failure, but it frames present levels as an opportunity for investors with multi‑year horizons.

Market Movement

After sliding below $60,000, Bitcoin’s move to a fresh cycle low galvanized interest in whether the market has completed a reset or simply reached an interim waypoint. Grayscale’s analysis places the price well under a long‑term mean derived from a weighted blend of three on‑chain valuation measures. That position aligns with periods historically associated with more favorable long‑run risk‑reward, though the firm emphasizes that the current drawdown lacks the extreme dislocation that characterized the post‑FTX capitulation phase.

While that caveat tempers bottom‑calling, the picture points to discounted conditions relative to a multi‑cycle baseline. Grayscale also frames this cycle’s setup as inherently different: the preceding advance was more muted than prior bull markets, and, in the firm’s view, today’s crypto market benefits from broader access to exchange‑traded products, greater integration on wealth management platforms, and deeper institutional participation. Those elements, it argues, can cushion downside and shorten the healing process compared with earlier bear markets.

Trading Activity

Short‑term positioning remains a focal point. Grayscale calls out the health of leveraged Bitcoin holders’ balance sheets as one of two near‑term catalysts. Elevated leverage can amplify intraday swings and, when collateral values weaken, increase the probability of liquidations, which in turn can cascade through order books. The firm suggests the extent to which these positions stabilize could influence whether the market establishes a durable base or endures further shakeouts.

On the flow side, analytics firm Swissblock highlights two real‑time gauges: its Risk Index and spot Bitcoin ETF net subscriptions and redemptions. In Swissblock’s framework, the Risk Index typically turns lower when selling pressure begins to fade and ETF accumulation slowly resumes, a pattern consistent with markets digesting residual supply. While those are constructive signals to monitor, Swissblock cautions that as long as its Risk Index sits in “Capitulation Risk,” structural stress remains in play and rallies may struggle for follow‑through.

Investor Sentiment

For long‑only allocators with extended time horizons, Grayscale characterizes the current zone as a buying opportunity best expressed through dollar‑cost averaging—an approach that naturally scales into weakness and reduces the burden of timing. By contrast, more tactical market participants may look for confirmation: signs that leverage has normalized, that policy visibility is improving, or that flow indicators are tilting sustainably positive.

Legislative clarity features prominently in sentiment formation. Grayscale flags progress on the CLARITY Act in the U.S. Senate as the second catalyst to watch in the near term, noting the firm’s constructive stance on the legislation. At the same time, it points out that prediction markets reflect an uncertain path forward. That gap between optimism and uncertainty helps explain why risk appetite remains tentative even as valuation gauges screen favorable.

Broader Market Context

One reason Grayscale expects this bear phase could be shallower than past cycles is the market’s changing structure. The firm cites three pillars—wider access to exchange‑traded products, distribution through wealth management platforms, and increasing institutional participation—as supports that were less developed in earlier downturns. Together, they can provide steadier marginal demand and a broader investor base that reacts less reflexively to volatility than early‑cycle retail cohorts.

The comparison with the FTX‑era lows is instructive. In that period, forced selling and counterparty stress dominated the tape, and credit concerns ricocheted across venues. Grayscale is explicit that today’s setup is not as extreme. While price is below long‑term averages and sentiment is fragile, the backdrop features more diversified distribution channels and institutional rails that did not exist in prior cycles to the same extent. That nuance matters when considering how quickly dislocations can be absorbed and whether dips attract systematic rebalancing flows.

Industry Impact

Policy trajectory looms large for industry participants. Grayscale points to the CLARITY Act’s progress in the Senate as material for near‑term direction, with the firm expressing optimism about the initiative. The outcome, which prediction markets view as uncertain, could influence how quickly wealth platforms, institutions, and other fiduciaries scale exposure via exchange‑traded products and managed solutions. Clearer rules can reduce operational hesitation, compress risk premiums, and broaden participation—an effect that can reinforce on‑chain valuation supports identified in Grayscale’s composite indicator.

For service providers—exchanges, custodians, and portfolio platforms—an environment that couples maturing market structure with advancing policy work can shift the industry’s focus from defensive balance‑sheet management toward client acquisition and product depth. That pivot is central to why some analysts expect the current drawdown to differ from past unwinds. A steadier base of investors, reaching Bitcoin through compliant wrappers and integrated advisory channels, can dampen reflexive selling and quicken the return of incremental bids when risk stabilizes.

Market Movement (Technical Backdrop)

Signals from technical trend measures add complexity. Fidelity Digital Assets notes that Bitcoin remains in a “death cross” condition that has persisted for more than 200 days and that price briefly fell below the 200‑week moving average over the weekend. Fidelity observes that similar violations in past episodes often aligned with forced selling, including during the 2022 collapse. For traders, that backdrop argues for respecting the risk of mechanically driven supply even as valuation metrics flash long‑term opportunity.

The interplay between long‑horizon valuation and short‑horizon technicals can produce extended ranges and choppy mean‑reversion. In that context, levels linked to long‑term moving averages and the behavior of leveraged cohorts tend to matter more than usual. Sustained reclaiming of widely watched benchmarks can encourage risk‑taking, while repeated failures can invite further de‑risking. Grayscale’s framing—undervalued but not definitively bottomed—fits a market that may require cleaner stabilization signals before momentum can rebuild.

Trading Activity

Flow watchers will continue to parse spot Bitcoin ETF subscription and redemption data for inflection. Swissblock suggests that net inflows, even if modest, coupled with a falling Risk Index, indicate that selling is being absorbed and that inventory may be migrating to steadier hands. Those dynamics can ease order‑book fragility and reduce the odds of cascading liquidations triggered by thin liquidity pockets.

Leverage remains a wildcard. Grayscale’s focus on the balance sheets of leveraged holders underscores the link between financing conditions and realized volatility. As pain trades resolve—either through margin replenishment, deleveraging, or a combination of both—market depth can normalize. That reset often precedes a more durable basing process and creates scope for valuation signals to exert greater pull on price.

Investor Sentiment

Positioning frameworks split along time horizons. Systematic accumulators may elect to scale in through dollar‑cost averaging, leaning on Grayscale’s assessment that price is below long‑term value. Discretionary traders, by contrast, may prefer evidence that the policy backdrop is firming and that stress proxies—such as the Risk Index and long‑term moving average tests—are resolving constructively. That bar for confirmation reflects scar tissue from previous cycles where apparent value was followed by deeper drawdowns before durable lows formed.

Institutional sentiment is similarly bifurcated. Distribution via exchange‑traded products and integration into wealth platforms have simplified operational due diligence and access. Yet headline risk around legislation keeps some allocators cautious, particularly those with formal policy triggers governing digital asset exposure. Should clarity improve, the pathway for model‑portfolio inclusion and incremental re‑risking widens, reinforcing the demand side that Grayscale believes distinguishes this cycle from prior ones.

Broader Market Context

Structural features now embedded in the market also influence liquidity dynamics. A more established ETF complex can intermediate flows, creating steady two‑way interest from a broader investor base. Wealth management channels, for their part, can turn episodic pullbacks into rebalancing entry points rather than catalysts for wholesale capitulation. Grayscale’s thesis—that these elements collectively fortify the market—helps reconcile why on‑chain undervaluation can coexist with lingering caution in tape‑driven indicators.

The historical arc reinforces the idea of a shallower, shorter reset when infrastructure, access, and participation improve. The post‑FTX period featured balance‑sheet distress and counterparty uncertainty that propagated across venues. According to Grayscale, today’s environment is materially stronger. While that does not immunize Bitcoin from macro‑ or leverage‑induced volatility, it may reduce the duration and depth of stress needed to restore equilibrium between risk supply and demand.

Industry Impact

For miners, exchanges, and service providers, the distinction between “undervalued” and “capitulation” is non‑trivial. An undervalued market with anchored infrastructure encourages continued investment in capacity and client services. A capitulatory break, by contrast, often forces retrenchment. Grayscale’s contention that conditions are not as extreme as prior bottoms, paired with Swissblock’s warning that Capitulation Risk persists, captures that knife‑edge: operational plans remain viable, but risk budgets stay attentive to liquidity and policy headlines.

Advisory practices and wealth platforms are likely to frame the debate for clients in similar terms. With Bitcoin below long‑term averages on on‑chain metrics, portfolio conversations can emphasize incremental allocation strategies and risk budgeting rather than binary in‑or‑out decisions. Yet the legislative track—anchored by the CLARITY Act’s progress—may determine how quickly those conversations translate into scaled flows.

What This Means for Crypto Markets

Three watchpoints stand out from the current mosaic:

First, valuation versus leverage. Grayscale’s composite indicator argues the former is attractive; the latter, as the firm notes, still needs to stabilize. Evidence of deleveraging without disorder—declining liquidations, steadier funding, and healthier balance sheets—would support the case for a durable floor.

Second, policy visibility. Grayscale highlights the CLARITY Act’s trajectory as a key near‑term driver and views its prospects favorably, even as prediction markets price uncertainty. Concrete progress can compress risk premiums and broaden product adoption across compliant wrappers, creating incremental bid depth that aligns with on‑chain undervaluation signals.

Third, flow and trend confirmation. Swissblock’s Risk Index migrating out of “Capitulation Risk” alongside consistent net inflows into spot Bitcoin ETFs would signal that supply overhangs are being absorbed. On the technical side, reclaiming and holding long‑term moving averages and resolving the extended “death cross” backdrop would reduce the probability that mechanically driven selling interrupts attempts to base.

Against that checklist, investor playbooks diverge by mandate. Long‑term allocators may continue to implement dollar‑cost averaging at discounted levels identified by Grayscale’s metrics. Tactical traders may wait for cleaner confirmation: improving ETF flows, better leverage health, and policy milestones. Both approaches acknowledge the same core backdrop—undervalued price by on‑chain standards, but not a textbook capitulation akin to the FTX aftermath.

Conclusion

Bitcoin’s slide to a fresh cycle low has reopened the “cheap or cheaper” debate. Grayscale Research’s composite on‑chain valuation framework suggests BTC is undervalued versus its long‑term average, yet the firm underscores that this is not a carbon copy of prior bottoms that followed acute stress events. In the near term, two catalysts—the CLARITY Act’s progress in the U.S. Senate and the stabilization of leveraged balance sheets—could determine whether the market transitions from fragile to firmer footing.

Fidelity Digital Assets’ observation that Bitcoin has lingered in a “death cross” for more than 200 days and briefly dipped below its 200‑week moving average highlights the lingering risk of trend‑ and leverage‑driven selling. Swissblock’s Risk Index and spot ETF net flows offer practical gauges of whether pressure is abating; a shift out of “Capitulation Risk” paired with consistent ETF accumulation would strengthen the case for a base.

For now, the message is one of cautious opportunity. The structural supports that Grayscale cites—exchange‑traded access, wealth platform distribution, and institutional participation—argue for a shallower reset than in past cycles, while technical and positioning signals counsel patience. Investors aligning horizon with strategy—systematic accumulation for the long term and confirmation‑seeking for the short term—appear best placed to navigate a market that looks inexpensive on on‑chain metrics yet still waits for its catalysts to land.