Grayscale sees three forces capable of supporting bitcoin adoption despite bear market

The drop in prices would not be enough to stop the adoption of bitcoin. This is the observation presented on August 12 by Zach Pandl, director of research at Grayscale. According to him, several trends far exceed the movements of a market cycle. Public deficits, the rise of blockchain in finance and the evolution of generational portfolios could thus support demand in the medium and long term. This analysis does not predict an automatic rise in prices, but highlights structural factors capable of continuing their progression despite instability.

Three Forces Overtaking Bitcoin’s Market Cycle

Zach Pandl, director of research at Grayscale, believes several trends could support bitcoin adoption over several years. His analysis highlights structural developments that go beyond short-term market fluctuations. Even when the BTC price goes through a bearish period, some investors may continue to adjust their allocations. For Grayscale, these changes can therefore continue beyond the current cycle.

THE three factors highlighted by Grayscale are the following:

• Public deficits and sovereign debt, which could reinforce interest in assets with limited supply;
• The integration of blockchain in finance, driven in particular by stablecoins and tokenized assets;
• The generational change in portfolios, with an increasing place given to digital assets by certain investors.

The first factor is based on the idea that limited supply can attract more interest when budgetary concerns increase. Higher debt does not, by itself, cause a mechanical increase in demand. American data However, they illustrate the extent of this pressure. As of August 12, the US public debt reached $39.91 trillion.

Of this total, 32,180 billion corresponded to the debt held by the public. The remaining 7,730 billion were intragovernmental detentions. Budget projections add another dimension to this analysis. The Congressional Budget Office foresees a deficit of $1.9 trillion for fiscal year 2026.

He then estimates that this deficit could reach $3.1 trillion in 2036. At the same time, the debt held by the public would increase from 101% to 120% of gross domestic product. This situation therefore fuels reflection on rare assets. However, it does not make it possible to directly predict changes in demand.

The second driver identified by Pandl concerns blockchain. This technology is gradually gaining ground in financial markets thanks to stablecoins and tokenized assets. The market for tokenized assets exceeded $34 billion in May. It was less than 3 billion by mid-2024.

Tokenized US Treasury products then represented approximately $16 billion. This progression shows that traditional financial instruments can use infrastructures based on cryptographic networks. Technology is thus gradually gaining a place in the financial markets.

bitcoin and regulated finance

Bitcoin remains a central benchmark in this transformation. Financial authorities are also participating in this development by defining the rules applicable to tokenized securities. The Securities and Exchange Commission describe these securities as securities represented by crypto-assets. Property records may be stored in whole or in part via cryptographic networks.

In particular, the SEC distinguishes between several structures, including issuer-sponsored, depository and synthetic models. This definition provides a framework for financial players who wish to use these infrastructures. It also shows that blockchain no longer only concerns markets specializing in digital assets.

Stablecoins follow a parallel regulatory trajectory. In April, the US Treasury has proposed rules intended to implement the GENIUS Act requirements for payment stablecoins. The text provides in particular to treat authorized issuers as financial institutions within the meaning of the banking secrecy law.

These actors should also implement anti-money laundering and sanctions compliance programs. For Grayscale, this development can encourage financial institutions to strengthen their operational capabilities related to blockchain. The issue therefore goes beyond just the bitcoin market and gradually concerns the organization of finance.

Generational change changes wallets

The third factor put forward by Grayscale concerns the preferences of younger investors. According to the company’s analysis, they are more willing to hold digital assets and alternative investments. They can combine them with stocks, bonds and other traditional assets.

This development could influence wealth management institutions and platforms. These players could adapt their products and allocation models to meet a customer base more familiar with digital assets. Generational change would thus act on demand, but also on the means allowing access to it.

The data provided by a survey conducted by Coinbase last January among 351 institutional investors are in this direction. Some 73% of respondents planned to increase their allocations to digital assets by 2026. They cited, in particular, more explicit regulation, better regulated products and stronger infrastructure.

Traditional financial companies are also developing new indicators around this evolution. Strategy Inc. launched the Bitcoin Banking Adoption Index in July. The index then put overall banking adoption at 32%. Fidelity had 71%, BNY 46% and Goldman Sachs 45%.

ETFs and corporate treasuries expand access

ETFs are an important channel in the adoption strategy outlined by Grayscale. They allow investors to gain exposure to bitcoin through their regular brokerage infrastructures. In a spot bitcoin ETF, authorized participants create and redeem shares. The fund then holds the underlying assets under custody agreements.

This mechanism facilitates the integration of this exposure into existing portfolios. It also allows the use of already known financial products, without requiring direct ownership. Corporate treasuries also offer another route. Some companies may list bitcoins on their balance sheet and finance their acquisitions with their cash, debt or equity.

Conservation then becomes a decision linked to risk management. Companies can use regulated custodians or cold storage with multiple signatures. When transactions cannot be reversed, security and governance take on particular importance.

Depending on the company, these different trends may strengthen over time. Budgetary pressures could support interest in scarce assets, while blockchain may expand its use in regulated finance. Generational change could also change the place of digital assets in portfolios.

Thus, Grayscale believes that adoption can continue to grow despite price volatility. This development depends mainly on structural trends rather than immediate market movements. The next budgetary, financial and institutional developments will therefore make it possible to measure the progress of this adoption beyond the current BTC cycle.