Bitcoin (BTC) has fallen more than 50 percent from its peak, and asset manager Grayscale named U.S. Federal Reserve rate policy and the fate of the CLARITY Act as key variables that will determine a market bottom. It said the correction is continuing but it maintained a long-term bullish outlook.

On June 29, blockchain media outlet CoinPost reported that Grayscale's head of research Jack Pan (잭 팬들) presented bullish and bearish scenarios for bitcoin in a market report released on June 26.

Bitcoin has dropped more than 50 percent from a peak of about $125,000 hit in October last year, falling below $60,000 and setting a new low for the current cycle. Pan cited shifting rate expectations and a reversal of the so-called "Value Impairment Trade" as the biggest drivers of the correction.

The market initially expected a dovish figure to become Fed chair, but hawkish Kevin Warsh was appointed instead. With inflation easing more slowly than expected, the market began to price in the possibility of rate increases rather than expectations of rate cuts later this year, the analysis said.

Grayscale said bitcoin's weakness cannot be explained by rates alone. It said the market is also reflecting uncertainty over whether the CLARITY Act will pass the Senate, Strategy's high-leverage structure and potential security risks from advances in quantum computing.

The report set out three conditions for an optimistic scenario: the CLARITY Act passes the Senate, Strategy stabilises its financial structure, and the Fed does not carry out additional rate increases. Pan said if those conditions are met, bitcoin is likely already close to a bottom zone.

If the CLARITY Act fails to progress this year, deleveraging continues among digital-asset holding companies including Strategy, and the Fed moves to additional rate increases due to high inflation, the report forecast a gradual additional decline from current levels.

It said a repeat of the roughly 80 percent plunge seen after the end of past bull markets is unlikely. This rally has progressed relatively moderately compared with previous cycles, and demand from institutional investors is supporting the downside, it said.

Pan said the current correction offers mid- to long-term investors an opportunity to build positions in line with structural growth in public blockchain technology and digital assets.

Grayscale also maintained a positive view of the mid- to long-term outlook. It cited an improved U.S. regulatory environment that is accelerating institutional inflows, as well as the spread of approved perpetual futures products, the expansion of stablecoins and broader tokenisation of real-world assets (RWA), as structural growth factors for the crypto market. It also said rising government debt, declining trust in traditional financial intermediaries and growth in the artificial intelligence (AI) industry are favourable long-term trends for the digital asset market.

Grayscale said, "Cryptocurrencies have been the best-performing asset class over the past decade," and added, "We think the next decade will be the same." The market therefore expects the Fed's rate policy, the fate of the CLARITY Act and the financial stability of digital-asset holding companies to act as key variables for forming a bitcoin bottom in the short term.