Unchained: Bits + Bips — Why Grayscale Sees ATHs Before Q3, With ETH Outperforming

Host: Laura Shin (Episode mainly featuring Steve Ehrlich, guest hosting)
Guest: Zach Handel, Director of Research at Grayscale Investments
Date: January 19, 2026

Episode Overview

This episode dives deep into the current crypto market environment, focusing on why Grayscale expects Bitcoin to hit new all-time highs by mid-2026, with Ethereum poised to continue outperforming. Key topics include the evolving U.S. crypto regulatory landscape, changing institutional and retail flows into crypto, what’s driving altcoin performance, and the impact of macro and geopolitical developments (notably, controversies surrounding the Fed and U.S. fiscal outlooks).

Regulatory Environment & Policy Backdrop

Congressional Stalemate and the Market Structure Bill

[02:56]

• Current context: Senate Banking Committee Chairman Tim Scott delayed consideration of the market structure bill, following heated debates over crypto’s place in regulation, stablecoin yields, and ethics concerns related to President Trump’s administration.
• Zach Handel’s take: Grayscale is primarily focused on the bill’s Title 1, which clarifies the commodity vs. security status of crypto tokens—vital for broadening institutional adoption.
  • Quote: “For investments business like us... Title 1 is the most important for Grayscale … clarifying the commodity and security status of tokens." [04:31]
• Other issues such as DeFi protections and stablecoin yields are being led by different industry stakeholders; Grayscale’s priority is regulatory clarity for exchange-traded products (ETPs) and portfolio-building.

[06:57]

• Grayscale’s stance: Happy to see clarity emerging quickly for crypto markets and letting other platforms lead on stablecoin and DeFi negotiations.
  • "It feels like it’s happening at a very rapid pace from our standpoint, from the standpoint of an ETF crypto, ETF issuer.” [06:57]

Traditional Finance’s Reaction to Crypto

[08:40]

• Big banks’ positioning: All major institutions are building in crypto, unwilling to wait for absolute legal certainty.
  • “Everybody is building and nobody is going to wait until President Trump's signature hits the legislation... All these big institutions have been engaged… for the last couple of years.” [08:40]
• Anticipated signs:
  • Increased presence of stablecoins on corporate balance sheets and major derivatives exchanges
  • Eventual direct banking interaction with blockchains
  • Anticipation of token issuance by large corporates as standard capital-raising instruments
• Long-term effect: Regulatory clarity will spark a surge in crypto-token issuance by traditional companies.

DeFi’s Competitive Threat

[11:22]

• Decentralized finance (DeFi) directly competes with banks on cross-border payments, trading of crypto-native assets, and collateralized lending.
  • “The parts of the large banks… that engage in those businesses [cross-border payments, trading, lending]—we’re going to go after first…” [11:22]

Crypto Market Dynamics: Fundamentals & Flows

Bitcoin and Ether’s Rally—What’s Driving It?

[13:40]

• Drivers of the rally:
  • 70% macro factors (demand for alternative stores of value amid dollar debasement and global imbalances)
  • 30% regulatory clarity
  • Surge in ETF inflows, where retail and especially “advised wealth” (from Registered Investment Advisors) are buying
  • “The debasement trade has arrived in crypto in the last couple of days.” [13:40]
• ETF Flows:
  • December 2025: $1B out of Bitcoin ETFs for tax loss harvesting, and $1B returned in early January—a sign of position rebalancing, not fundamental outflow.
  • Renewed institutional flows coming in early 2026.

[17:45]

• Buyer profile: Mainly advised wealth (RIAs), not so much re-leveraging in offshore derivatives; open interest and funding rates remain subdued.
• Massive growth potential: Less than 0.5% of U.S. advised wealth ($40–45 trillion) is currently allocated to crypto; simple incremental allocation would mean hundreds of billions in inflows.

Short-Term Risks and Outlook

[23:09]

• Bitcoin Forecast: Grayscale expects new all-time highs (>$126K) by June 2026, fuelled by macro and ETF-driven flows.
  • “We think something above 126 [thousand] by June 30, something like that, is a reasonable summary of our expectation.” [23:43]
• Risks: Main near-term risk is further selling by “OG” long-term holders, which suppressed price in late 2025 but may now be played out.
  • All such profit-taking can be transparently tracked on-chain.

Ethereum, Solana, and Competing L1s

[26:42]

• Ethereum:
  • Stands to benefit most from regulatory clarity, esp. given its centrality to DeFi and stablecoins
  • Also captures some “macro bid” as a scarce commodity with deflationary mechanics
  • Full ETF and staking support, making it institutional-ready
  • “If we get regulatory clarity with the market structure bill…Ethereum continues to outperform.” [26:42]
• Solana:
  • Very strong for scenarios requiring high throughput (e.g. tokenized equity trading)
  • Expected to continue leading in specific niches, boosted by forthcoming ETF products and regulatory clarity

[31:53]

• Market Structure Bill’s Impact: Ethereum has the most at stake—due to stablecoins, DeFi, and tokenized treasuries using it for underlying infrastructure.
  • Out of 40–45 L1 projects, Grayscale expects only 5–6 differentiated smart contract platforms to survive long-term (e.g., ETH has high-quality blockspace; Solana, speed and low fees).

Macro Environment: Federal Reserve, Debt, and Dollar Debasement

The Powell Controversy

[35:43]

• Context: Fed Chair Jay Powell is publicly resisting political pressure from President Trump for drastic rate cuts. Powell asserts Fed independence is being threatened, causing political turmoil.
• Implications: Erosion of central bank independence typically means higher average inflation and further dollar weakening, supporting demand for hard assets and cryptocurrencies.
  • “If the Fed becomes dependent…on an election, likely it will lead to a higher average inflation rate over time.” [36:14]
  • “The underlying debt problem is the root of all our issues and all the demand for precious metals, the macro demand for the crypto asset class, these are all about debt imbalances in the United States.” [37:41]

Geopolitical Factors and Safe Havens

[41:02]

• Events such as Venezuela’s evolving oil industry, U.S. energy policy, and China/Russia regional moves: These may slightly weaken demand for the U.S. dollar and treasuries over time, incrementally boosting the investment case for Bitcoin/crypto as "safe havens."

[43:28]

• Stablecoins: Growing use in countries with instability (e.g., Venezuela) signals adoption of blockchain-based alternatives as parallel rails for currency and trade.

Market Structure Bill: Prospects and Consequences

[44:50]

• Short-term: Expect “blood in the streets”; bipartisan legislation is difficult but the trend is positive.
  • “Don’t get discouraged by blood in the street…Bipartisan legislation in a very partisan, polarized nation is very difficult to pull off. Unhappy people and some, you know, tough times ahead of this legislation is part of the process.” [44:50]
• Downside risk reduction: When regulation is clear, downside risks to crypto are sharply reduced, paving the way for sustained institutional inflows and innovation.

Notable Quotes & Memorable Moments

• On macro flows:
  • “The debasement trade has arrived in crypto in the last couple of days.” (Zach Handel, 13:40)
• On Ethereum’s outlook:
  • “My view would be Ethereum continues to outperform.” (Zach Handel, 00:00 and 26:42)
• On policy progress:
  • “We’re very happy to see regulatory clarity coming for the industry, broadly speaking. And it feels like it’s happening at a very rapid pace…” (Zach Handel, 06:57)
• On Fed independence:
  • “If monetary policy is dependent on the fiscal situation, on an election likely, it will lead to a higher average inflation rate over time.” (Zach Handel, 36:14)
• On OG Bitcoiners:
  • “With the benefit of hindsight, it looks like basically an OG bitcoiner crash out was the main reason for the underperformance of price in the month of November…” (Zach Handel, 23:43)

Key Timestamps

• Regulatory Bill Discussion and Grayscale Perspective: [02:56] – [06:40]
• Traditional Finance’s Crypto Adoption: [08:40] – [11:22]
• Market Analysis — Fundamentals and ETF Flows: [13:40] – [20:15]
• Price Targets and Rally Risks: [23:09] – [26:05]
• Ethereum and Smart Contract Platforms: [26:42] – [34:06]
• Powell, Politics, and Inflation Dynamics: [35:43] – [39:18]
• Geopolitical Pressures and Dollar Demand: [41:02] – [43:28]
• Closing Market Structure Thoughts: [44:50] – [46:22]

Closing Thoughts

The episode painted a bullish yet nuanced picture: a thawing regulatory environment is setting the stage for new institutional capital and product innovation, particularly in ETFs and tokenization. Macro and political turmoil in the U.S. and abroad are accelerating the “alternative store of value” thesis for crypto. Ethereum is best positioned among altcoins for near-term outperformance. The biggest risks? Unpredictable OG holder behavior and the ever-present challenge of uncertain politics—yet these are increasingly outweighed by secular tailwinds and rising clarity.