Key Points

Bitcoin would gain from easing inflationary pressures.
It would also likely rally if Strategy held a smaller share of the supply.
The next halving, though still distant, will probably serve as a catalyst as well.

Bitcoin (CRYPTO: BTC) has fallen more than 50 percent from its October 2025 high of $126,080.

This decline places the asset in bear market territory. Three specific catalysts could reverse the trend and support renewed gains. Each is examined below.

1. The Fed shifts toward rate cuts

Bitcoin performs well when liquidity is abundant in the financial system.

Loose credit supports risk assets while tighter conditions weigh on them. The current environment remains challenging. May's Consumer Price Index registered 4.2 percent, and the Federal Reserve under Chair Kevin Warsh has kept rates unchanged. Markets now assign a 79 percent chance of a rate increase rather than a cut by the end of 2026.

This outlook could improve for Bitcoin if two conditions are met. First, the Iran ceasefire must persist long enough for energy prices to ease. Limited signs of this adjustment are already visible, though progress remains slow amid ongoing uncertainty. Second, employment must soften, a development that has not yet occurred.

Core inflation has shown modest monthly declines, indicating that underlying price pressures may be less broad than the headline number suggests. Should growth moderate later in the year, the Fed could begin cutting rates by early 2027, providing support for Bitcoin.

2. The Strategy overhang clears

Strategy (NASDAQ: MSTR) controls approximately 847,363 bitcoins, representing nearly 4 percent of total supply. This concentration stands in contrast to Bitcoin's original design as decentralized currency. Strategy has also indicated willingness to sell portions of its holdings.

On June 29, the company filed its Digital Credit Capital Framework, permitting up to $1.25 billion in Bitcoin sales to cover preferred stock dividends and share repurchases. After years of pledging never to sell, that commitment has ended. The shift has affected market sentiment, as Strategy now represents a prominent holder whose actions influence price.

Several outcomes could resolve this pressure. Repeated sales under the framework might be absorbed by the market, leading to a further price drop until selling no longer surprises participants. Alternatively, a strong rally could reopen Strategy's premium to net asset value, allowing it to issue new shares and purchase additional Bitcoin. A third scenario involves the firm's financial structure failing, forcing liquidation of its entire position. While painful in the short term, this would ultimately remove the overhang of a major seller.

3. The 2028 halving effect

Roughly 654 days remain until the next halving, expected in April 2028. Mining rewards will drop from 3.125 bitcoins to 1.5625 bitcoins per block, sharply reducing new supply.

In the 12 months before the 2012, 2016, and 2020 halvings, prices rose as holders and miners positioned ahead of the supply reduction. The 2024 cycle differed due to spot Bitcoin ETFs advancing demand. If prior patterns hold, accumulation could begin around April 2027.

This cycle may deviate from history. Prior peaks occurred 12 to 18 months after halvings, matching the October 2025 top. Past cycles also saw 70 to 80 percent declines from peaks, suggesting the current 50 percent drop may not yet be complete. Even so, the halving offers the clearest supply-based reason for long-term confidence.

Should you buy Bitcoin right now?

Before purchasing Bitcoin, consider the following.

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Stock Advisor returns as of July 5, 2026.

Alex Carchidi holds Bitcoin. The Motley Fool holds and recommends Bitcoin. The Motley Fool maintains a disclosure policy.

The views expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.