Author: Cathy
Bitcoin has plummeted from $126,000 to the current $90,000, a 28.57% crash.
The market is in panic, liquidity has dried up, and the pressure of deleveraging is suffocating everyone. Data from Coinglass shows that the fourth quarter experienced significant forced liquidation events, severely weakening market liquidity.
But at the same time, some structural positives are converging: The US SEC is about to introduce “innovation exemption” rules, expectations for a Fed rate cut cycle are growing stronger, and global institutional channels are maturing rapidly.
This is the biggest contradiction in the current market: In the short term, things look bleak, but the long-term outlook seems rosy.
The question is, where will the money for the next bull market come from?
Retail Money Isn’t Enough
Let’s start with a myth that’s being shattered: Digital Asset Treasury Companies (DATs).
What is a DAT? Simply put, it’s a public company that issues stock and debt to buy crypto (Bitcoin or other altcoins), then actively manages those assets (staking, lending, etc.) to generate profit.
The core of this model is the “capital flywheel”: As long as the company’s stock price can consistently trade above the net asset value (NAV) of its crypto holdings, it can issue stock at a high price, buy crypto at a low price, and keep leveraging up.
Sounds great, but there’s a catch: The stock price must always maintain a premium.
Once the market shifts to “risk-off,” especially when Bitcoin crashes, this high-beta premium collapses quickly or even turns into a discount. When the premium disappears, issuing new shares dilutes shareholder value and the ability to raise funds dries up.
Scale is the key issue.
As of September 2025, while more than 200 companies have adopted the DAT strategy and together hold over $115 billion in digital assets, this figure is less than 5% of the overall crypto market.
This means DATs simply don’t have enough purchasing power to support the next bull market.
Worse, when the market is under pressure, DATs may need to sell assets to stay afloat, adding even more selling pressure to an already weak market.
The market must find a bigger, more structurally stable source of capital.
The Fed and SEC Open the Floodgates
Structural liquidity shortages can only be solved through institutional reforms.
The Fed: The Faucet and the Gate
On December 1, 2025, the Fed’s quantitative tightening (QT) policy ends—a critical turning point.
Over the past two years, QT has been sucking liquidity out of global markets; its end removes a major structural constraint.
Even more important is the expectation of rate cuts.
On December 9, CME “FedWatch” data showed an 87.3% probability of a 25-basis-point rate cut by the Fed in December.
The historical data is clear: During the 2020 pandemic, the Fed’s rate cuts and quantitative easing lifted Bitcoin from around $7,000 to roughly $29,000 by year-end. Rate cuts lower borrowing costs and push capital into risk assets.
There’s also a key figure worth watching: Kevin Hassett, a potential Fed chair candidate.
He is crypto-friendly and supports aggressive rate cuts. But more importantly, he brings a dual strategic value:
First, the “faucet”—directly controlling the looseness of monetary policy, affecting the cost of market liquidity.
Second, the “gate”—determining how open the US banking system is to the crypto industry.
If a crypto-friendly leader takes office, it could accelerate FDIC and OCC cooperation on digital assets—a prerequisite for sovereign wealth funds and pension funds to enter the space.
SEC: Regulation Shifts from Threat to Opportunity
SEC Chair Paul Atkins has announced plans to launch the “Innovation Exemption” rule in January 2026.
This exemption aims to streamline compliance, allowing crypto companies to launch products faster in a regulatory sandbox. The new framework will update token classification and may include a “sunset clause”—when a token reaches a certain level of decentralization, its security status ends. This gives developers clear legal boundaries and draws talent and capital back to the US.
More importantly, there’s been a shift in regulatory attitude.
In its 2026 review priorities, the SEC has, for the first time, removed crypto from its standalone priority list, instead emphasizing data protection and privacy.
This shows the SEC is moving from viewing digital assets as an “emerging threat” to integrating them into mainstream regulatory themes. This “de-risking” removes institutional compliance obstacles, making digital assets easier for corporate boards and asset managers to accept.
Where the Real Big Money Might Come From
If DAT money isn’t enough, where’s the real big money? The answer may lie in three pipelines now being built.
Pipeline One: Institutions’ Tentative Entry
ETFs have become the preferred way for global asset managers to allocate capital to crypto.
After the US approved spot Bitcoin ETFs in January 2024, Hong Kong followed with spot Bitcoin and Ethereum ETFs. This global regulatory convergence has made ETFs a standardized channel for rapid international capital deployment.
But ETFs are just the beginning; what matters more is the maturity of custody and settlement infrastructure. Institutional investors are shifting focus from “can we invest” to “how to invest safely and efficiently.”
Global custodians like BNY Mellon now offer digital asset custody. Platforms like Anchorage Digital integrate middleware (like BridgePort) to provide institutional-grade settlement infrastructure. These partnerships allow institutions to allocate funds without pre-funding, vastly improving capital efficiency.
The most promising prospects are pensions and sovereign wealth funds.
Billionaire investor Bill Miller expects that in the next three to five years, financial advisors will begin recommending a 1%-3% Bitcoin allocation in portfolios. That sounds small, but for trillions in global institutional assets, a 1%-3% allocation means trillions flowing in.
Indiana has proposed allowing pensions to invest in crypto ETFs. UAE sovereign investors, in partnership with 3iQ, launched a hedge fund attracting $100 million, targeting 12%-15% annualized returns. This institutionalized process ensures capital inflows are predictable and long-term—completely different from the DAT model.
Pipeline Two: RWA, the Trillion-Dollar Bridge
RWA (Real-World Asset) tokenization may be the most important driver of the next wave of liquidity.
What is RWA? It means turning traditional assets (like bonds, real estate, art) into digital tokens on the blockchain.
As of September 2025, the global RWA market cap is about $30.91 billion. According to Tren Finance, by 2030, the tokenized RWA market could grow more than 50-fold, with most companies expecting the market size to reach $4-$30 trillion.
This scale far surpasses any existing crypto-native capital pool.
Why is RWA important? Because it bridges the language gap between traditional finance and DeFi. Tokenized bonds or treasuries allow both sides to “speak the same language.” RWAs bring stable, yield-bearing assets to DeFi, reducing volatility and offering institutional investors a non-crypto-native source of yield.
Protocols like MakerDAO and Ondo Finance, by bringing US treasuries on-chain as collateral, have become magnets for institutional capital. RWA integration has made MakerDAO one of the largest DeFi protocols by TVL, with billions in US Treasuries backing DAI. This proves that when compliant, yield-backed traditional assets appear, traditional finance is eager to deploy capital.
Pipeline Three: Infrastructure Upgrades
Whether capital comes from institutional allocation or RWAs, efficient and low-cost trading and settlement infrastructure is a prerequisite for mass adoption.
Layer 2s process transactions off the Ethereum mainnet, significantly lowering gas fees and reducing confirmation times. Platforms like dYdX use L2s to offer rapid order creation and cancellation, which is impossible on Layer 1. This scalability is crucial for handling high-frequency institutional flows.
Stablecoins are even more critical.
According to TRM Labs, as of August 2025, on-chain stablecoin transaction volume exceeded $4 trillion, up 83% year-on-year, accounting for 30% of all on-chain transactions. In the first half of the year, total stablecoin market cap reached $166 billion, becoming the backbone of cross-border payments. Rise reports show over 43% of B2B cross-border payments in Southeast Asia use stablecoins.
With regulators (such as the Hong Kong Monetary Authority) requiring stablecoin issuers to maintain 100% reserves, stablecoins’ status as compliant, highly liquid on-chain cash tools is cemented, ensuring institutions can transfer and clear funds efficiently.
How Might the Money Come?
If these three pipelines really open up, how will the money come? The short-term market correction reflects the necessary process of deleveraging, but structural indicators suggest the crypto market may be on the threshold of a new wave of large-scale capital inflows.
Short Term (End of 2025–Q1 2026): Policy-Driven Rebound
If the Fed ends QT and cuts rates, and if the SEC’s “Innovation Exemption” lands in January, the market could see a policy-driven rebound. This phase is mainly driven by sentiment; clear regulatory signals will bring risk capital back. But this wave of money is highly speculative, volatile, and its sustainability is questionable.
Medium Term (2026–2027): Gradual Institutional Entry
As global ETFs and custody infrastructure mature, liquidity may primarily come from regulated institutional pools. Modest strategic allocations by pensions and sovereign funds could take effect. This capital is patient, low-leverage, and can provide a stable foundation—not prone to chasing highs and lows like retail investors.
Long Term (2027–2030): Structural Changes from RWA
Sustained large-scale liquidity may depend on RWA tokenization. RWAs bring the value, stability, and yield streams of traditional assets onto the blockchain, potentially pushing DeFi TVL into the trillions. RWAs directly link the crypto ecosystem to the global balance sheet, which could ensure long-term structural growth rather than cyclical speculation. If this path materializes, the crypto market will truly move from the periphery to the mainstream.
Summary
The last bull market was driven by retail and leverage. If the next one comes, it may depend on institutions and infrastructure.
The market is moving from the edge to the mainstream, and the question has shifted from “Can we invest?” to “How can we invest safely?”
The money won’t come overnight, but the pipelines are being built.
Over the next three to five years, these pipelines may gradually open. By then, the market will no longer be fighting for retail attention, but for institutional trust and allocation.
This is a shift from speculation to infrastructure—a necessary step for the crypto market to mature.
