Why will institutions, rather than retail investors, pave the way for the next bull market?

From $126 thousand to $90.82K — Bitcoin has rapidly lost 28.57% of its value, leaving behind concern and uncertainty. According to Coinglass, the fourth quarter recorded a wave of forced liquidations, exerting strong pressure on market liquidity. However, alongside this current stress, deep structural shifts are forming that could change the game: the SEC is preparing an “Innovation Exemption,” the Fed is completing quantitative tightening, and global institutional channels are rapidly maturing. This paradox — a disaster in the short term, but hope in the long term — raises a critical question: where will fresh capital come from for the next influx?

Blurring the old model: why retail investors are no longer enough

The previous cycle was based on a simple formula: retail investors + leverage = exponential growth. But this math no longer works, and the reason lies not in psychology but in structure.

Digital asset treasury companies (DAT) were the main hope for supporting crypto expenses. The concept is simple: a public company issues shares and debt, buys Bitcoin or altcoins, and then earns through staking or lending. As long as the stock price traded at a premium to net asset value (NAV), this “capital flywheel” spun profitably. But one risk — once the market shifts into a “risk-off” mode, it instantly destroys this beta premium. Bitcoin falls, the premium evaporates, and suddenly the company’s DDT is forced to sell assets to survive.

The scale of the problem: over 200 DAT companies currently hold about $115 billion in digital assets — less than 5% of the crypto market. This is insufficient for a large influx. Under market pressure, these companies could even become sellers rather than buyers, further amplifying downward pressure.

The simple conclusion: the capital needed for the next wave must come from another source — larger, more structured, more resilient to panic.

Regulatory transformation: from barrier to gateway

A structural liquidity shortage can only be addressed through institutional reforms. And even more so — the foundation is already being laid.

Fed: the tap and valve of the monetary system

December 1, 2025, marks the official end of the Federal Reserve’s quantitative tightening — a turning point that cannot be overstated. Two years of continuous liquidity withdrawal from global markets kept risky assets in an iron cage. Its end means one of the biggest structural constraints will be lifted.

But even more important — expectations of a rate cut. CME FedWatch shows an 87.3% probability of a 25 basis point cut in December. The history here is telling: in 2020, when the Fed sharply cut rates and launched quantitative easing, Bitcoin jumped from $7 thousand to ~$29 thousand in a year. Lower interest rates = cheaper borrowing = capital migrates into risky assets.

Kevin Hassett — a potential candidate for Fed Chair — presents a dual dynamic. First: he will determine the rigidity of monetary policy (kран). Second — he will control the openness of the US banking system to crypto (загород). If a crypto-friendly leader comes in, coordination between FDIC and OCC regarding digital assets could accelerate, opening the gate for sovereign funds and pension funds.

SEC: from threat to opportunity mechanism

Paul Atkins, SEC Chair, announced the launch of the “Innovation Exemption” rule in January 2026. This is not just easing — it’s a rethinking of the regulatory architecture. The new rule will simplify compliance processes, allowing crypto companies to test products faster in the regulatory sandbox.

The revolutionary part: reclassification of tokens with a possible “sunset clause” — the security status terminates when the token reaches sufficient decentralization. This provides developers with clear legal boundaries and halts the uncertainty that previously kept talent and capital away from the US.

Even more telling: cryptocurrencies are first time included outside the separate “watchlist” in SEC priorities for 2026. Instead, the focus shifts to data protection and privacy. This signals that SEC is ceasing to see digital assets as a “new threat” and is beginning to integrate them into the overall financial regulatory framework. Such “de-lisiting” reduces compliance barriers, making it easier for boards and fund managers to approve digital assets in portfolios.

Three channels of big money: where are they really hidden

If DAT capital is insufficient, then where are the real big money waiting? The answer breaks down into three parallel channels currently being paved.

Channel one: institutions preparing to enter

ETFs are now standard. After the approval of spot Bitcoin ETFs in the US in January 2024 and the approval of spot Bitcoin and Ethereum ETFs in Hong Kong, global regulation harmonization will be complete. ETFs are not an adventure, but a standard channel for rapid deployment of international capital.

But ETFs are just a façade. The real infrastructure is being built deeper: in custody and settlement. Bank of New York Mellon already provides custodial services for digital assets. Platforms like Anchorage Digital integrate middleware that provides institutional-level settlement infrastructure — investors no longer need to pre-fund operations, radically increasing capital efficiency.

A huge potential lies in pension funds and sovereign wealth funds. Investor Bill Miller notes that over the next three to five years, financial advisors will start recommending allocating 1%-3% of portfolios to Bitcoin. For trillions of dollars of institutional assets, 1%-3% is already trillions of dollars of inflow.

Indiana, as one of the largest US states by institutional capital, has already proposed allowing pension funds to invest via crypto-ETF. Sovereign investors in the UAE, together with 3iQ, launched a hedge fund with $100 million target ROI of 12%-15% per year. Such investments are not speculation but strategic allocation characterized by patience and low leverage. This provides a stable foundation for the market, unlike retail panic waves.

Channel two: RWA — a bridge to trillions of dollars

RWA (tokenization of real assets) could become the main driver of the next liquidity wave — or even redefine the entire crypto market.

What is RWA in practice? It’s the transformation of traditional assets — bonds, real estate, artworks — into digital tokens on the blockchain. As of September 2025, the market cap of RWA is about $30.91 billion. According to Tren Finance, by 2030, this market could grow more than 50 times, with consensus estimating a potential of 4-30 trillion dollars. This is far larger than any crypto-native capital pool ever existed.

Why is RWA transformational? It bridges the gap between traditional finance and DeFi. Tokenized treasury bonds allow both sides to “speak the same language.” RWA brings stability and yield to DeFi, reduces volatility, and provides institutions with a proven earning mechanism not tied to crypto speculation.

Protocols like MakerDAO and Ondo Finance, which introduce US treasury bonds as collateral, are already attracting institutional capital. MakerDAO has become one of the largest DeFi protocols by TVL, holding billions of dollars in government bonds backing DAI. When compliance products with traditional assets of clear legal rights are launched — traditional finance actively begins investing.

Channel three: infrastructure scaling

Capital, regardless of its source, needs efficient and low-cost settlement infrastructure.

Layer 2 solutions address the most acute problem: processing transactions off the main Ethereum network, drastically reducing fees and confirmation times. Platforms like dYdX via L2 enable lightning-fast order processing — impossible on L1. For high-frequency institutional capital, this is critical.

Stablecoins are even more important than L2. According to TRM Labs, the volume of stablecoin transactions on the blockchain exceeded $4 trillion in August 2025, up 83% year-over-year, accounting for 30% of all blockchain transactions. In the first half of the year, their market cap reached $166 billion — they have already become the backbone for cross-border payments. In Southeast Asia, over 43% of B2B payments are made via stablecoins.

Regulatory elimination of remaining doubts: Hong Kong’s monetary authority requires 100% reserves for issuers. This cements the status of stablecoins as a compliant, liquid instrument, ensuring safe transfer and clearing for institutions.

How this capital will actually arrive

The timeline of inflows breaks down into three phases.

Short-term (end of 2025 — Q1 2026): political signals heat up speculation

If the Fed completes QT and cuts rates in December, and the SEC launches the “Innovation Exemption” in January 2026, the market could get a politically driven hot rebound. At this stage, psychological factors dominate — clear signals from regulators bring risk capital back. But this influx is speculative, volatile, and its sustainability is in question.

Medium-term (2026-2027): gradual institutional entry

With mature ETF infrastructure and custodial services, liquidity begins flowing from regulated institutional pools. Even a small 1%-3% allocation from pension and sovereign funds will operate at scale — such capital is much more patient and depends on far less leverage than retail investors, providing a stable market foundation.

Long-term (2027-2030): RWA redefines the game

Long-lasting, large-scale liquidity will likely depend on the tokenization of RWA. As thousands of traditional assets start entering the blockchain as tokens, DeFi gains value, stability, and yield previously exclusive to traditional finance. TVL of DeFi protocols will probably surpass trillions of dollars. These will no longer be cyclical speculations but structural growth based on the global balance of assets and liabilities.

Conclusion: from speculation to institution

Previous bull market cycles relied on retail investors and leverage. The next — if it truly arrives — will be based on institutions, regulatory changes, and infrastructure.

The crypto market is moving from the periphery to the mainstream. Money will not arrive suddenly — they are already paving their channels. Over the next three to five years, ETF, RWA, Layer 2, and stablecoins together could change the dynamics rarely in reverse. Then the market will no longer compete for retail traders’ attention but for trust and allocation from large institutions.

This is a transition from casino to capitalism, from speculation to infrastructure. An inevitable path to maturity.