Author: Cathy
Produced by: Baihua Blockchain
Bitcoin fell from $126,000 to now $90,000, a drop of 28.57%.
Market panic, liquidity exhaustion, and the pressure of deleveraging are making it hard for everyone to breathe. Coinglass data shows that the fourth quarter experienced significant forced liquidations, greatly weakening market liquidity.
But at the same time, some structural positives are converging: the U.S. SEC is about to launch the 'Innovation Exemption' rule, expectations for the Federal Reserve entering a rate-cutting cycle are growing stronger, and global institutional channels are maturing rapidly.
This is the biggest contradiction in the current market: it looks grim in the short term, yet seems promising in the long term.
The question is where the money for the next bull market will come from.
01. Retail money is insufficient.
Let's start with a myth that is breaking: Digital Asset Trust companies (DAT).
What is DAT? Simply put, it is when listed companies buy coins (Bitcoin or other altcoins) by issuing stocks and debt, and then earn money through active asset management (staking, lending, etc.).
The core of this model lies in the 'capital flywheel': as long as a company's stock price can continuously exceed the net asset value (NAV) of its held crypto assets, it can amplify capital by issuing stocks at high prices and buying coins at low prices.
It sounds great, but there is a premise: the stock price must remain at a premium.
Once the market shifts to 'risk aversion,' especially during a Bitcoin crash, this high β premium will quickly collapse, even turning into a discount. Once the premium disappears, issuing stocks will dilute shareholder value, and financing capabilities will wither.
More importantly, scale is key.
As of September 2025, although over 200 companies have adopted the DAT strategy, collectively holding over $115 billion in digital assets, this figure accounts for less than 5% of the overall crypto market.
This means that the purchasing power of DAT is fundamentally insufficient to support the next round of the bull market.
Worse still, when the market is under pressure, DAT companies may need to sell assets to maintain operations, which could add additional selling pressure to a weak market.
The market must find larger, more stable sources of capital.
02, The Federal Reserve and SEC Open the Floodgates.
Structural liquidity shortages can only be resolved through institutional reforms.
Federal Reserve: the faucet and the gate.
On December 1, 2025, the Fed's quantitative tightening policy ends, marking a critical turning point.
Over the past two years, QT quantitative tightening has continued to withdraw liquidity from global markets, and its end signifies the removal of a significant structural constraint.
More importantly, expectations for interest rate cuts.
On December 9, according to CME 'Fed Watch' data, the probability of the Fed cutting rates by 25 basis points in December is 87.3%.
Historical data is very intuitive: during the 2020 pandemic, the Federal Reserve's interest rate cuts and quantitative easing drove Bitcoin from about $7,000 to about $29,000 by the end of the year. Lowering interest rates reduces borrowing costs, driving capital toward high-risk assets.
Another key figure worth watching is Kevin Hassett, a potential candidate for Fed Chair.
He holds a friendly stance towards crypto assets and supports aggressive interest rate cuts. But more importantly, is his dual strategic value:
One is the 'faucet'—directly determining the tightness of monetary policy, affecting the cost of market liquidity.
Another is the 'gate'—determining the extent to which the U.S. banking system opens up to the crypto industry.
If a crypto-friendly leader takes office, it may accelerate the collaboration between the FDIC and OCC on digital assets, which is a prerequisite for sovereign funds and pensions to enter.
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 simplify compliance processes, allowing crypto companies to launch products faster in a regulatory sandbox. The new framework will update the token classification system, potentially including 'sunset clauses'—where a token's securities status terminates once it reaches a certain level of decentralization. This provides developers with clear legal boundaries, attracting talent and capital back to the U.S.
More importantly, there has been a shift in regulatory attitudes.
In 2026, the SEC's review focus has removed cryptocurrency from its independent priority list for the first time, shifting emphasis to data protection and privacy.
This indicates that the SEC is shifting from viewing digital assets as a 'new threat' to integrating them into mainstream regulatory themes. This 'de-risking' eliminates institutional compliance barriers, making it easier for digital assets to be accepted by corporate boards and asset management institutions.
03, Truly significant big money.
If DAT's money is insufficient, where is the real big money? Perhaps the answer lies in the three pipelines being laid.
Pipeline One: Institutional tentative entry.
ETFs have become the preferred way for global asset management firms to allocate funds to the crypto space.
After the U.S. approves spot Bitcoin ETFs in January 2024, Hong Kong also approved spot Bitcoin and Ethereum ETFs. This global regulatory convergence makes ETFs the standardized channel for rapid deployment of international capital.
But ETFs are just the beginning; more importantly, the maturation of custodial and settlement infrastructure. Institutional investors' focus has shifted from 'can we invest' to 'how to invest safely and efficiently.'
Global custodians like Bank of New York Mellon have already provided digital asset custodial services. Platforms such as Anchorage Digital integrate middleware (like BridgePort) to offer institutional-grade settlement infrastructure. These collaborations allow institutions to allocate assets without pre-funding, significantly improving capital efficiency.
The most imaginative are pension and sovereign wealth funds.
Billionaire investor Bill Miller expects that in the next three to five years, financial advisors will begin to recommend a 1% to 3% allocation of Bitcoin in investment portfolios. It may sound like a small proportion, but for global institutional assets worth trillions, a 1%-3% allocation means trillions of dollars flowing in.
Indiana has proposed allowing pension funds to invest in crypto ETFs. Sovereign investors from the UAE have partnered with 3iQ to launch a hedge fund, attracting $100 million, targeting an annual return of 12%-15%. This institutionalized process ensures predictable and long-term structural inflows of institutional capital, which is distinctly different from the DAT model.
Pipeline Two: RWA, a trillion-dollar bridge.
Tokenization of RWA (real-world assets) may be the most important driver of liquidity in the next wave.
What is RWA? It is the conversion of traditional assets (such as bonds, real estate, and art) into digital tokens on the blockchain.
As of September 2025, the global RWA total market value is approximately $30.91 billion. According to the Tren Finance report, by 2030, the tokenized RWA market may grow more than 50 times, with most companies expecting its market size to reach between $4 trillion and $30 trillion.
This scale far exceeds any existing crypto-native capital pool.
Why is RWA important? Because it bridges the language barrier between traditional finance and DeFi. Tokenized bonds or treasury bills allow both sides to 'speak the same language.' RWA brings stable, yield-supported assets to DeFi, reducing volatility and providing non-crypto-native yield sources for institutional investors.
Protocols like MakerDAO and Ondo Finance have become magnets for institutional capital by bringing U.S. treasury bills onto the chain as collateral. The integration of RWA has made MakerDAO one of the largest DeFi protocols by TVL, with billions of U.S. treasury bonds backing DAI. This indicates that when compliant yield products backed by traditional assets emerge, traditional finance will actively deploy capital.
Pipeline Three: Infrastructure upgrades.
Regardless of whether the source of capital is institutional allocation or RWA, high-efficiency, low-cost trading and settlement infrastructure is a prerequisite for large-scale adoption.
Layer 2 handles transactions outside the Ethereum mainnet, significantly reducing gas fees and shortening confirmation times. Platforms like dYdX provide rapid order creation and cancellation capabilities through L2, which cannot be realized on Layer 1. This scalability is crucial for handling high-frequency institutional capital flows.
Stablecoins are key.
According to the TRM Labs report, as of August 2025, the on-chain trading volume of stablecoins exceeded $4 trillion, an annual increase of 83%, accounting for 30% of the total on-chain transaction volume. As of the first half of the year, the total market value of stablecoins reached $166 billion, becoming a pillar for cross-border payments. The rise report indicates that over 43% of B2B cross-border payments in Southeast Asia use stablecoins.
As regulatory bodies (such as the Hong Kong Monetary Authority) require stablecoin issuers to maintain 100% reserves, the status of stablecoins as compliant, high-liquidity on-chain cash tools is solidified, ensuring that institutions can efficiently conduct capital transfers and settlements.
03, How might the money come?
If these three pipelines can truly open, where will the money come from? The short-term market correction reflects the necessary process of deleveraging, but structural indicators suggest that the crypto market may be on the threshold of a new round of massive capital inflow.
Short term (end of 2025 - Q1 2026): potential rebound from policy changes.
If the Federal Reserve ends QT and cuts interest rates, and if the SEC's 'Innovation Exemption' lands in January, the market may welcome a policy-driven rebound. This phase largely relies on psychological factors, as clear regulatory signals allow risk capital to flow back. However, this wave of funds is highly speculative, volatile, and remains in doubt.
Medium term (2026-2027): gradual entry of institutional funds.
As global ETFs and custodial infrastructure mature, liquidity may primarily come from regulated institutional capital pools. A small strategic allocation from pension and sovereign funds may take effect, characterized by high patience and low leverage, providing a stable foundation for the market, unlike retail investors who chase trends.
Long term (2027-2030): Structural changes that RWA may bring.
Continuous large-scale liquidity may rely on RWA tokenization anchoring. RWA brings the value, stability, and yield streams of traditional assets to the blockchain, expected to push DeFi's TVL toward trillions. RWA directly links the crypto ecosystem to the global balance sheet, potentially ensuring long-term structural growth rather than cyclical speculation. If this path holds, the crypto market will truly transition from the margins to the mainstream.
04, Summary.
The last bull market relied on retail and leverage.
If the next round comes, it may rely on systems and infrastructure.
The market is transitioning from the margins to the mainstream, and the question has shifted from 'can we invest' to 'how to invest safely.'
Money won't come suddenly, but the pipelines are already being laid.
In the next three to five years, these pipelines may gradually open. By then, the market will no longer compete for retail attention, but for institutional trust and allocation quotas.
This is a transition from speculation to infrastructure, and a necessary path for the maturity of the crypto market.
(The above content is excerpted and reprinted with permission from partner PANews, original link | Source: Plain Blockchain)
"Retail outflows, what will the next bull market rely on?" This article was first published on (BlockKey).
