Written by: Cathy
Bitcoin has plummeted from $126,000 to the current $90,000, a 28.57% crash.
Market panic, liquidity drying up, and deleveraging pressure are suffocating everyone. Coinglass data 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 U.S. SEC is about to introduce an "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 terrible in the short term, but seems promising in the long run.
The question is, where will the money for the next bull market actually come from?
Retail Money Isn't Enough
Let's start with a myth that is being busted: Digital Asset Treasuries (DAT).
What is a DAT? Simply put, it's a publicly traded company that buys coins (Bitcoin or other altcoins) by issuing stocks and debt, and then makes money through active asset management (staking, lending, etc.).
The core of this model is the "capital flywheel": as long as the company's stock price remains higher than the net asset value (NAV) of its held crypto assets, it can continuously amplify capital by issuing stock at high prices and buying coins at low prices.
It sounds great, but there's a prerequisite: the stock price must maintain a premium.
Once the market shifts to "risk-off," especially when Bitcoin falls sharply, this high-beta premium can quickly crumble, even turning into a discount. Once the premium disappears, issuing stock dilutes shareholder value, and fundraising ability dries up.
More critical is the scale.
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 DAT's purchasing power is simply not enough to fuel the next bull market.
Worse, when the market is under pressure, DAT companies may need to sell assets to maintain operations, adding extra selling pressure to an already weak market.
The market must find larger, more structurally stable sources of funding.
The Fed and SEC Turn on the Taps
Structural liquidity shortages can only be solved through institutional reform.
Federal Reserve: The Faucet and the Gate
December 1, 2025, marked the end of the Federal Reserve's Quantitative Tightening (QT) policy, a key turning point.
Over the past two years, QT has continuously drained liquidity from global markets. Its end means a major structural constraint has been removed.
More important is the expectation of interest rate cuts.
On December 9th, according to CME's "FedWatch Tool," the probability of a 25 basis point rate cut by the Fed in December is 87.3%.
Historical data is clear: during the 2020 pandemic, the Fed's rate cuts and quantitative easing pushed Bitcoin from around $7,000 to about $29,000 by year-end. Rate cuts lower borrowing costs, pushing capital towards riskier assets.
Another key figure to watch is Kevin Hassett, a potential candidate for Fed Chair.
He holds a friendly stance towards crypto assets and supports aggressive rate cuts. But more importantly, his dual strategic value:
One is the "faucet"—directly determining the looseness or tightness of monetary policy, affecting the cost of market liquidity.
The other is the "gate"—determining the degree to which the U.S. banking system is open to the crypto industry.
If a crypto-friendly leader takes office, it could accelerate coordination between the FDIC and OCC regarding digital assets, a prerequisite for sovereign wealth funds and pensions to enter.
SEC: Regulation Turns from Threat to Opportunity
SEC Chair Paul Atkins has announced plans to introduce an "Innovation Exemption" rule in January 2026.
This exemption aims to simplify compliance processes, allowing crypto companies to launch products faster within a regulatory sandbox. The new framework will update the token classification system and may include a "sunset clause"—where a token's status as a security terminates once it reaches a sufficient level of decentralization. This provides developers with clear legal boundaries, attracting talent and capital back to the U.S.
More important is the shift in regulatory attitude.
In its 2026 examination priorities, the SEC, for the first time, removed cryptocurrency from its standalone priority list, instead emphasizing data protection and privacy.
This indicates the SEC is shifting from viewing digital assets as an "emerging threat" to integrating them into mainstream regulatory themes. This "de-risking" removes institutional compliance barriers, making digital assets more acceptable to corporate boards and asset management institutions.
The Real Big Money
If DAT money isn't enough, where is the real big money? Perhaps the answer lies in three pipelines being laid.
Pipeline One: Tentative Institutional Entry
ETFs have become the preferred method for global asset managers to allocate funds to the crypto space.
After the U.S. approved spot Bitcoin ETFs in January 2024, Hong Kong also approved spot Bitcoin and Ethereum ETFs. This global regulatory convergence makes ETFs a standardized channel for rapid international capital deployment.
But ETFs are just the beginning; more important is the maturity of custody and settlement infrastructure. The focus for institutional investors has shifted from "can we invest?" to "how can we invest safely and efficiently?"
Global custodians like BNY Mellon already offer digital asset custody services. Platforms like Anchorage Digital integrate middleware (e.g., BridgePort) to provide institutional-grade settlement infrastructure. These collaborations allow institutions to allocate assets without pre-funding, greatly improving capital utilization efficiency.
The most imaginative prospect is pensions and sovereign wealth funds.
Billionaire investor Bill Miller stated he expects financial advisors to begin recommending a 1% to 3% allocation to Bitcoin in portfolios within the next three to five years. This sounds like a small percentage, but for global institutional assets worth tens of trillions, a 1%-3% allocation means trillions of dollars flowing in.
Indiana has proposed allowing pensions to invest in crypto ETFs. A UAE sovereign investor partnered with 3iQ to launch a hedge fund, attracting $100 million with a goal of 12%-15% annualized returns. This institutionalized process ensures fund inflows are predictable and structurally long-term, starkly different from the DAT model.
Pipeline Two: RWA, The Trillion-Dollar Bridge
RWA (Real World Asset) tokenization could be the most important driver of liquidity in the next wave.
What is RWA? It's the conversion of traditional assets (like bonds, real estate, artwork) into digital tokens on the blockchain.
As of September 2025, the global RWA total market cap is approximately $30.91 billion. According to a Tren Finance report, by 2030, the tokenized RWA market could grow over 50-fold, with most companies expecting its size to potentially reach $4-30 trillion.
This scale far surpasses any existing crypto-native capital pool.
Why is RWA important? Because it solves the language barrier between TradFi and DeFi. Tokenized bonds or treasury bills allow both sides to "speak the same language." RWA brings stable, yield-backed assets to DeFi, reduces volatility, and provides institutional investors with a non-crypto-native source of yield.
Protocols like MakerDAO and Ondo Finance, by introducing U.S. Treasury bills on-chain as collateral, have become magnets for institutional capital. RWA integration has made MakerDAO one of the largest DeFi protocols by TVL, with tens of billions in U.S. Treasuries backing DAI. This shows that when compliant, yield products backed by traditional assets emerge, traditional finance will actively deploy capital.
Pipeline Three: Infrastructure Upgrade
Regardless of the capital source—institutional allocation or RWA—efficient, low-cost transaction settlement infrastructure is a prerequisite for mass adoption.
Layer 2 processes transactions outside the Ethereum mainnet, significantly reducing Gas fees and shortening confirmation times. Platforms like dYdX use L2 to offer fast order creation and cancellation capabilities, which is impossible on Layer 1. This scalability is crucial for handling high-frequency institutional capital flows.
Stablecoins are even more critical.
According to a TRM Labs report, as of August 2025, stablecoin on-chain transaction volume exceeded $4 trillion, up 83% year-over-year, accounting for 30% of all on-chain transaction volume. As of the first half of the year, the total stablecoin market cap reached $166 billion, becoming a pillar of cross-border payments. A rise report shows that over 43% of B2B cross-border payments in Southeast Asia use stablecoins.
As regulators (like the Hong Kong Monetary Authority) require stablecoin issuers to maintain 100% reserves, the status of stablecoins as compliant, highly liquid on-chain cash tools is solidified, ensuring institutions can efficiently transfer and settle funds.
How Might the Money Come?
If these three pipelines truly open, how might the money come? The short-term pullback reflects the necessary process of deleveraging, but structural indicators suggest the crypto market might be on the threshold of a new wave of large-scale capital inflows.
Short-term (End of 2025 - Q1 2026): Policy-Driven Rebound Potential
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 stage is primarily driven by psychological factors, with clear regulatory signals bringing risk capital back. But this wave of capital is highly speculative, volatile, and its sustainability is questionable.
Medium-term (2026-2027): Gradual Entry of Institutional Funds
As global ETF and custody infrastructure matures, liquidity will likely come from regulated institutional capital pools. Small strategic allocations from pensions and sovereign funds might take effect. This capital is characterized by high patience and low leverage, providing a stable foundation for the market, unlike retail investors who chase rallies and sell off during dips.
Long-term (2027-2030): Structural Change Potentially Brought by RWA
Sustained large-scale liquidity might rely on RWA tokenization anchoring. RWA introduces the value, stability, and yield streams of traditional assets onto the blockchain, potentially pushing DeFi's TVL into the trillions. RWA directly links the crypto ecosystem to global balance sheets, potentially ensuring long-term structural growth rather than cyclical speculation. If this path holds, the crypto market will truly move from the fringe to the mainstream.
Summary
The last bull run was fueled by retail investors and leverage.
The next one, if it comes, might rely on institutions and infrastructure.
The market is moving from the edge to the mainstream; the question has changed from "can we invest?" to "how do we invest safely?"
The money won't come suddenly, but the pipelines are being laid.
Over the next three to five years, these pipelines will likely open gradually. By then, the market will no longer be competing for retail attention, but for institutional trust and allocation quotas.
This is a shift from speculation to infrastructure, and it's the necessary path for the crypto market to mature.
