Author: Cathy
Produced by: Plain Language Blockchain
Bitcoin has dropped from $126,000 to the current $90,000, a 28.57% plunge.
Market panic, liquidity exhaustion, and the pressure of deleveraging have left everyone gasping for breath. Coinglass data shows that the fourth quarter experienced significant forced liquidations, greatly weakening market liquidity.
However, at the same time, some structural positives are gathering: the U.S. SEC is about to launch the "Innovation Exemption" rule, expectations for the Federal Reserve to enter 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, but seems promising in the long term.
The question is, where will the money for the next bull market come from?
01. Retail Investors' Money is Insufficient
First, let’s talk about a myth that is being shattered: Digital Asset Treasury (DAT) companies.
What is DAT? Simply put, it is when a publicly listed company buys cryptocurrencies (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 can remain consistently above the net asset value (NAV) of its held crypto assets, it can continuously amplify capital by issuing stocks at high prices and buying coins at low prices.
It sounds great, but there is a prerequisite: the stock price must always maintain a premium.
Once the market shifts to "risk aversion," especially during a significant drop in Bitcoin, this high beta premium can collapse rapidly, even turning into a discount. Once the premium disappears, issuing stocks will dilute shareholder value, and the ability to raise funds will dry up.
More critically, there is the issue of scale.
As of September 2025, although more than 200 companies have adopted the DAT strategy, collectively holding over $115 billion in digital assets, this number accounts for less than 5% of the overall crypto market.
This means that the purchasing power of DAT is simply insufficient to support the next bull market.
Worse still, when the market is under pressure, DAT companies may need to sell assets to maintain operations, which would add additional selling pressure to the already weak market.
The market must find larger and more stable sources of funding.
02. Federal Reserve and SEC Open the Floodgates
The structural liquidity shortage can only be resolved through institutional reforms.
Federal Reserve: Faucet and Gateway
On December 1, 2025, the Federal Reserve's quantitative tightening policy will end, marking a key turning point.
For the past two years, QT has continuously drained liquidity from the global market, and its end means a significant structural constraint has been removed.
More importantly, there are expectations for interest rate cuts.
On December 9, according to CME's "FedWatch," the probability of the Federal Reserve cutting rates by 25 basis points in December is 87.3%.
Historical data is very clear: during the pandemic in 2020, the Fed's rate cuts and quantitative easing drove Bitcoin from about $7,000 to around $29,000 by the end of the year. Rate cuts lower borrowing costs and push capital towards high-risk 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, he has a dual strategic value:
One is the "faucet"—directly determining the tightness of monetary policy, affecting the cost of market liquidity.
The other is the "gateway"—determining the extent to which the U.S. banking system opens up to the crypto industry.
If a crypto-friendly leader takes office, it could accelerate the collaboration between the FDIC and OCC on digital assets, which is a prerequisite for sovereign funds and pension funds to enter the market.
SEC: Regulation Transforms from Threat to Opportunity
SEC Chairman 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 within a regulatory sandbox. The new framework will update the token classification system and may include "sunset clauses"—when a token meets decentralization standards, its status as a security will terminate. This provides developers with clear legal boundaries, attracting talent and capital back to the U.S.
More importantly, there is a shift in regulatory attitude.
In its 2026 review priorities, the SEC has removed cryptocurrencies from its independent priority list for the first time, instead emphasizing data protection and privacy.
This indicates that the SEC is shifting from viewing digital assets as "emerging threats" to integrating them into mainstream regulatory themes. This "de-risking" eliminates institutional compliance barriers, making digital assets easier for corporate boards and asset management institutions to accept.
03. The Real Potential for Big Money
If DAT's money is insufficient, where is the real big money? Perhaps the answer lies in three pipelines that are being laid out.
Pipeline One: Institutional Tentative Entry
ETFs have become the preferred method for global asset management institutions to allocate funds to the crypto space.
After the U.S. approved a spot Bitcoin ETF in January 2024, Hong Kong also approved spot Bitcoin and Ethereum ETFs. This global regulatory convergence has made ETFs the standardized channel for international capital to deploy quickly.
But ETFs are just the beginning; more importantly, the maturity of custody and settlement infrastructure is crucial. Institutional investors' focus has shifted from "can we invest" to "how to invest safely and efficiently."
Global custodians like BNY Mellon have begun offering digital asset custody services. Platforms like Anchorage Digital integrate middleware (such as BridgePort) to provide institutional-grade settlement infrastructure. These collaborations allow institutions to allocate assets without pre-funding, greatly improving capital efficiency.
The most imaginative aspect is the involvement of pension funds and sovereign wealth funds.
Billionaire investor Bill Miller has stated that he expects financial advisors to start recommending a 1% to 3% allocation of Bitcoin in investment portfolios over the next three to five years. While this may seem like a small percentage, for the trillions of dollars in global institutional assets, a 1%-3% allocation could mean trillions of dollars flowing in.
Indiana has proposed allowing pension funds to invest in crypto ETFs. UAE sovereign investors have partnered with 3iQ to launch a hedge fund that attracted $100 million, targeting an annual return of 12%-15%. This institutionalized process ensures that capital inflows are predictable and structurally long-term, contrasting sharply with the DAT model.
Pipeline Two: RWA, the Trillion-Dollar Bridge
The tokenization of RWA (Real World Assets) could be the most important driver of liquidity in the next wave.
What is RWA? It refers to converting traditional assets (such as bonds, real estate, and artworks) into digital tokens on the blockchain.
As of September 2025, the total market value of global RWA is approximately $30.91 billion. According to a report by Tren Finance, by 2030, the tokenized RWA market could 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-backed 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 introducing U.S. treasury bonds as collateral on-chain. The integration of RWA has made MakerDAO one of the largest DeFi protocols by total value locked (TVL), with billions of dollars in 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 capital source is institutional allocation or RWA, efficient, low-cost trading and settlement infrastructure is a prerequisite for large-scale adoption.
Layer 2 processes 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 achieved on Layer 1. This scalability is crucial for handling high-frequency institutional capital flows.
Stablecoins are even more critical.
According to a report by TRM Labs, as of August 2025, the on-chain trading volume of stablecoins exceeded $4 trillion, a year-on-year increase of 83%, accounting for 30% of all on-chain trading volume. As of the first half of the year, the total market value of stablecoins reached $166 billion, becoming a pillar of cross-border payments. A report by Rise shows that over 43% of B2B cross-border payments in Southeast Asia use stablecoins.
As regulators (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 transfer and settle funds.
04. How Might the Money Come?
If these three pipelines can truly open up, how will the money flow in? The market's short-term pullback reflects the necessary process of deleveraging, but structural indicators suggest that the crypto market may be on the threshold of a new wave of large-scale capital inflows.
Short-term (End of 2025 - Q1 2026): Potential Rebound from Policy Changes
If the Federal Reserve ends QT and cuts rates, and if the SEC's "Innovation Exemption" is implemented in January, the market may see a policy-driven rebound. This phase will largely rely on psychological factors, with clear regulatory signals prompting a return of risk capital. However, this wave of funding may be speculative, highly volatile, and its sustainability is uncertain.
Medium-term (2026-2027): Gradual Entry of Institutional Funds
As global ETFs and custody infrastructure mature, liquidity may primarily come from regulated institutional capital pools. A small strategic allocation from pension funds and sovereign wealth 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 from RWA
Sustained large-scale liquidity may rely on the tokenization of RWA. RWA brings 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 the global balance sheet, likely 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.
05. Conclusion
The last bull market relied on retail investors and leverage.
If the next one comes, it may depend on institutions and infrastructure.
The market is moving 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 being laid.
In the next three to five years, these pipelines may gradually open. By then, the market will be competing not for retail attention, but for institutional trust and allocation limits.
This is a transition from speculation to infrastructure, and it is an inevitable path for the crypto market to mature.
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