Eastern Standard Time, January 9, 2026. The pricing and liquidity landscape of Bitcoin has diverged significantly from the vision outlined in the white paper over a decade ago. Since November 2023, when the Chicago Mercantile Exchange (CME) first surpassed Binance in Bitcoin open interest, to the approval and continued growth of Bitcoin spot ETFs in the U.S., traditional finance is systematically entering the crypto market through regulated channels such as futures and ETFs. Originally waving the banners of "decentralization" and "disrupting Wall Street," Web3 has, at the level of compliance and liquidity, been unilaterally integrated by the infrastructure and licensing systems of traditional finance. On the surface, on-chain protocols continue to operate, and public chain blocks are constantly being produced, but the true forces driving price and direction are migrating into the familiar derivatives and fund structures of Wall Street. Thus, a new suspense emerges: Is crypto finance being slowly absorbed and standardized as a subclass of assets within the existing financial system, or is it quietly "curving" the rules and order of traditional finance through its technology stack and asset forms?

The Symbolic Turning Point of CME Surpassing Binance

On November 10, 2023, the Bitcoin open interest on the Chicago Mercantile Exchange surpassed that of Binance for the first time (according to a single source). This specific date became a watershed moment in the narrative, symbolizing the transfer of Bitcoin pricing power from crypto-native exchanges to the regulated derivatives market. In the early days of digital assets, price discovery primarily occurred on offshore exchanges like Binance, where users drove extreme volatility with high-leverage contracts, perpetual contracts, and various innovative margin models, while regulation often lingered in gray areas. The CME, on the other hand, has long served brokers, hedge funds, and large fiduciary institutions, which are bound by compliance requirements but possess deeper capital pools and more mature risk management tools. As CME's open interest surpassed that of Binance, the landscape began to shift: on one side, retail and crypto-native players rapidly entered and exited in a high-volatility environment, while on the other side, institutions slowly but steadily reshaped Bitcoin's volatility and liquidity under a regulated centralized clearing system, using traditional risk models and hedging strategies. In an environment with higher regulatory friendliness, more standardized contract designs, and margin rules closer to traditional futures markets, the center of Bitcoin price discovery gradually migrated from the offshore crypto context to the familiar trading floors of Wall Street. Compliant margin requirements and risk limits constrained extreme leverage, and centralized clearing reduced systemic breakage risks, while these conventional configurations of traditional futures markets are redefining how Bitcoin "should" fluctuate.

The Long-Term Capital Picture After the ETF Door Opens

If CME's open interest surpassing Binance marked the power shift at the derivatives level, then compliant products like Bitcoin spot ETFs opened a completely different entry point for traditional capital at the spot level. According to research briefs, Bitcoin spot ETFs are designed as a "packaged shell," encapsulating technical barriers such as self-custody, KYC, and custodial security within the fund structure (according to a single source). Holders only need to place orders through a brokerage account, just like buying a regular index fund. In this structure, details such as cold wallet management, multi-signature, and on-chain transfer delays, which originally required understanding and bearing by crypto-native users, are all handled by custodians, fund managers, and market-making institutions. There is an increasingly loud voice in the market—"Large fiduciary institutions are the true providers of market liquidity" (PANews). From this perspective, Bitcoin spot ETFs have become the preferred path for long-term capital allocations to Bitcoin for pension funds, sovereign funds, family offices, etc.: they comply with internal processes, fit into existing asset allocation frameworks, and can bring new management fee income to managers. When people envision these institutions allocating a small percentage of Bitcoin in their asset portfolios, the picture is no longer engineers operating wallets on-chain, but traditional investment committees discussing risk budgets. In contrast, if traditional institutions want to "go on-chain" directly—building their own wallet systems, opening accounts on native exchanges, adapting to on-chain settlement and risk control—every step is high-friction: IT transformation, compliance justification, audit pressure, and reputational risks layer upon layer. In comparison, buying ETFs or using regulated futures for hedging is a lower-friction practical choice, and the result of this choice is not disruption, but the integration of crypto asset trading and liquidity through compliant channels.

Wall Street's Licensing Moat and Web3's Regulatory Dilemma

A key reason traditional institutions can quickly incorporate on-chain assets like Bitcoin into their product lines is the moat formed by existing licensing systems, risk control capabilities, and client networks. The CME's launch of Bitcoin futures and Wall Street asset management giants' introduction of Bitcoin spot ETFs have not broken through traditional regulatory structures but have instead utilized existing futures exchange licenses, public fund licenses, and custodial licenses (according to a single source) to reserve space for new assets within familiar frameworks. Since KYC, anti-money laundering, customer suitability, and risk disclosure processes have been standardized, the marginal compliance costs are extremely low: filling in a new underlying code on existing contract templates and product structures is much easier than rebuilding a parallel compliance system. Correspondingly, the Web3 space has also attempted to penetrate traditional assets through methods like "tokenizing U.S. stocks" and RWA on-chain. However, once touching on securities brokerage, custody, clearing, registration, and cross-jurisdictional regulation, projects face exponentially rising compliance costs and a fragmented regulatory environment (according to a single source): the overlapping securities laws, licensing requirements, and data localization rules of different countries make the "globally unified on-chain asset market" practically difficult to achieve. It is in this contrast that the judgment that "Web3 finance, especially secondary market trading, is being unilaterally absorbed and integrated by the traditional financial system (Wall Street), rather than disrupting it" (PANews) becomes more concrete. Wall Street firmly locks in the capital entry and trust system with its compliance moat, while crypto projects are at a clear disadvantage in the licensing and regulatory game, only able to experiment in the margins, break through in local markets and gray areas, but struggle to fundamentally leverage global financial infrastructure.

The Misalignment of Decentralized Ideals and Compliance Entry

On the surface of the on-chain world, everything still seems highly decentralized: protocols call upon each other, wallet addresses traverse different public chains, and technical topics like MEV, liquidity mining, and cross-chain bridges continue to dominate industry discourse. However, when one zooms out to the drivers of trading volume and price, the reality becomes increasingly clear: the main market fluctuations are driven by changes in the CME futures curve and the redemption situation of Bitcoin spot ETFs, rather than the transaction curves of individual on-chain DEXs. This misalignment arises—while the code level still adheres to the ideal of decentralized design, liquidity and risk management increasingly revolve around compliant products and traditional institutions. In this new landscape, whoever controls the compliance entry controls the pricing power. Public chains and protocols are responsible for carrying assets and completing final settlements, and the on-chain ledger remains an immutable proof; however, at the level of capital entry and derivatives, the rules are written by Wall Street, which is familiar with derivatives terms, clearing standards, and credit ratings. The subscription and redemption of ETFs affect spot buying, and the structure of futures positions determines hedging and shorting costs; these indicators collectively shape prices, while on-chain transactions are more about following and re-evaluating discounts. When both liquidity and risk management core modules are dominated by traditional institutions, the "open finance" vision initially depicted by Web3 is forced to be rewritten within a compliance framework: KYC becomes the default premise, product suitability is written into the boundaries of smart contract design, and on-chain finance evolves into a compromise version of a new form—maintaining some openness and composability, yet obeying the red lines of traditional regulation at critical junctures.

The Exchange in the Game: A Two-Way Trade of Technology and Credit

From the perspective of traditional institutions, their proactive embrace of on-chain assets and crypto products is not driven by idealism but is a calculated business decision. First, Bitcoin and other on-chain assets being incorporated into asset allocation frameworks represent a new asset class that can provide potential diversification sources beyond existing stock and bond portfolios; second, the management fees and transaction fees generated around Bitcoin ETFs, regulated futures, and structured products form a new income pool; third, for institutions looking to attract young investors and global retail capital, crypto assets possess inherent narrative and traffic advantages. Providing Bitcoin exposure in a compliant manner allows them to capture this new demand without completely overhauling internal systems. From the perspective of crypto projects and Web3 entrepreneurs, they must also connect to the Wall Street system: to gain fiduciary capital, they need the long-term holding and market-making support of institutional funds; to win broader social recognition, they need compliance endorsements to reduce regulatory and public opinion risks; to maintain the liquidity of high-volatility assets, they need deeper derivatives markets to absorb volatility and amplify narrative space. Thus, this seemingly one-sided integration resembles an invisible exchange: the crypto world exports technology stacks, asset issuance, and on-chain infrastructure, while traditional finance contributes licenses, credit, and global capital networks. Technology exchanges for credit, innovation exchanges for licenses, have formed a delicate game of mutual need yet difficult trust. Who will ultimately dominate the new financial order in this hybrid system remains unanswered, leaving the suspense for the next complete financial and technological cycle.

Who Truly Holds Power in the Next Bull Market

Returning to the conflict raised at the beginning—Web3 did not immediately disrupt Wall Street within a single cycle; rather, it was first integrated by traditional finance through tools like futures and ETFs at the secondary trading and liquidity levels. However, this does not mean that the transformation has ended. On-chain infrastructure, asset forms, and identity systems still retain the potential to change the game: programmable assets, global frictionless settlement, and on-chain native credit and identity systems all point to possibilities different from existing financial markets. The key question in the coming years is whether compliance entry will continue to be highly concentrated in a few Wall Street institutions, thereby solidifying the structure of "traditional finance writing the rules, on-chain responsible for bookkeeping"; meanwhile, whether the on-chain native ecosystem can establish truly irreplaceable functions in settlement, identity, and asset innovation, rather than becoming a bottom-layer technology supplier for regulatory-friendly asset pools. From a prudent perspective, the integration of crypto and traditional finance will continue to deepen, and in the short term, pricing power and narrative power will likely still lean towards Wall Street, which holds licenses and capital entry. However, the longer game occurs at the level of rules and technical standards: whoever can write their "code" into underlying protocols, clearing standards, compliance interfaces, and even smart contract languages will have the opportunity to truly hold the core power of the financial system in the next bull market and the next era.

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