Written by: Andjela Radmilac

Translated by: Saoirse, Foresight News

Bitcoin reached an all-time high of $126,000 on October 6, 2025. At that time, the market generally believed that cryptocurrencies were about to complete their institutional transformation. Bitcoin spot ETFs were smoothly launched in the U.S., many listed companies raised funds to purchase Bitcoin, and the White House also committed to making the U.S. a global center for the cryptocurrency industry, bringing a long-standing regulatory standoff to a close.

However, by early August 2026, the price of Bitcoin was about $62,600, less than half of its historical peak. In the past ten months, U.S. regulators have not re-initiated crackdowns, have not shut down various spot ETFs, nor issued threats of sanctions against major exchanges in the U.S.; rather, they have continued to introduce supportive policies for the industry. With no new negative policies from the regulatory side, the continuous decline in market prices remains unexplained. Most of the legal barriers that pressed down on the industry a year ago have been dismantled, yet market demand has completely dried up. During the last cycle, the crypto industry struggled: regulatory policies were filled with uncertainty, banks were hesitant to engage in related businesses, corporate legal costs skyrocketed, and U.S. native crypto products found it challenging to land, causing large institutions to avoid the sector altogether.

At that time, regulatory enforcement relied entirely on lawsuits, rather than mature and codified laws; the cost of crypto asset custody was prohibitively high, and stablecoins lacked a federal regulatory framework to rely on. A token might circulate for years before the SEC suddenly declares that all parties involved in transactions are operating unregistered securities businesses.

If a company cannot determine whether its core business is legal, it cannot properly plan for personnel recruitment, negotiate with banks, or estimate its debt risks. Asset management institutions are unwilling to explain such new enforcement risks to their investment committees, and banks will not develop financial products that regulatory bodies might later hold them accountable for. In a rulemaking petition submitted by Coinbase in 2022, it stated that the current securities regulatory framework is incompatible with most digital asset markets; other executives in the industry also warned that stringent regulations are forcing talent, capital, and trading orders to flow overseas.

Industry lobbyists often make extreme statements that are difficult to translate into substantive solutions, but their core demands are not without merit: high-pressure regulation has brought extremely high operating costs to the entire industry.

On this basis, industry supporters formed a subjective judgment: since stringent regulation suppresses industry activity, then a friendly and relaxed regulatory environment can attract more users, bring in massive institutional capital, and drive up token valuations and prices. But the reality is that lifting policy restrictions only lowers the threshold for holding assets and does not give investors the incentive to increase their holdings.

How Washington's Policy Stance Has Gradually Shifted

After Trump was re-elected, the regulatory wind almost immediately reversed direction. An executive order signed in January 2025 recognized the legitimate use of public chains and stablecoins, established a presidential task force, and required various government departments to create a regulatory framework centered on U.S. dominance in the digital asset industry.

In March of the same year, a second executive order introduced a Bitcoin strategic reserve mechanism: the federal government would no longer periodically auction confiscated Bitcoin but would retain it uniformly; it also instructed relevant officials to study a plan for increasing Bitcoin holdings without adding a fiscal burden.

CryptoSlate's policy archive fully showcases the dramatic reversal of the government's stance. In the past, Washington's discussions about Bitcoin centered around money laundering, evading sanctions, and harming consumer rights; now, the U.S. government plans to hold onto these assets for the long term. Although the new policies do not include plans to increase Bitcoin through the federal open market, Bitcoin has gained a level of official compliance status that was unimaginable a few years ago.

The SEC also released a series of relaxed measures: it established a special task force for crypto assets and dismissed numerous crypto-related lawsuits initiated by the previous administration. In February 2025, the SEC’s lawsuit against Coinbase was dismissed, and subsequently all enforcement procedures against Kraken, Consensys, Cumberland, Binance, and others were halted. As of April 2026, the SEC publicly stated that it had withdrawn seven lawsuits against the crypto industry initiated by the previous administration.

Congress passed the first major federal crypto bill in the U.S.—the "GENIUS Act," which was officially signed into effect in July 2025 and established a full set of regulatory requirements for reserve funds, operating licenses, and information disclosure for payment stablecoins. The Federal Reserve lifted the special reporting obligations for banks conducting crypto business; the Office of the Comptroller of the Currency also made it clear that all banks in the U.S. could offer custody and transaction execution services for crypto assets to their clients.

However, not all industry demands have been met: the strategic reserve relies solely on seized Bitcoin, and the government has not massively purchased on the secondary market; Bitcoin spot ETFs had already been approved in January 2024; and as Congress approached its summer recess in 2026, a comprehensive crypto bill covering the entire market structure remained stalled in the Senate, unable to be implemented.

Even so, the crypto industry now has a relatively mild executive branch, a significantly reduced enforcement focus from the SEC, nationally unified stablecoin regulations, and smooth banking cooperation channels, allowing companies to regularly interface with policymakers. When product teams make research and development decisions, they no longer have to worry that every new feature will ultimately be caught up in federal lawsuits.

A series of policy adjustments constitute a significant political victory for the industry but do not compel investors to continue buying Bitcoin at six-figure prices.

What the Bitcoin Market Truly Needs is Real Incremental Funds

On October 6, 2025, Bitcoin hit an all-time high. Four days later, global macro risk impacts combined with market high leverage resulted in over $19 billion in positions being forcibly liquidated in just 24 hours from October 10 to 11. Falling global stock markets can only explain the intensity of Bitcoin's first-round drop but cannot account for the subsequent nine months of continual weakness in the market.

As of July 1, 2026, Citigroup estimated that the U.S. Bitcoin spot ETF had a net outflow of approximately $3.3 billion for the year. The firm adjusted its expected inflows into ETFs for 2026 from $10 billion to $0 while lowering Bitcoin's 12-month target price to $82,000.

Institutional entry channels have remained smooth, but institutional investment enthusiasm has long since faded.

Exchange data also confirms the market downturn: Coinbase's second-quarter financial report shows trading revenue of $599.2 million, a substantial drop from the previous year's $764.3 million; monthly trading users decreased from 8.7 million to 7.6 million, and the company recorded a net loss of $359.5 million. Although Coinbase expanded into stablecoins, derivatives, and other diverse businesses, its global trading share increased rather than decreased, but the data is sufficient to indicate that leading exchanges are merely dividing the shrinking share in a dwindling market.

CryptoSlate's mid-year market review reveals that Bitcoin's price fell to $58,600 in early July, a 33% drop for the year; in just June, the net outflow of spot ETF funds reached $4.5 billion.

Spot ETFs were supposed to break Bitcoin's dependence on overseas exchanges and native crypto traders, and this has largely been achieved. Institutions like BlackRock and Fidelity allow investors to allocate Bitcoin using the same accounts for purchasing index funds, bonds, and retirement plans, meaning the vast majority of investors no longer have to deal with the cumbersome processes associated with private keys, crypto wallets, or professional custodians.

However, this trading mechanism has also made sell operations effortless. Financial managers who previously avoided Bitcoin due to complicated crypto custody processes can now complete purchases in seconds, and selling is equally just a click away. Institutionalization has pushed Bitcoin into competition with all liquid assets but has not fostered a long-term, permanent holding investment logic.

In 2026, the competition environment for Bitcoin funding further deteriorated: cash and government bonds continued to generate stable yields; inflation and interest rate trends remained uncertain, leading to waning enthusiasm for speculative assets; a large amount of capital shifted toward the artificial intelligence sector. Investors who had already indirectly held Bitcoin through ETFs and public companies do not need to wait for new policy favorable support for their holdings—during bull market phases, most have already reached their maximum asset allocation limits.

Outsiders once believed that an uninterrupted flow of institutional funds was an inexhaustible reservoir, but the reality is a bidirectional trading market: investor selling intentions and buying intentions are equally strong. Even if the compliance environment surrounding Bitcoin has significantly improved, investors still believe that a valuation above $100,000 is too high.

The Corporate Treasury's Accumulation Model Faces a Reversal

The market has given birth to a batch of listed companies with digital asset treasuries, initially intended to continue providing purchasing power for Bitcoin even if ordinary retail investors lose interest. These companies raise funds by issuing stocks, convertible bonds, and preferred shares, with all funds used to purchase Bitcoin; as long as the company's secondary market valuation is higher than the value of the Bitcoin assets held, the enterprise can continue to profit. Issuing new shares will not dilute the corresponding Bitcoin holdings per share; instead, it can raise share prices, optimize financing costs, and obtain more funds to continue accumulating Bitcoin.

The core premise of this model's establishment is: investors are willing to pay a premium for the company's assets. Once the premium disappears, issuing new shares will directly dilute the interests of existing shareholders, and the enterprise will still need to repay debts and distribute dividends on preferred shares; a drop in Bitcoin prices will continuously erode the company's asset base, causing the entire business logic to collapse.

The stock price of several treasury-type listed companies has begun to fall below the total value of their held crypto assets, and companies are no longer willing to issue shares to maintain their Bitcoin holdings.

The industry’s largest and most well-known representative, Strategy, perfectly illustrates how the accumulation logic turned into selling. From June 29 to July 5, 2026, the company sold 3,588 Bitcoins, cashing out approximately $216 million to pay dividends on preferred shares and supplement dollar cash reserves. Its financial report filed with the SEC disclosed a digital asset loss of $8.32 billion in the second quarter, almost entirely due to unrealized losses from the drop in Bitcoin prices.

This loss does not mean the company consumed $8.32 billion in cash; the company still holds a significant amount of Bitcoin.

This sale is symbolically significant: the entire treasury accumulation craze is based on a consensus—that these companies would indefinitely absorb market selling pressure and would never become sellers. CryptoSlate's analysis of this transaction views it as a stress test for this long-accumulated business model.

The U.S. government may recognize and praise this accumulation model, or even partly replicate this thinking through federal strategic reserves, but it cannot intervene in normal capital operations of businesses and cannot prevent companies from facing operational pressures such as dividend payouts, rising financing costs, and disappearing valuation premiums.

What Actual Changes Have Resulted from the Policy Shift

Despite the market’s deep correction, the industry dividends brought by loose policies have not disappeared with the drop in coin prices. Now, U.S. domestic exchanges basically will not face shutdowns due to lawsuits; banks have obtained clear qualifications to provide custody and trading services; issuers of stablecoins operate under nationally unified federal regulatory rules. Product development teams can plan business based on a stable and predictable regulatory environment; crypto companies intending to enter the U.S. market no longer need to be highly vigilant for sudden regulatory crackdowns.

However, the value brought by policy dividends has hardly been reflected in Bitcoin prices. The "GENIUS Act" primarily regulates dollar stablecoins, payment companies, and government bond-related businesses and does not enhance market demand for Bitcoin or other unrelated crypto assets. Bitcoin holders do not enjoy any profit-sharing rights from stablecoin reserves, the revenues of issuing companies, or transaction fees.

SEC dismissing lawsuits can only increase the survival probability of exchanges; it cannot optimize product attractiveness; bank custody can only reduce operational risks and will not compel investment committees to increase Bitcoin allocation ratios; spot ETFs merely simplify private key operations and will not lead pension funds to overlook significant price fluctuations; banks and large asset management banks entering the market may also compress the trading fees that native crypto intermediaries previously earned.

The real changes brought by the policy are limited to three areas: business operating licenses, institutional entry channels, and compliance risks. The drop in coin prices over the past ten months proves that the industry's long-term policy compliance dividends inaccurately correlate with long-term market demand and actual business landing value.

Legal operating qualifications, institutional investment channels, speculative fund demand, and daily commercial implementation are not linear developmental stages. An asset can be fully compliant yet go unnoticed, easy to purchase but severely overvalued, greatly favored by hedge funds yet completely disconnected from ordinary households; a public chain can circulate trillions of dollars yet fails to create value for its native tokens; stablecoins can thrive simply because users need convenient dollar settlements, not crypto assets.

The vast majority of investors prefer cash-flow-generating assets like stocks, bonds, and real estate. Bitcoin does not provide continuous returns, inherently leading to valuation deficiencies: stocks are supported by profits to sustain market value, bonds pay interest periodically, and real estate generates rental income; Bitcoin's value completely relies on the willingness of subsequent buyers to pay for it, as investors view it as a scarce digital asset, a macro hedge reserve, or a combination of both.

Friendly policies can reduce the chances of Bitcoin being completely prohibited, enhance holding security, and strengthen the aforementioned investment logic but cannot lock in price ranges. When the price was $20,000, asset allocators could see asymmetric opportunities for upside; but when the price rises to $126,000, market positions become crowded, with no cash flow income and significant downside risks, making it difficult to attract incremental funds.

Global liquidity, real interest rates, geopolitical conflicts, market leverage, and overall risk appetite—any change in these factors can offset the policy benefits released by the SEC. The government can eliminate the legal uncertainties surrounding spot ETFs but cannot force fund managers to forsake cash, gold, bonds, or Nvidia stocks to turn towards Bitcoin ETFs.

The crypto industry, after years of struggling with Washington, has clear external opponents, with victories all quantifiable: hiring lobbying teams, funding political candidates, winning regulatory lawsuits, replacing strict regulators, and promoting the implementation of special legislation.

However, the challenges the industry faces going forward are far from as clear-cut. Companies must prove: that even if the coin price does not rise, users will still use their products; that revenue can remain stable during bear market cycles; that their asset security systems are reliable; and that they can operate healthy balance sheets without relying on continuous high-priced equity issuances.

Asset management entities need to demonstrate that institutional fund allocations can withstand market pullbacks, rather than just following the trend to enter during bull markets; Bitcoin supporters must rely on the asset's inherent value to persuade potential buyers, rather than hoping for new government policies to boost the market.

Supportive policies have not caused Bitcoin to lose its value, and past high-pressure regulations were not fabricated by the industry. Washington has lifted many policy shackles, yet it has exposed underlying industry problems that politicians cannot resolve: marginal incremental demand is weak, market leverage is high, cross-asset capital competition is fierce, practical application scenarios are scarce, and investors are only willing to position themselves in low-priced ranges.

The crypto industry has won the debate over "can it enter the mainstream U.S. financial system," but now it must prove its irreplaceable value within that financial system. The U.S. government can allow Bitcoin to circulate, enact regulatory rules, open institutional investment channels, and establish federal reserve holdings, but it cannot determine how much the next buyer is willing to bid.