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With retail investors leaving, what will drive the next bull market?

With retail investors leaving, what will drive the next bull market?

MarsBitMarsBit2025/12/09 22:59
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By:白话区块链

Bitcoin has recently plummeted by 28.57%, leading to market panic and a liquidity crunch. However, long-term structural positives are converging, including expectations of Federal Reserve rate cuts and SEC regulatory reforms. The market currently faces a contradiction between short-term pressures and long-term benefits. Summary generated by Mars AI. The accuracy and completeness of this summary are still being iteratively improved.

Bitcoin has plummeted from $126,000 to the current $90,000, a 28.57% crash.

The market is in panic, liquidity has dried up, and the pressure of deleveraging is suffocating everyone. According to Coinglass data, the fourth quarter experienced significant forced liquidation events, and market liquidity has been greatly weakened.

But at the same time, some structural positives are converging: the US SEC is about to introduce the “Innovation Exemption” rule, expectations for the Federal Reserve entering a rate-cutting cycle are growing stronger, and global institutional channels are rapidly maturing.

This is the biggest contradiction in the current market: the short term looks bleak, but the long term seems promising.

The question is, where will the money for the next bull market come from?

01. Retail Money Is No Longer Enough

Let’s start with a myth that is being shattered: Digital Asset Treasury companies (DAT).

What is DAT? Simply put, it refers to listed companies buying coins (bitcoin or other altcoins) by issuing stocks and debt, and then making 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 consistently stay above the net asset value (NAV) of its crypto holdings, it can issue stocks at a high price and buy coins at a low price, continuously amplifying capital.

It sounds great, but there’s a premise: the stock price must always maintain a premium.

Once the market shifts to “risk aversion,” especially when bitcoin plunges, this high-beta premium collapses rapidly, even turning into a discount. When the premium disappears, issuing stocks dilutes shareholder value, and the ability to raise funds dries up.

More crucial is the scale.

As of September 2025, although more than 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 DAT’s purchasing power is simply not enough to support the next bull market.

Even worse, when the market is under pressure, DAT companies may need to sell assets to maintain operations, which in turn adds extra selling pressure to an already weak market.

The market must find larger and more structurally stable sources of capital.

02. The Federal Reserve and SEC Open the Floodgates

Structural liquidity shortages can only be solved through institutional reforms.

The Federal Reserve: The Faucet and the Gate

On December 1, 2025, the Federal Reserve’s quantitative tightening policy ends, marking 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.

Even more important is the expectation of rate cuts.

On December 9, according to CME “FedWatch” data, the probability of the Federal Reserve cutting rates by 25 basis points in December is 87.3%.

Historical data is straightforward: during the 2020 pandemic, the Federal Reserve’s rate cuts and quantitative easing pushed bitcoin from about $7,000 to around $29,000 by year-end. Rate cuts lower borrowing costs and drive capital into high-risk assets.

There’s another key figure to watch: Kevin Hassett, a potential candidate for Federal Reserve Chair.

He holds a crypto-friendly stance and supports aggressive rate cuts. But more importantly, he has 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”—deciding the extent to which the US banking system opens up to the crypto industry.

If a crypto-friendly leader takes office, it could accelerate FDIC and OCC collaboration on digital assets, which is a prerequisite for sovereign funds and pension funds to enter the market.

SEC: Regulation Turns from Threat to Opportunity

SEC Chair Paul Atkins has announced plans to introduce the “Innovation Exemption” rule in January 2026.

This exemption aims to simplify compliance processes, allowing crypto companies to launch products more quickly within a regulatory sandbox. The new framework will update the token classification system and may include a “sunset clause”—when a token reaches a certain level of decentralization, its security status terminates. This provides developers with clear legal boundaries, attracting talent and capital back to the US.

Even more important is the shift in regulatory attitude.

For the first time, the SEC has removed cryptocurrencies from its independent priority list in its 2026 review focus, instead emphasizing data protection and privacy.

This indicates that 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 easily accepted by corporate boards and asset management institutions.

03. Where the Real Big Money Might Come From

If DAT money isn’t enough, then where is the real big money? Perhaps the answer lies in three pipelines currently being laid out.

Pipeline One: Institutions’ Tentative Entry

ETFs have become the preferred way for global asset management institutions to allocate funds to the crypto sector.

After the US approved spot bitcoin ETFs in January 2024, Hong Kong also approved spot bitcoin and ethereum ETFs. This global regulatory convergence has made 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. Institutional investors have shifted their focus from “can we invest” to “how to invest safely and efficiently.”

Global custodians such as BNY Mellon now offer 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 scenario involves pension funds and sovereign wealth funds.

Billionaire investor Bill Miller predicts that in the next three to five years, financial advisors will begin recommending a 1% to 3% allocation to bitcoin in portfolios. While this sounds small, for the trillions of dollars in global institutional assets, a 1%-3% allocation means trillions of dollars flowing in.

Indiana has proposed allowing pensions to invest in crypto ETFs. UAE sovereign investors have partnered with 3iQ to launch a hedge fund, attracting $100 million with a target annualized return of 12%-15%. Such institutionalized processes ensure that institutional capital inflows are predictable and structurally long-term, fundamentally different from the DAT model.

Pipeline Two: RWA, the Trillion-Dollar Bridge

RWA (Real World Asset) tokenization may be the most important driver of the next wave of liquidity.

What is RWA? It’s the process of converting traditional assets (such as bonds, real estate, art) into digital tokens on the blockchain.

As of September 2025, the global RWA market cap is about $30.91 billion. According to a Tren Finance report, by 2030, the tokenized RWA market could grow more than 50-fold, with most companies expecting the market size to reach $4-30 trillion.

This scale far exceeds any existing crypto-native capital pool.

Why is RWA important? Because it bridges the language gap between traditional finance and DeFi. Tokenized bonds or treasuries allow both sides to “speak the same language.” RWA brings stable, yield-bearing assets to DeFi, reduces volatility, and provides institutional investors with non-crypto-native sources of yield.

Protocols like MakerDAO and Ondo Finance have become magnets for institutional capital by bringing US Treasuries on-chain as collateral. RWA integration has made MakerDAO one of the largest DeFi protocols by TVL, with billions of dollars in US Treasuries backing DAI. This shows that when compliant, yield-bearing products backed by traditional assets appear, traditional finance will actively deploy capital.

Pipeline Three: Infrastructure Upgrades

Regardless of whether capital comes from institutional allocation or RWA, efficient and low-cost trading and settlement infrastructure is a prerequisite for large-scale adoption.

Layer 2 processes transactions off the Ethereum mainnet, significantly reducing gas fees and shortening confirmation times. Platforms like dYdX provide fast order creation and cancellation capabilities via L2, 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, on-chain stablecoin transaction volume exceeded $4 trillion, up 83% year-on-year, accounting for 30% of all on-chain transactions. As of the first half of the year, the total stablecoin market cap reached $166 billion, making it a pillar of cross-border payments. The rise report 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, highly liquid on-chain cash tools is solidified, ensuring institutions can efficiently transfer and settle funds.

03. How Might the Money Flow In?

If these three pipelines can truly be opened, how will the money come in? The recent market pullback reflects the necessary process of deleveraging, but structural indicators suggest the crypto market may be on the threshold of a new wave of large-scale capital inflows.

Short Term (End of 2025 - Q1 2026): Policy-Driven Rebound

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 is mainly driven by sentiment, with clear regulatory signals bringing risk capital back. However, this wave of funds is highly speculative, volatile, and its sustainability is questionable.

Mid Term (2026-2027): Gradual Institutional Entry

As global ETFs and custody infrastructure mature, liquidity may mainly come from regulated institutional capital pools. Small strategic allocations by pension and sovereign funds may take effect. This capital is patient and low-leverage, providing a stable foundation for the market and avoiding the retail investor pattern of chasing highs and selling lows.

Long Term (2027-2030): Structural Changes Driven by RWA

Sustained large-scale liquidity may depend on RWA tokenization anchoring. RWA brings the value, stability, and yield streams of traditional assets onto the blockchain, potentially pushing DeFi’s TVL to the trillion-dollar level. RWA directly links the crypto ecosystem to the global balance sheet, ensuring long-term structural growth rather than cyclical speculation. If this path is realized, the crypto market will truly move from the margins to the mainstream.

04. Summary

The last bull market was driven by 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.”

The 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 be competing for retail attention, but for institutional trust and allocation quotas.

This is a shift from speculation to infrastructure, and an essential path for the crypto market to mature.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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