From retail to mainstream: how institutions will rewrite the crypto market cycle

Bitcoin at $92.16K (+1.51%), yet the market is breathing heavy. From the peak of $126,000, we have fallen about 27 percentage points, liquidity fleeing, deleveraging everywhere. Forced liquidations dominate Q4 according to Coinglass. But here’s the paradox: while prices are falling in the short term, structural factors of enormous scale are taking shape. The real question is not “when will it rebound?”, but “where will the capital come from for the next bullish cycle?”.

The retail model no longer holds

Everyone was betting on Digital Asset Treasury companies (DAT). These publicly traded companies buy crypto by issuing shares and debt, creating a “capital flywheel”: as long as their shares trade above net asset value, they can issue at high prices and buy crypto at low prices. Brilliant model on paper.

The problem is twofold:

First, the share premium collapses when risk increases. A sharp drop in Bitcoin turns the premium into a discount, new share issuance halts, and the engine stalls.

Second, the scale is insufficient. Over 200 companies in the portfolio control $115 billion in digital assets—less than 5% of the global crypto market. When the market is under pressure, DATs might be forced to sell, not buy. The most obvious source of capital proves fragile and countercyclical precisely when stability is needed.

The market must look elsewhere.

Three liquidity channels: from policies to billions

Channel one: central banks turn the taps on

On December 1, 2025, the Federal Reserve ends quantitative tightening (QT)—the liquidity drain of the last two years. A crucial removal of the structural brake.

But the real accelerator is the expectation of rate cuts. On December 9, according to CME FedWatch, the probability of a 25 bps cut in December is 87.3%. The story of 2020 is instructive: when the Fed cut rates and launched QE during the pandemic, Bitcoin soared from $7,000 to $29,000 in less than a year. Lower rates = reduced cost of credit = capital flowing into riskier assets.

Kevin Hassett deserves special attention. If appointed to the Fed, he would bring favorability toward crypto assets and support aggressive cuts. But his double value is controlling two levers: the monetary policy (policy and liquidity cost) tap, and the banking gateway (system opening toward crypto). With a friendly leader, sovereign and pension fund access accelerates.

Channel two: SEC turns threat into opportunity

Paul Atkins, SEC chairman, announced the upcoming launch of the “Innovation Exemption” rule in January 2026. What does it mean? Simplified compliance processes, regulatory sandbox, faster product launches.

The new framework will update token classification and could include a “sunset clause”: when a token reaches sufficient decentralization, it loses security status. Developers will have clear legal boundaries, talents return to the US with their capital.

But the most important change is cultural. The SEC has just removed cryptocurrencies from its independent priority list for 2026, instead emphasizing privacy and data protection. This is no small matter: it means shifting from “digital assets = emerging threat” to “digital assets = mainstream regulatory theme.” This de-risking removes compliance hurdles for institutions; boards and asset managers face less resistance.

Channel three: institutional infrastructure matures

Spot Bitcoin ETFs have become the preferred channel. Hong Kong approved spot ETFs on Bitcoin and Ethereum, creating global regulatory convergence. The ETF is standardized, fast, effective for international deployment.

But ETFs are just the beginning. The real change is in custody and regulatory infrastructure. Institutional investors no longer ask “can we invest?”, they ask “how to invest safely?”.

BNY Mellon already offers custody for digital assets. Anchorage Digital integrates middleware like BridgePort, providing institutional regulation infrastructure. They enable institutions to allocate without pre-funding, multiplying capital efficiency.

The most relevant case involves pension funds and sovereign funds. Billionaire Bill Miller predicts that in the next 3-5 years, financial advisors will recommend allocations of 1%-3% in Bitcoin in portfolios. It seems small, but applied to trillions of global institutional assets, it means thousands of billions entering. Indiana has already proposed allowing pension funds to invest in crypto ETFs. Sovereign investors from the UAE collaborated with 3iQ on a $100 million hedge fund, targeting an annual return of 12%-15%. These inflows are predictable, structural, completely different from the DAT model.

The trillion-dollar bridge: tokenization of real assets

There is, however, an even larger source of capital: tokenization of RWA (Real World Assets). RWAs are traditional assets—bonds, real estate, art—converted into digital tokens on blockchain.

As of September 2025, the RWA market was worth about $30.91 billion. But according to TrendFinance, by 2030 it could grow over 50 times, with market forecasts between $4 and $30 trillion. This scale eliminates any native crypto capital pool.

Why do RWAs change the game? Because they solve the language problem between traditional finance and DeFi. Tokenized bonds and government securities allow both worlds to “speak the same language.” RWAs bring stable assets with yields into DeFi, reduce volatility, and offer institutional sources of profit outside native crypto.

MakerDAO and Ondo Finance, by putting US government bonds on-chain as collateral, have become magnets for institutional capital. RWAs have made MakerDAO one of the leading DeFi protocols by TVL, with tens of billions in US Treasury backing the DAI. When compliant products supported by traditional assets exist, traditional finance deploys capital.

Infrastructure must support the flow

Regardless of the source—institutional allocation or RWA—efficient, low-cost regulation infrastructure is needed. Layer 2 solutions process transactions off Ethereum mainnet, drastically reducing gas fees and confirmation times. dYdX on L2 offers order creation and cancellation impossible on Layer 1. This scalability is crucial for managing high-frequency flows.

Stablecoins are even more fundamental. According to TRM Labs, until August 2025, on-chain volume in stablecoins exceeded $4 trillion, growing 83% annually and representing 30% of all on-chain transactions. In the first half, total market cap reached $166 billion, a pillar of cross-border payments. In Southeast Asia, over 43% of B2B cross-border payments use stablecoins.

With regulators like the Hong Kong Monetary Authority requiring 100% reserves, stablecoins solidify their status as compliant, liquid on-chain cash instruments, ensuring institutions can transfer and regulate funds efficiently.

The money timeline

If these three channels truly open—ETFs, favorable policies, mature infrastructure—how does the capital arrive?

End of 2025 - Q1 2026: policy rebound

If the Fed ends QT and cuts rates, if SEC implements the “Innovation Exemption” in January, the market could rise driven by clear regulatory signals. Speculative capital returns. But these funds are highly volatile and sustainability is uncertain. It’s a psychological rebound, not a structural base.

2026-2027: institutional capital gradually enters

With global ETFs and mature custody infrastructure, liquidity mainly comes from regulated pools. Small allocations from pension and sovereign funds have an effect: patient capital, low leverage, stable, not chasing rallies or panicking sellers like retail.

2027-2030: RWA and lasting structures

Massive, sustained liquidity arrives only through tokenization of RWAs. RWAs bring value, stability, and yields to blockchain, with the potential to push DeFi TVL into trillions. They directly connect the crypto ecosystem to global balance sheets, ensuring structural growth rather than cyclical speculation.

The market grows, retail declines

The last bull market was retail-driven, with leverage everywhere. The next will be institutional and infrastructural. The question has shifted from “can I invest?” to “how to invest safely?”. Money doesn’t arrive suddenly, but the channels are already built. Over the next 3-5 years, they will gradually open. At that point, the market will no longer compete for retail attention but for institutional trust and allocations. It’s the transition from speculation to infrastructure: the necessary step toward the maturity of the crypto market.