The 2026 Crypto Market: The Era of Institutions and the End of the Old Cycle

Introduction: Transition to a New Paradigm

2026 will be a pivotal year in cryptocurrency history. The market, once driven by retail investor sentiment and Bitcoin halving mechanics, is now undergoing significant change. The latest research reports from eight major institutions—including Fidelity, Bitwise, Galaxy Digital, and Coinbase—point to the arrival of an era where institutional investors take center stage.

The simple “4-year cycle theory” is no longer valid. With sovereign nations like Brazil and Kyrgyzstan exploring reserve currency concepts, and traditional asset management firms entering the space, the market dynamics are fundamentally shifting.

Macro Environment: Decline of Cycles and Asset Maturation

Has the 4-year cycle ceased to function?

The consensus among Bitwise, Fidelity, and Grayscale is clear. The halving effect is diminishing in marginal impact. In particular, 21Shares explicitly states: “The four-year cycle of Bitcoin has broken down.”

With ETFs now introduced into the market, demand structures have fundamentally changed. The driving force has shifted entirely from supply-side factors (miner halving) to demand-side strategies (institutional allocation). As clients of BlackRock and Fidelity begin quarterly Bitcoin allocations, the narrative of every four-year halving will no longer be the primary basis for investment decisions.

Decline in Volatility and Asset Class Transition

Bitwise makes bold predictions. By 2026, Bitcoin’s volatility will fall below that of tech stocks for the first time. This is not just a numerical shift; it suggests a qualitative change where Bitcoin transitions from a “high-beta tech stock” to a “mature hedge asset.”

Fidelity does not specify exact figures but emphasizes that, amid global debt growth and declining fiat currency values, Bitcoin will decouple from tech stocks and evolve into a global inflation hedge.

Institutional Consensus: Major Capital Flows

After removing cycle effects, institutional investors show highly aligned views on capital flows, despite discussing different details.

Stablecoins: Challenging the Traditional Financial System

If Bitcoin is digital gold, then stablecoins are digital dollars. Many institutions believe stablecoins will transcend the crypto space and challenge the very foundation of traditional finance.

21Shares’ forecast: The total market cap of stablecoins will surpass $1 trillion in 2026.

Galaxy Digital’s outlook: On-chain trading volume of stablecoins will officially exceed that of the US ACH (Automated Clearing House) network. This indicates stablecoins will replace interbank settlement systems, becoming a more efficient capital flow route.

Coinbase’s projection: The stablecoin market will reach $1.2 trillion by 2028.

a16z’s perspective: Stablecoins will evolve into the “basic settlement layer” of the internet, driving the rise of PayFi (payment finance), enabling cross-border remittances as cheaply and instantly as email.

AI Payments and KYA: Foundations of a New Commercial Civilization

This is the most significant technological variable both a16z and Coinbase are watching, each from different angles but with the same vision.

Emergence of new protocol standards: Coinbase’s report highlights Google’s Agentic Payments Protocol (AP2), noting their development of x402 protocol as an extension of AP2 for payments. This allows AI agents to execute instant micro-payments (HTTP Payment Required) directly via HTTP, opening new business loops between AI entities.

Evolution from KYC to KYA: a16z creatively introduces the concept of “KYA” (Know Your Agent). They point out that in current on-chain transactions, the ratio of “non-human” to “human” entities has reached 96:1. Traditional KYC (Know Your Customer) will evolve into KYA (Know Your Agent). AI agents, without bank accounts, can hold crypto wallets and continuously purchase data, computing power, and storage via micro-payments, 24/7.

Prediction Markets: A New Media for Free Flow of Information

This represents the true “institutional investor consensus track,” with many institutions pointing to 2026 as an explosive point.

Bitwise’s view: The open interest in decentralized prediction markets (like Polymarket) will hit record highs, becoming a “source of truth” alongside traditional news media.

21Shares’ numerical forecast: The annual trading volume of prediction markets will surpass $100 billion.

Coinbase’s unique perspective: They suggest that new US tax regulations (limiting gambling losses deduction) will intentionally steer users toward prediction markets. Since these markets may be classified as “derivatives” for tax purposes and are not considered gambling, they will have a tax advantage.

Inter-Agency Conflicts: Alpha Often Exists in Disputes

Consensus is often priced in, so divergence signals potential excess returns (alpha) and risks.

Digital Asset Vaults (DAT): Clearout vs Optimists

Regarding the “public company Bitcoin holdings” model initiated by MicroStrategy, opinions among institutions are sharply divided.

Warning of liquidation risk (Galaxy Digital & 21Shares)

21Shares predicts DuckDuckGo’s total size will reach $250 billion but emphasizes: “Only a few companies will survive.” Small DAT firms trading below NAV long-term will be forced into liquidation.

Galaxy Digital is more specific: “At least 5 DAT companies will sell assets, be acquired, or go bankrupt.” They forecast that the blind pursuit in 2025 will flood the market with companies lacking strategic capital, making 2026 a “year of liquidation.”

Viewpoint that market impact will be limited (Grayscale)

They position DAT as “redfin” (redfin fish). Despite media attention, the disappearance of accounting standards and premiums will limit its influence on market price formation in 2026.

Quantum Threat: Should We Be Wary or Overreact?

Cautionary camp (Coinbase)

Their report dedicates a chapter to “The Quantum Threat,” warning that immediate migration to post-quantum cryptography standards is necessary. Upgrading signature algorithms to quantum-resistant solutions is essential.

Calm camp (Grayscale)

They see “quantum threat” as a “redfin.” Within the 2026 investment cycle, the likelihood of quantum computers decrypting cryptographic curves is zero, and investors need not pay a “fear premium.”

“Zombie” Phenomenon in Layer2 Chains

This is one of 21Shares’ most sensitive predictions. Most Ethereum Layer2s will not surpass 2026 and will fall into “zombie chains.”

Core reason: There is a very strong Matthew effect in liquidity and developer resources, ultimately concentrating on top-tier chains like Base, Arbitrum, Optimism, and high-performance chains like Solana.

Data verification: Galaxy Digital predicts that “the ratio of application layer revenue to L1/L2 network revenue will double by 2026,” supporting the “Fat Application Theory.” Value is flowing from infrastructure layers to super apps with actual user bases.

Overlooked Perspectives: Minor Consensus

Beyond mainstream views, some institutions propose unique “less popular” forecasts worth noting.

Revival of Privacy Tracks

Galaxy Digital and Grayscale are optimistic about privacy tracks, with Galaxy Digital predicting the total market cap of privacy tokens will surpass $100 billion. They highlight Zcash ($ZEC)’s rebound, believing privacy will be re-evaluated from a “crime tool” to an “institutional essential service.”

Return of Regulated ICOs

21Shares foresees that with clear legislation in the US digital asset market, “regulated ICOs” will return as a legitimate capital-raising method in the capital markets.

Excess Returns of Crypto-Related Companies

Bitwise predicts that crypto-related firms (mining companies, Coinbase, Galaxy Digital, etc.) will outperform traditional tech giants.

Investment Survival Guide for 2026

Integrating the outlooks of eight institutions, the market logic in 2026 has fundamentally changed. The simple model of “waiting blindly for halving” is a thing of the past.

For investors, the new survival rules can be summarized into three aspects:

1. Focus on leaders and actual earnings: Amid the harsh淘汰 of L2 and DAT, liquidity and capital structure are indicators of survival. Prioritize protocols generating positive cash flow.

2. Understand “technological content”: From Google AP2 standards to KYA, upgrades in technological infrastructure will bring new alpha. Focus on implementing new protocols like x402.

3. Beware of false narratives: For institutions, there are not only golden opportunities but also “redfin.” Distinguishing long-term trends (e.g., stablecoins replacing ACH) from short-term speculation is key to success in 2026.

(This article reflects the analytical opinions of the author based on institutional reports and does not constitute investment advice.)