After retail investors give up, who will support the next bull market?

The crash at the end of 2025 revealed a harsh reality: the last cycle’s prosperity was built on the fragile foundation of retail investors and leverage. Bitcoin fell from $126,000 to around $90,000, a 28.57% plunge, accompanied by widespread forced liquidations, as retail investors surrendered en masse. Liquidity dried up, and the pressure to deleverage cast a shadow over the entire market.

But this time is different. After retail investors exit, a new force is quietly entering. The Federal Reserve’s quantitative tightening (QT) is about to end, expectations for rate cuts continue to rise, the SEC’s regulatory framework is being restructured, and global institutional channels are rapidly maturing. The contradiction lies here: short-term looks grim, but long-term signals are becoming clearer and clearer.

The question becomes: when retail investors surrender, where will the funds for the next bull run come from?

Market Dilemma: Retail Exit, Traditional Financing Models Fail

Let’s first look at a myth that’s collapsing: Digital Asset Treasury Companies (DAT).

These publicly listed companies raise Bitcoin or other digital assets by issuing stocks and debt, then leverage collateralization, lending, and other means to amplify returns. The core of this model is the “capital flywheel”—as long as stock prices stay above the net asset value, the company can repeatedly issue shares at high prices and buy back coins at low prices, continuously expanding its capital scale.

It sounds perfect, but there’s a fatal premise: stock prices must always maintain a premium.

Once the market shifts to “risk aversion,” especially during Bitcoin’s sharp decline, this high-beta premium collapses rapidly, even turning into a discount. When the premium disappears, issuing new shares becomes a poison that dilutes shareholders’ value, and financing capacity dries up. This is precisely the surrender drama currently unfolding.

More painfully, there are scale limitations. As of September 2025, over 200 companies have adopted DAT strategies, holding more than $115 billion in digital assets, but this accounts for less than 5% of the overall crypto market. In other words, DAT’s purchasing power cannot support the next bull market. Even worse, when the market is under pressure, these companies may be forced to sell assets to maintain operations, which could accelerate market declines.

Structural liquidity shortages can only be addressed through systemic reforms.

Policy Turning Point: Institutional Rescue by the Federal Reserve and SEC

Federal Reserve: Turning on the Liquidity Tap

In December 2025, the Federal Reserve officially ends quantitative tightening (QT), marking a decisive moment. The past two years of QT have been draining liquidity from global markets; its termination signifies the removal of a major structural constraint.

More critically, expectations for rate cuts are rising. According to CME’s “Fed Watch” data, the probability of rate cuts in December 2025 is as high as 87.3%. A textbook example is in front of us: during the 2020 pandemic, the Fed’s rate cuts and QE pushed Bitcoin from about $7,000 to $29,000 by year’s end. Rate cuts reduce borrowing costs and drive capital into high-risk assets.

Another key player worth noting is the potential leadership within U.S. economic decision-makers. These officials are friendly toward crypto assets and support aggressive rate cuts. More importantly, their dual strategic value—controlling monetary policy easing/tightening and influencing the cost of market liquidity, as well as determining the openness of the U.S. banking system to the crypto industry. If policymakers are friendly to crypto, it could accelerate the collaboration between FDIC and OCC on digital assets, which is a prerequisite for sovereign funds and pension funds to enter.

SEC: Turning Threat into Opportunity

SEC Chairman Paul Atkins has announced the launch of the “Innovation Exemption” rule in January 2026. This is not a minor reform but a structural shift.

The new exemption aims to simplify compliance processes, allowing crypto companies to launch products faster within regulatory sandboxes. The most imaginative part is the “sunset clause”—once the decentralization level of tokens reaches certain standards, their securities status terminates. This provides developers with clear legal boundaries, attracting talent and capital back to the U.S.

More importantly, it signifies a fundamental shift in regulatory attitude. In SEC’s review focus for 2026, for the first time, cryptocurrencies are removed from the priority list of concerns, shifting emphasis to data protection and privacy. This indicates SEC is moving from viewing digital assets as an “emerging threat” to integrating them into mainstream regulatory frameworks. This “de-risking” removes the last obstacle for institutional compliance, making digital assets more acceptable to corporate boards and asset management firms.

Three Funding Channels Are Opening

If DAT’s money isn’t enough, where is the real big money coming from? The answer may lie in three channels that are being laid out.

Channel 1: Institutional Tentative Entry Has Begun

ETFs have become the preferred channel for global asset management institutions to allocate funds into crypto. After the U.S. approved spot Bitcoin ETFs in January 2024, Hong Kong also approved spot Bitcoin and Ethereum ETFs. This global regulatory convergence makes ETFs a standardized deployment tool for international capital.

But ETFs are just the beginning. More fundamentally, the maturity of custody and settlement infrastructure is key. Institutional investors’ focus has shifted from “whether to invest” to “how to invest safely and efficiently.” Global custodians like BNY Mellon already offer digital asset custody services, and platforms like Anchorage Digital have integrated 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 are pension funds and sovereign wealth funds. Billionaire investor Bill Miller predicts that within the next three to five years, financial advisors will recommend allocating 1%-3% of portfolios to Bitcoin. It sounds like a small proportion, but for trillions of dollars in global institutional assets, 1%-3% means trillions of dollars flowing in.

Actual actions are already happening. Indiana has proposed allowing pensions to invest in crypto ETFs, and UAE sovereign investors have partnered with 3iQ to launch a hedge fund, attracting $100 million with an annualized return target of 12%-15%. This institutionalized process ensures predictable and long-term capital inflows, vastly different from the fragility of the DAT model.

Channel 2: RWA, a Bridge of Over a Trillion Dollars

RWA (Real-World Asset) tokenization could be the most important liquidity driver of the next wave. Simply put, it involves transforming traditional assets (such as bonds, real estate, art) into digital tokens on the blockchain.

As of September 2025, the total global RWA market cap is about $31 billion. According to Tren Finance, by 2030, the tokenized RWA market could grow over 50 times, reaching a size of $4-30 trillion. This scale far exceeds any existing native crypto capital pools.

Why is RWA so critical? Because it bridges the language gap between traditional finance and DeFi. Tokenized bonds or treasuries enable both sides to “speak the same language.” RWA brings stable, income-backed assets to DeFi, reducing volatility and providing institutional investors with non-native yield sources.

Protocols like MakerDAO and Ondo Finance, by bringing U.S. Treasuries on-chain as collateral, have become magnets for institutional capital. MakerDAO, through RWA integration, has become one of the largest TVL DeFi protocols, with billions of dollars in U.S. Treasuries supporting the DAI stablecoin. This clearly shows that when compliant, traditional-asset-backed yield products emerge, traditional finance will actively deploy capital.

Channel 3: Infrastructure Upgrades Ensure Smooth Flow

Whether capital comes from institutional allocations or RWA, high-efficiency, low-cost transaction and settlement infrastructure is essential for large-scale adoption.

Layer 2 solutions process transactions outside the Ethereum mainnet, significantly reducing gas fees and confirmation times. Platforms like dYdX offer fast order creation and cancellation via Layer 2, capabilities impossible on Layer 1. This scalability is crucial for handling high-frequency institutional capital flows.

Stablecoins are also a key infrastructure component. According to TRM Labs, by August 2025, on-chain stablecoin transaction volume exceeded $4 trillion, up 83% annually, accounting for 30% of total on-chain transaction volume. By mid-2025, the total market cap of stablecoins reached $166 billion, becoming a pillar of cross-border payments. Especially in Southeast Asia, over 43% of B2B cross-border payments are already using stablecoins.

As regulators like 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 being solidified, ensuring institutions can transfer and settle funds efficiently.

The Path from Speculation to Systematicization

If these three channels truly open up, where will the funds come from? The short-term market correction reflects the necessary deleveraging process, but structural indicators suggest the crypto market may be approaching a threshold for a new wave of large-scale capital inflows.

Short-term (early 2026): Policy-driven rebound

With the Fed ending QT and starting rate cuts, and the SEC’s innovation exemption coming into effect in January, the market may see a policy-driven rebound. This phase mainly relies on psychological factors and clear regulatory signals to bring risk capital back. However, this wave of capital is highly speculative, volatile, and its sustainability is uncertain.

Mid-term (2026-2027): Gradual institutional entry

As global ETFs and custody infrastructure mature, liquidity will mainly come from regulated institutional pools. The deployment strategies of pensions and sovereign funds will take effect, characterized by high patience and low leverage, providing a stable foundation for the market, unlike retail investors who chase highs and sell lows.

Long-term (2027-2030): RWA-driven structural change

Sustained large-scale liquidity may depend on RWA tokenization anchoring. RWA brings traditional assets’ value, stability, and income streams onto the blockchain, potentially pushing DeFi’s TVL into the trillions. RWA links the crypto ecosystem directly to global asset balance sheets, possibly ensuring long-term structural growth rather than cyclical speculation.

Summary

The last bull run relied on retail investors and leverage, ultimately forcing retail investors to surrender.

If the next one arrives, it will likely depend on systemic and infrastructural development. The market is shifting from the fringes to the mainstream, and the question has changed from “Can we invest?” to “How to invest safely.”

Money won’t flood in suddenly, but channels are being laid out. Over the next three to five years, these channels will gradually open. By then, the market’s competition will no longer be for retail attention but for institutional trust and allocation capacity.

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