Retail investors are leaving; what will the next bull market rely on?

Question

Original Title: Retail Investors Are Leaving, What Will Drive the Next Bull Market?

Original Author: Plain Language Blockchain

Original Source:

Repost: Daisy, Mars Finance

Bitcoin has plunged from $126,000 to its current $90,000, a 28.57% drop.

The market is panicked, liquidity is drying up, and the pressure to deleverage is suffocating everyone. According to Coinglass, the fourth quarter saw significant forced liquidation events, severely weakening market liquidity.

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

This is the market’s biggest contradiction: things look bleak in the short term, but the long-term outlook seems promising.

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

Retail Money Is No Longer Enough

First, let’s bust a myth that’s being shattered: Digital Asset Treasury companies (DAT).

What is DAT? Simply put, it’s when publicly listed companies buy coins (Bitcoin or other altcoins) by issuing stocks and debt, then actively manage those assets (staking, lending, etc.) to make money.

The core of this model is the “capital flywheel”: as long as the company’s stock price stays above its net asset value (NAV) in crypto holdings, it can keep issuing stock at a premium and buying coins at a discount, constantly amplifying capital.

It sounds great, but there’s a catch: stock prices must always remain at a premium.

Once the market shifts to “risk aversion,” especially when Bitcoin plummets, this high-beta premium collapses quickly, even turning into a discount. Once the premium disappears, issuing more stock dilutes shareholder value, and financing ability dries up.

Even more crucial is scale.

As of September 2025, over 200 companies have adopted the DAT strategy, holding a combined $115 billion in digital assets, but that’s less than 5% of the total crypto market.

This means DAT’s buying power is simply not enough to support the next bull market.

Worse, when the market is under pressure, DAT companies may have to sell assets to stay afloat, adding extra selling pressure to an already weak market.

The market must find funding sources that are larger in scale and more structurally stable.

The Fed and SEC Are Opening the Floodgates

Structural liquidity shortages can only be solved through institutional reform.

Federal Reserve: The Faucet and the Gate

On December 1, 2025, the Federal Reserve’s quantitative tightening (QT) policy ends—a critical turning point.

For the past two years, QT has been siphoning liquidity from global markets. Its end means a major structural constraint is being removed.

Even more important is the expectation of rate cuts.

On December 9, according to CME “FedWatch,” there’s an 87.3% probability the Fed will cut rates by 25 basis points in December.

Historical data is clear: during the 2020 pandemic, the Fed’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 risk assets.

Another key figure to watch: Kevin Hassett, a potential Fed chair nominee.

He’s crypto-friendly and supports aggressive rate cuts. Even more important are his dual strategic values:

First, the “faucet”—directly determining the looseness of monetary policy and impacting market liquidity costs.

Second, the “gate”—determining how open the US banking system is to the crypto industry.

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

SEC: Regulation Turns from Threat to Opportunity

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

This exemption aims to streamline compliance, allowing crypto companies to launch products faster in a regulatory sandbox. The new framework will update the token classification system, possibly including a “sunset clause”—when a token reaches sufficient decentralization, its securities status ends. This gives developers clear legal boundaries, attracting talent and capital back to the US.

More importantly, there’s a shift in regulatory attitude.

In its 2026 review priorities, the SEC has, for the first time, removed cryptocurrencies from its standalone priority list, emphasizing data protection and privacy instead.

This indicates the SEC is moving from seeing digital assets as an “emerging threat” to integrating them into mainstream regulatory topics. This “derisking” removes compliance barriers for institutions, making digital assets easier for corporate boards and asset managers to accept.

Where the Real Big Money May Come From

If DAT money isn’t enough, where’s the real big money? The answer may lie in three pipelines being laid.

Pipeline One: Institutions’ Tentative Entry

ETFs have become the preferred way for global asset managers to allocate to crypto.

After the US approved spot Bitcoin ETFs in January 2024, Hong Kong also approved spot Bitcoin and Ethereum ETFs. This global regulatory convergence makes ETFs a standardized channel for international capital to deploy quickly.

But ETFs are just the start. Even more important is the maturity of custody and settlement infrastructure. Institutional investors are shifting focus from “can we invest” to “how can we invest safely and efficiently.”

Global custodians like BNY Mellon now offer digital asset custody. Platforms like Anchorage Digital integrate middleware (such as BridgePort) to provide institutional-grade settlement infrastructure. These collaborations let institutions allocate assets without pre-funding, greatly improving capital efficiency.

Most intriguing are pension funds and sovereign wealth funds.

Billionaire investor Bill Miller expects financial advisors to begin recommending a 1% to 3% Bitcoin allocation in portfolios within three to five years. Sounds small, but for trillions of dollars in global institutional assets, a 1%-3% allocation means trillions flowing in.

Indiana has proposed allowing pension funds to invest in crypto ETFs. UAE sovereign investors have launched a hedge fund with 3iQ, attracting $100 million and targeting 12%-15% annualized returns. Such institutionalized processes ensure predictable and structurally long-term inflows, unlike 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 conversion of traditional assets (bonds, real estate, art) into digital tokens on the blockchain.

As of September 2025, global RWA market cap is about $3.091 billion. According to Tren Finance, by 2030, the tokenized RWA market could grow over 50x, with most companies expecting its size to reach $4-30 trillion.

This scale far surpasses any current crypto-native capital pool.

Why is RWA important? Because it bridges the language gap between traditional finance and DeFi. Tokenized bonds or treasuries let both sides “speak the same language.” RWA brings stable, yield-bearing assets to DeFi, reducing volatility and providing non-crypto-native returns for institutional investors.

Protocols like MakerDAO and Ondo Finance attract 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 in US Treasuries backing DAI. This shows that when compliant, yield-bearing products backed by traditional assets emerge, traditional finance actively deploys capital.

Pipeline Three: Infrastructure Upgrades

Whether capital comes from institutional allocation or RWA, efficient, low-cost trading and settlement infrastructure is a prerequisite for mass adoption.

Layer 2s process transactions off Ethereum mainnet, significantly reducing gas fees and confirmation times. Platforms like dYdX use L2s to provide rapid order creation and cancellation, which isn’t possible on Layer 1. This scalability is crucial for handling high-frequency institutional capital flows.

Stablecoins are even more critical.

According to TRM Labs, as of August 2025, on-chain stablecoin transaction volume exceeds $4 trillion, up 83% year-over-year, accounting for 30% of all on-chain transactions. By mid-year, total stablecoin market cap reached $166 billion, making them a pillar of cross-border payments. Rise reports show over 43% of Southeast Asia’s B2B cross-border payments use stablecoins.

As regulators (like the Hong Kong Monetary Authority) require stablecoin issuers to maintain 100% reserves, stablecoins’ status as a compliant, highly liquid on-chain cash tool is cemented, ensuring institutions can transfer and settle funds efficiently.

How Might the Money Arrive?

If these three pipelines truly open, how will the money come in? Recent market pullbacks reflect a necessary deleveraging process, but structural indicators suggest the crypto market may be on the cusp of a new wave of large-scale inflows.

Short-term (late 2025 to Q1 2026): Policy-Driven Rebound

If the Fed ends QT and cuts rates, and if the SEC’s “Innovation Exemption” lands in January, the market may see a policy-driven rebound. This phase is mainly psychological—clear regulatory signals bring risk capital back. But this money is highly speculative, volatile, and its sustainability is uncertain.

Medium-term (2026-2027): Gradual Institutional Entry

As global ETFs and custody infrastructure mature, liquidity may come primarily from regulated institutional pools. Small strategic allocations by pensions and sovereign funds could take effect. This capital is patient and low-leverage, providing a stable foundation for the market, unlike retail investors who chase rallies and panic sell.

Long-term (2027-2030): Structural Change from RWA

Sustained large-scale liquidity may depend on RWA tokenization. RWA brings value, stability, and yield streams from traditional assets onto the blockchain, potentially pushing DeFi TVL to the trillion-dollar level. RWA ties the crypto ecosystem directly to the global balance sheet, paving the way for long-term structural growth instead of cyclical speculation. If this scenario plays out, crypto will truly move from the fringes to the mainstream.

Summary

The last bull market was driven by retail investors and leverage.

If there’s a next one, it may depend on institutions and infrastructure.

The market is moving from the edge to the mainstream; the question is no longer “can you invest,” but “how can you invest safely.”

The money won’t come all at once, but the pipelines are being laid.

In the next three to five years, these pipelines may gradually open. By then, the competition won’t be for retail attention, but for institutional trust and allocation.

This is a shift from speculation to infrastructure—a necessary path for the crypto market to mature.