Retail investors were the ones who urged the previous rally, but whose time is it now for the institutions?

The Critical Market Moment

Bitcoin has fallen from $126,000 to the current $93.11K—a 26% drop that has swept across the entire industry. Liquidity has frozen, cascading liquidations have triggered, and the market has entered a defensive mode. But as prices consolidate, a strange pattern is emerging from the background: federal monetary policy is turning, regulatory doors are beginning to open, and global institutions are preparing infrastructure. This is the deepest contradiction right now—short-term pain but a long-term setup that most may not yet see.

The real question: if the next bull market grows, where exactly will the money come from?

The Limitations of Retail Capital and the DAT Model

It’s not hard to understand why liquidity shortages became a problem. Last year, one model became mainstream in institutional crypto adoption: Digital Asset Treasury (DAT) companies. These are publicly-listed firms buying Bitcoin and crypto using equity issuance and debt, then earning through staking and lending operations.

The concept is elegant on paper—while stock prices are at a premium versus net asset value, they can issue stocks and buy crypto at lower costs, creating a capital flywheel. But the model has a fatal dependency: it always needs a premium on stock valuation. When sentiment reverses, or Bitcoin drops further, this high-beta multiple disappears, turning into a discount.

More critically: scale. Even if by September 2025, over 200 companies adopt the DAT strategy with combined holdings of $115 billion, it still accounts for less than 5% of the total crypto market cap. For a sustainable bull market requiring multi-trillion inflows? Not enough. Even scarier—when market pressure mounts, DAT firms may need to sell assets to maintain operations, adding more selling pressure to a weakening market.

Larger, more stable funders are needed. And those do not come from retail.

When Will Financial Pipelines Open

Valves and doors: Federal Reserve and regulatory framework

On December 1, 2025, the Federal Reserve’s quantitative tightening (QT) program ended—a turning point that few investors grasped the significance of. For two years, QT continued to drain liquidity from global markets. Its end signaled that a major structural headwind was lifting.

Even more critical are the expected rate cuts. CME data shows an 87.3% probability that the Fed will cut by 25 basis points in December. Historical precedent: during the 2020 pandemic, rate cuts and QE by the Federal Reserve pushed Bitcoin from $7,000 to $29,000 by year-end. Lower borrowing costs = capital flows into risk assets.

But there’s a second layer of importance to watch: the federal leadership transition. If the next Fed chair is crypto-friendly and willing to advocate aggressive policy shifts, it won’t just directly affect monetary conditions—it will also open institutional “doors” for deeper crypto integration into the US banking system.

The SEC has signaled its direction: Chair Paul Atkins announced an “Innovation Exemption” rule for January 2026. This exemption simplifies compliance, allowing crypto firms to launch products in regulatory sandboxes with faster timelines. The key here is the potential “sunset clause”—once a token reaches sufficient decentralization, it will lose its securities classification.

For institutions, this is game-changing. It removes legal ambiguity, which has been the biggest deterrent for corporate boards and asset managers to allocate. In SEC priorities for 2026, for the first time, crypto disappears from the “independent threat” category and becomes part of the broader data protection and privacy agenda. This is the door—not just more open collaboration, but regulatory de-risking that allows mainstream institutions to invest without reputational anxiety.

Pipeline 1: Institutional allocation through ETF infrastructure

The approval of spot Bitcoin ETFs in the US in January 2024 established a standard playbook. This was followed by Hong Kong’s approvals for spot Bitcoin and Ethereum ETFs. This global convergence normalized ETFs as the standard vehicle for institutional capital deployment.

But ETFs are just the first step. The more critical infrastructure is custody and settlement. Global custodians like BNY Mellon are now offering digital asset custody. Platforms like Anchorage Digital are building middleware solutions that provide institutional-grade settlement infrastructure, eliminating pre-funding requirements and maximizing capital efficiency.

The biggest opportunity here is with pension funds and sovereign wealth funds. Bill Miller, billionaire investor, estimates that in the next 3-5 years, financial advisors will start recommending a 1-3% Bitcoin allocation in portfolios. The percentage is small, but considering the trillions of assets under institutional control, a 1-3% allocation translates into trillions of potential inflow.

Real-world cases: Indiana has proposed pension fund allocations to crypto ETFs. UAE sovereign investors have partnered with 3iQ to launch a hedge fund with an initial target of $100 million, aiming for 12-15% annualized returns. This level of institutionalization guarantees predictable, long-term inflows—completely different from the speculative DAT model.

Pipeline 2: RWA—the trillion-dollar bridge

Tokenization of real-world assets (RWA) could become the most important liquidity driver of the next cycle. RWA involves converting traditional assets—bonds, treasuries, real estate, art—into blockchain-based digital tokens.

By September 2025, the global RWA market cap was around $30.91 billion. But projections suggest that by 2030, the RWA market could grow 50x, potentially reaching $4-30 trillion scale. This surpasses any existing crypto-native capital pool.

Why is RWA powerful? Because it bridges the language gap between traditional finance and DeFi. Tokenized treasuries or bonds allow institutional and DeFi sides to “speak the same language.” RWA brings stable, yield-bearing assets into DeFi, reducing volatility and providing non-crypto yield sources attractive to traditional investors.

Protocols like MakerDAO and Ondo Finance have already integrated US treasuries on-chain as collateral. Result? MakerDAO is now one of the biggest DeFi protocols by TVL, backed by billions of US treasuries supporting DAI. When compliant, traditional asset-backed yield products are available, traditional finance will actively deploy.

Pipeline 3: Settlement efficiency through Layer 2 and stablecoins

Wherever capital comes from—institutional allocation or RWA—efficient settlement infrastructure is a prerequisite.

Layer 2 solutions process transactions off Ethereum mainnet, dramatically reducing gas fees and confirmation times. Platforms like dYdX enable rapid order creation and cancellation on L2, impossible on Layer 1. This scalability is essential for high-frequency institutional flows.

Even more important: stablecoins as on-chain settlement layer. According to TRM Labs, on-chain stablecoin transaction volume reached $4 trillion by August 2025, up 83% year-on-year. It now accounts for 30% of all on-chain transactions. In the first half of the year, total stablecoin market cap was $166 billion, and it is now the backbone of cross-border settlements. The Rise report notes that 43% of B2B cross-border payments in Southeast Asia are now using stablecoins.

Regulatory support has strengthened this foundation: Hong Kong Monetary Authority now requires 100% reserves for stablecoin issuers, effectively cementing stablecoins as compliant on-chain cash tools with guaranteed efficient settlement for institutions.

How Will Inflows Develop

Q4 2025 - Q1 2026: Policy-driven rebound

After QT ends and the Fed cuts rates, plus the SEC’s innovation exemption is implemented, the market will experience a policy-driven bounce. Psychological factors dominate at this stage, and regulatory clarity will attract risk capital. But the money here remains speculative; sustainability is not guaranteed.

2026-2027: Gradual institutional deployment

As global ETF and custody infrastructure mature, liquidity will start flowing from regulated institutional pools. Strategic allocations by pension and sovereign funds—even small percentages—will have a compounding effect. The quality of this funding is high patience, low leverage, providing stable foundations versus retail volatility.

2027-2030: Structural growth from RWA tokenization

The long-term major liquidity wave will rely on RWA scale. Bringing traditional assets’ value, stability, and yield streams onto blockchain could push DeFi TVL into the trillion-dollar range. RWA directly connects the crypto ecosystem to global balance sheets, guaranteeing long-term structural growth beyond cyclical speculation.

The Summary

The previous bull market was built on retail speculative energy and leverage-driven amplification. The next? It may shift toward institutional capital and infrastructure maturation. From an edge asset, crypto is moving toward mainstream, and the question has shifted from “can we invest” to “how do we invest safely.”

Money won’t rain from the sky suddenly. But the pipes are already being filled with workers. Over the next 3-5 years, these three pipelines will gradually open. It’s no longer retail attention that matters—trust and allocation budgets from institutions will decide. This is an evolution from speculation to infrastructure, the maturity the industry needs to truly become a global financial asset.