Where will the money for the next bull market come from?

Written by: Cathy

Bitcoin has plunged from $126,000 to the current $90,000, a 28.57% crash.

The market is panicked, liquidity is drying up, and the pressure of deleveraging is suffocating everyone. According to Coinglass data, there have been significant forced liquidations in Q4, severely weakening market liquidity.

At the same time, some structural positives are converging: The US SEC is about to introduce the “Innovation Exemption” rule, expectations for a Fed rate-cutting cycle are getting stronger, and global institutional channels are rapidly maturing.

This is the biggest paradox in the market right now: things look terrible in the short term, but long-term prospects seem bright.

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

01 Retail Money Is Not Enough

Let’s first talk about a myth that is breaking: Digital Asset Treasury companies (DAT).

What is DAT? Simply put, these are listed companies that issue stocks and debt to buy coins (Bitcoin or other altcoins), and then make money through active asset management (staking, lending, etc.).

The core of this model is the “capital flywheel”: as long as the company’s stock price stays above the net asset value (NAV) of its crypto holdings, it can issue stock at a high price and buy coins at a lower price, continuously amplifying capital.

It sounds great, but there’s a premise: the stock price must always stay at a premium.

Once the market turns risk-averse, especially when Bitcoin crashes, this high-beta premium collapses quickly, sometimes even turning into a discount. Once the premium disappears, issuing stock dilutes shareholder value and the ability to raise funds dries up.

More crucially, there’s the issue of scale.

As of September 2025, although more than 200 companies are using the DAT strategy, collectively holding over $115 billion in digital assets, this is less than 5% of the entire crypto market.

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

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

The market must find larger-scale, more structurally stable sources of capital.

02 The Fed and SEC Open the Floodgates

Structural liquidity shortages can only be solved through systemic reforms.

The Fed: The Tap and the Gate

On December 1, 2025, the Fed’s quantitative tightening policy ends, marking a key turning point.

Over the past two years, QT has been sucking liquidity from global markets; its end means a major structural constraint is removed.

Even more important is the expectation of rate cuts.

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

History is clear: during the 2020 pandemic, the Fed’s rate cuts and quantitative easing propelled Bitcoin from about $7,000 to about $29,000 by year-end. Rate cuts lower borrowing costs and push capital into risk assets.

There’s another key figure to watch: Kevin Hassett, a potential Fed Chair candidate.

He’s crypto-friendly and supports aggressive rate cuts. More importantly, he has dual strategic value:

One is the “tap”—directly deciding monetary policy’s looseness and affecting market liquidity costs.

The other is 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 cooperation on digital assets, which is a prerequisite for sovereign wealth funds and pension funds to enter the space.

SEC: Regulation Turns from Threat to Opportunity

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

This exemption aims to streamline compliance and allow crypto companies to launch products faster in a regulatory sandbox. The new framework will update token classification systems and may include a “sunset clause”—when a token reaches a certain level of decentralization, its security status terminates. This gives developers clear legal boundaries, attracting talent and capital back to the US.

More importantly, there is a shift in regulatory attitude.

For the first time, the SEC has removed cryptocurrency from its standalone priority list in its 2026 examination priorities, instead emphasizing data protection and privacy.

This shows the SEC is shifting from viewing digital assets as an “emerging threat” to integrating them into mainstream regulatory themes. This “de-risking” removes compliance hurdles for institutions, making digital assets more acceptable to corporate boards and asset management institutions.

03 Where the Real Big Money Might Come From

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

Pipeline 1: Institutional Testing and Entry

ETFs have become the preferred way for global asset managers to allocate funds 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 the standardized channel for rapid international capital deployment.

But ETFs are just the beginning; more important is the maturity of custody and settlement infrastructure. Institutional investors have shifted their focus from “can we invest” to “how to invest safely and efficiently.”

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

Most promising are pension funds and sovereign wealth funds.

Billionaire investor Bill Miller predicts that in the next three to five years, financial advisors will start recommending a 1%-3% Bitcoin allocation in portfolios. That may sound small, but for the trillions of dollars in institutional assets globally, a 1%-3% allocation would mean trillions flowing in.

Indiana has proposed allowing pension funds to invest in crypto ETFs. UAE sovereign investors partnered with 3iQ to launch a hedge fund, attracting $100 million with a target annual return of 12%-15%. Such institutionalized processes ensure that capital inflows are predictable and long-term, fundamentally different from the DAT model.

Pipeline 2: RWA—A Trillion-Dollar Bridge

RWA (Real World Asset) tokenization could be the most important driver of the next liquidity wave.

What is RWA? It’s the conversion of traditional assets (such as bonds, real estate, art) into digital tokens on the blockchain.

As of September 2025, the global RWA market cap is about $30.91 billion. According to Tren Finance, by 2030, the tokenized RWA market could grow more than 50-fold, with most companies expecting the market size to reach $4–30 trillion.

This is far beyond any existing crypto-native capital pool.

Why is RWA important? Because it solves the language barrier 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 institutional investors with non-crypto-native yield sources.

Protocols like MakerDAO and Ondo Finance are attracting 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 of dollars in US treasuries backing DAI. This shows that when compliant, yield-backed traditional asset products emerge, TradFi actively deploys capital.

Pipeline 3: Infrastructure Upgrades

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

Layer 2s process transactions outside the Ethereum mainnet, significantly lowering gas fees and shortening confirmation times. Platforms such as dYdX use L2 to offer fast order creation and cancellation—impossible on Layer 1. This scalability is critical for handling high-frequency institutional capital flows.

Stablecoins are even more crucial.

According to TRM Labs, as of August 2025, on-chain stablecoin transaction volume exceeded $4 trillion, up 83% YoY, accounting for 30% of all on-chain transactions. In the first half of the year, total stablecoin market cap reached $166 billion, becoming the backbone of cross-border payments. Rise reports that over 43% of B2B cross-border payments in Southeast Asia use stablecoins.

With regulators (such as the Hong Kong Monetary Authority) requiring stablecoin issuers to maintain 100% reserves, the status of stablecoins as compliant, highly liquid on-chain cash tools is solidified, ensuring institutions can efficiently move and settle funds.

03 How Might the Money Flow In?

If these three pipelines really open up, how will the money come in? The recent market correction reflects the necessary process of deleveraging, but structural indicators suggest the crypto market may be on the verge of a new wave of massive capital inflows.

Short Term (End of 2025–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 will be driven mainly by sentiment, as clear regulatory signals bring risk capital back. But this money is highly speculative, volatile, and its sustainability is questionable.

Mid Term (2026–2027): Gradual Institutional Entry

As global ETFs and custodial infrastructure mature, liquidity is likely to come mainly from regulated institutional pools. Small, strategic allocations from pensions and sovereign funds may materialize—this capital is patient and low-leverage, providing a stable market foundation, and won’t chase rallies or panic sell like retail.

Long Term (2027–2030): Structural Changes Driven by RWA

Sustained large-scale liquidity will likely rely on RWA tokenization. RWAs bring the value, stability, and income streams of traditional assets onto the blockchain, potentially pushing DeFi TVL into the trillions. RWAs directly link the crypto ecosystem to the global balance sheet, ensuring long-term structural growth rather than cyclical speculation. If this path is realized, crypto will truly move from the fringes to the mainstream.

04 Summary

The last bull market was driven by retail and leverage.

If another comes, it will likely be driven by institutions and infrastructure.

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

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

Over the next three to five years, these pipelines may gradually open. By then, the competition will no longer 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.