By Brett Munster
For most of its existence, the crypto market followed a remarkably consistent four-year rhythm. From bitcoin’s early days through 2023, investors could almost set their calendars by it: a year of explosive upside, followed by a steep drawdown, then a quieter period of consolidation that established a higher base than the prior cycle, and finally a steady rebuild of momentum into the next surge. That framework, however, no longer describes how the crypto market behaves. Since the launch of U.S. spot bitcoin ETFs in January 2024, crypto has begun trading in a meaningfully different way, marking what we believe is the definitive break of the traditional four-year cycle.
The introduction of spot bitcoin ETFs represented a structural shift rather than a simple demand catalyst. For the first time, large pools of capital—pensions, endowments, RIAs, multi-asset funds, and corporate treasuries—were able to access bitcoin through familiar, regulated vehicles without dealing with private keys, custody risk, or offshore exchanges. This mattered not just because it increased demand, but because it changed the nature of that demand. Since early 2024, bitcoin’s price action has instead resembled a stair-step pattern: sharp, contained bursts of appreciation followed by extended periods of consolidation. As a result, volatility is compressing, drawdowns are shallower, and recoveries are faster. Since 2024, bitcoin’s drawdown from all-time highs has never exceeded 30%, compared to 60%+ corrections in prior cycles.
Bitcoin’s disappointing performance in 2025 defied the typical boom-and-bust pattern, yet the market remains stable. Prices are following the step-ladder trend established after spot ETFs launched, consolidating at higher levels rather than plunging into a deep bear market. This suggests that growing institutional participation is tempering extremes, reducing both the explosive gains of past bubbles and the severe crashes that followed. Unlike earlier cycles, 2025 did not produce an euphoric spike in price, making a classic post-bubble collapse in 2026 increasingly unlikely.
The market is maturing. Capital inflows are steadier, and optimism is sustained rather than frenzied, marking a healthier trajectory than the violent cycles of crypto’s early years. Bitcoin has never experienced two consecutive down years, and while past performance is no guarantee, conditions entering 2026—supported by strong tailwinds—point to a continuation of measured growth rather than abrupt decline.
Continued Regulatory Progress
The first major tailwind heading into 2026 is continued regulatory progress, which has quietly but meaningfully reshaped the industry over the past year. Throughout 2025 we repeatedly emphasized the shift from adversarial enforcement toward constructive rulemaking in Washington and highlighted it as one of the most important stories in crypto in 2025. That shift laid the legal foundation for crypto to integrate into the traditional financial system, even if market prices initially failed to reflect it. Crucially, regulatory momentum is not slowing. If anything, there are credible reasons to believe it will accelerate in 2026.
At the heart of this shift is the Digital Asset Market Clarity Act, or CLARITY Act, which aims to define how digital assets are regulated in the U.S., distinguishing commodities under the CFTC from securities under the SEC. For entrepreneurs and investors, this clarity is critical: it replaces the current ambiguity that exposes token networks to retroactive enforcement with a predictable compliance pathway, enabling growth and decentralization without fear of sudden regulatory backlash. The House passed the bill in 2025 with bipartisan support, while the Senate is actively preparing its version, with a markup expected in early 2026. Scheduled markups, bipartisan backing, and industry engagement make passage highly probable.
Alongside CLARITY, longer-term policy initiatives are emerging that would have been unthinkable just a few years ago. Senators Cynthia Lummis and Nick Begich have reintroduced the BITCOIN Act in both chambers, which would establish a Strategic Bitcoin Reserve and authorize the Treasury to acquire up to one million bitcoin using existing federal assets. Though still early-stage and unlikely to advance before broader market-structure issues are resolved, the proposal signals growing willingness among policymakers to treat bitcoin as a strategic, not merely speculative, asset.
Perhaps the most consequential shift lies in tokenization. In December 2025, the SEC approved pilot programs allowing core market infrastructure providers—most notably the Depository Trust & Clearing Corporation (DTCC) — to test tokenized versions of traditional securities. These tokenized shares will carry the same legal rights as their conventional counterparts. The DTCC is the backbone of U.S. capital markets, handling clearing and settlement for nearly every stock, bond, and securities transaction, processing trillions in annual transaction value, and settling over 100 million transactions daily. It is one of the most critical pieces of financial infrastructure globally, serving as the quiet engine that powers modern markets. Its move toward tokenization is therefore not experimental at the margins; it represents a potential re-architecture of the financial system’s core plumbing.
Following this approval, SEC Chairman Paul Atkins went a step further, predicting that the entire U.S. stock market—not just a portion of it—will be tokenized and operate on blockchain rails within a “couple of years.” Not over a decade. Not incrementally. All of it, and soon.
The magnitude of this shift is difficult to overstate. Today, the total value of tokenized stocks trading on public blockchains is roughly $700 million. By contrast, the total market capitalization of U.S. equities is nearly $70 trillion. That is a difference of nearly 100,000 times. In effect, the Chairman of the SEC has stated that he expects the value of tokenized stocks transacting over blockchain networks such as Ethereum, Solana, and others to grow by roughly five orders of magnitude over the coming years.
Equities are only the beginning. Other traditional assets—bonds, money market funds, commodities, and real estate—are just as likely to migrate onto blockchain rails, bringing hundreds of trillions of dollars’ worth of assets onto blockchain networks. Already, stablecoins have demonstrated proof of concept, with over $300 billion of dollar-denominated liabilities on-chain. Soon, investors will be able to trade both crypto and traditional assets in the same wallet, using the same settlement logic and blockchain architecture. Crypto is no longer about trading cryptoassets; it is becoming the infrastructure for trading EVERY financial asset.
2025 will be remembered as the year regulatory groundwork was laid. As 2026 approaches, continued progress on CLARITY, expanded tokenization of core financial infrastructure, and even potential government-level bitcoin adoption create a powerful backdrop. In a market increasingly shaped by measured, institutionally driven behavior, prices may finally begin to reflect the scale of innovation and regulatory certainty now unfolding.
Acceleration of Institutional Adoption
2025 was the year institutions finally arrived in force. In only the second year of operation, the U.S. spot bitcoin ETFs attracted nearly $50 billion dollars in net inflows, rivaling long-established giants such as the S&P 500 (SPY) and Nasdaq-100 (QQQ) trackers in terms of growth. Pension funds, university endowments, and sovereign wealth funds not only disclosed allocations, but in many cases increased those positions meaningfully over the course of the year. For an asset class that was once considered uninvestable by fiduciaries, this represented a historic shift in institutional perception and behavior.
Equally notable was the rise of new institutional buyers beyond traditional asset managers. Publicly listed digital asset treasury companies (DATs) made crypto, and bitcoin in particular, a core balance sheet strategy. Unlike short-term traders, these firms operate with multi-year horizons, access to capital markets, and mandates to accumulate digital assets across cycles. Combined with ETF inflows and sovereign accumulation, institutional demand in 2025 absorbed over six times the newly mined bitcoin, creating a structural imbalance between supply and long-term demand.
Crucially, these forces are still in their early stages. Traditional financial infrastructure moves deliberately, and most major distribution channels only began opening late in 2025. Throughout 2024 and much of 2025, wealth platforms and broker-dealer networks focused on due diligence, compliance, and operational readiness for crypto products. Only in the final months did large U.S. advisory platforms—including wirehouses and bank-affiliated wealth managers overseeing tens of trillions—approve bitcoin ETFs for client accounts.
Until December, Bank of America advisors could not recommend crypto. Today, updated guidance now suggests 1–4% allocations for clients, with broader adoption expected in 2026. Vanguard enabled crypto access for its roughly 50 million clients late last year, paving the way for meaningful allocations this year. A few months ago, Morgan Stanley advisors were barred from providing crypto exposure to their clients. Now the firm is offering its own crypto ETFs, allowing its wealth management arm—serving 19 million clients with $6.5 trillion—to recommend crypto. The fact is that for the first time ever, most major U.S. financial institutions—including Goldman Sachs, Citi, JPMorgan, Wells Fargo, Charles Schwab, Fidelity and more—will offer crypto products and services in 2026.
As these approvals translate into wider distribution across advisor platforms, the impact on ETF flows is only beginning to emerge. In traditional ETF markets, inflows rarely peak in the launch year. Gold offers a useful historical parallel. Following the introduction of the first U.S. gold ETF in the mid-2000s, assets grew steadily for seven consecutive years as distribution broadened and investor confidence increased. This is the common growth pattern for the vast majority of ETFs and the Bitcoin ETFs appear to be no exception. As these wealth management platforms move from initial approval to routine inclusion in model portfolios, the addressable pool of capital is set to expand dramatically in 2026.
Supply dynamics reinforce this outlook. At current prices, the bitcoin network is expected to produce roughly $15 billion of new supply in 2026. ETFs alone bought about $24 billion in 2025, and that figure is likely to rise as adoption broadens. Even conservatively, ETFs could absorb more than twice the newly issued bitcoin next year, not including demand from corporate treasuries, pensions, endowments, sovereign funds, and retail investors buying on Coinbase. Institutional demand has the potential to outstrip new supply by a wide margin.
Taken together, regulated ETF access, growing corporate treasury participation, improving bank infrastructure, and expanding advisory channels suggest that 2025 was not the peak but the inflection point of institutional crypto adoption. For financial professionals, 2026 may mark bitcoin’s transition from a peripheral or experimental allocation to a normalized component of diversified portfolios—driven less by hype and more by steady integration into traditional finance.
Favorable Liquidity Conditions
As 2026 begins, the liquidity environment that has shaped markets over the past three years is shifting. In December 2025, the Federal Reserve ended its mmulti-year quantitative tightening (QT) program, one of the most aggressive balance sheet reductions in history, which reduced its securities holdings by more than $2.2 trillion. With QT concluded, monetary policy is moving away from deliberate tightening toward a stance that is accommodative by default.
This change has major implications for risk assets, including crypto. As QT slowed and ended, the U.S. money supply (M2) continued to grow, reaching record highs and expanding at the fastest pace in over three years. This signals growing liquidity in the financial system, likely to increase further as policy shifts from restrictive toward neutral or even accommodative. Unlike QT, which mechanically removed liquidity and pressured risk assets, the current backdrop supports credit creation, investment, and risk-taking.
The liquidity boost goes beyond the Fed’s balance sheet. Fiscal pressures are mounting as government borrowing accelerates. Over the past year, federal debt increased by roughly $2.1 trillion, pushing interest payments on U.S. debt to a record $104.4 billion in October 2025. That same month produced the largest monthly budget deficit in history, surpassing even COVID-era peaks. Additional fiscal spending planned for 2026 will likely widen the deficit further, requiring more debt issuance and supporting money creation.
The challenge is not limited to new borrowing, existing debt is compounding the problem. About $9 trillion of U.S. government debt matures in 2026—over a quarter of total debt—and must be rolled over at far higher interest rates than when it was issued in the near-zero rate environment of the early 2020s. This unusually large rollover reflects the surge in short-dated issuance during 2020 and 2021, when the government responded to the pandemic with massive fiscal stimulus. Now, that debt is coming due precisely as borrowing costs sit at a ten-year high. In practical terms, the government is being forced to borrow more, even as borrowing becomes more expensive.
Historically, such conditions—large deficits, high debt burdens, and extensive refinancing—tend to coincide with looser monetary policy, lower real interest rates, and central bank balance sheet expansion, creating a supportive environment for hard assets like gold and scarce digital assets such as bitcoin.
The Fed’s recent actions reflect this shift. After holding rates steady for much of 2025, not only did the Fed cut interest rates three times in the back half of 2025, it began purchasing short-term Treasury securities in December. Initially framed as a technical measure, this now opens the door to more active liquidity support if markets tighten.
A potential leadership change adds another layer. Fed Chair Jerome Powell’s term ends in May 2026, with Kevin Hassett, a pro-growth and crypto-friendly candidate, likely to succeed him. Hassett has been a vocal advocate for lower interest rates and has argued that growth should be prioritized over strict inflation control. What makes Hassett’s potential appointment particularly notable for crypto markets is not only his monetary stance, but his history with digital assets. As a former advisor to Coinbase and a participant in the White House digital asset working group, he would be the most crypto-friendly policymaker ever considered for the Fed’s top role. His appointment could combine more accommodative monetary policy with a constructive regulatory environment, boosting crypto’s appeal relative to other risk assets.
Together, the end of QT, rising money supply, fiscal pressures, and a dovish policy shift create strong macroeconomic tailwinds for crypto in 2026. They point to rising liquidity, lower interest rates, and continued compression of real yields—conditions that have historically favored risk assets. In this environment, scarce assets independent of government balance sheets, like bitcoin, become particularly attractive as portfolio diversifiers and potential stores of value, amplifying the core fundamentals behind crypto’s long-term investment case.
In Other News
Global crypto ETF inflows hit $47.2 billion in 2025.
Crypto M&As and IPOs surged in 2025, and insiders see deal momentum carrying into 2026.
Spot bitcoin ETFs report $697 million in net inflows, largest daily total since October.
Bitwise CIO flags three hurdles crypto must clear for a sustained 2026 rally.
Florida introduced a bill to create a Strategic Bitcoin Reserve, allowing up to 10% of public funds to hold BTC.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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