The true driving force of the next bull market: institutional capital vs. retail investor outflow, what does DAT mean

Over the past few weeks, Bitcoin has plummeted from its all-time high of $126,080 to around $90,110, experiencing nearly 29% volatility. This decline reflects not only a price correction but also a fundamental shift in market participant structure. As retail funds exit and leverage is forced to unwind, an urgent question emerges: where will the capital for the next bull run come from?

DAT (Digital Asset Treasury Company) was once seen as a new engine driving crypto market growth, but what does its decline signify? It indicates that the era of relying on listed companies to buy coins and amplify leverage is coming to an end. This shift pushes the market to seek more stable, institutionalized sources of capital. The answers may be found in three actively developing channels: structural reforms by the Federal Reserve and SEC, orderly entry of institutional investors, and the transformative impact of RWA tokenization.

What does the decline of DAT mean?

The DAT model was once highly successful. In essence, listed companies would acquire Bitcoin or other digital assets by issuing stocks and debt, then profit through staking, lending, and other mechanisms. This business logic was based on an elegant “self-reinforcing mechanism”: as long as the company’s stock price maintained a premium (relative to its net asset value), it could issue shares at high prices and buy coins at low prices, continuously expanding capital.

However, changing market conditions have shattered this assumption. When risk aversion dominates and Bitcoin prices come under pressure, the high-beta premium of DAT companies collapses rapidly. The premium disappears, and their financing ability dries up. By the end of 2025, over 200 companies had adopted the DAT strategy, holding assets exceeding $115 billion, but this accounted for less than 5% of the total crypto market.

What does the decline of DAT imply? It means that the current mechanisms can no longer generate sufficient liquidity to drive the next bull market. Worse, when the market weakens, DAT companies may be forced to sell assets to maintain operations, further exacerbating sell-off pressures. The market must find larger-scale, more resilient sources of capital.

How structural reforms can open the floodgates of capital

Structural liquidity shortages can only be addressed through fundamental policy reforms.

The dual role of the Federal Reserve

On December 1, 2025, the Fed ended its two-year quantitative tightening (QT) policy. This marks the removal of a key structural constraint—the global market is no longer being drained of liquidity by the central bank. More importantly, expectations of rate cuts are intensifying. According to CME’s “Fed Watch” data, the probability of a 25 basis point rate cut in December 2025 is as high as 87.3%.

History is instructive. During the COVID-19 pandemic in 2020, Fed rate cuts and quantitative easing directly propelled Bitcoin from about $7,000 to $29,000 by year-end. Lower borrowing costs made capital more inclined to flow into high-risk assets.

Another significant variable is potential leadership changes at the Fed. Candidates like Kevin Hassett are friendly toward crypto assets and support more aggressive rate cuts. If such political factors materialize, they could not only lead to further monetary easing but also accelerate the opening of the US banking system to the crypto industry—an essential precondition for large institutional players like sovereign funds and pension funds to enter.

SEC regulatory shift

In January 2026, SEC Chair Paul Atkins is set to introduce the “Innovation Exemption” rule. This new policy aims to streamline compliance for crypto companies, allowing them to launch products more quickly within a regulatory sandbox framework. More groundbreaking is the potential inclusion of a “sunset clause”—once tokens reach a predefined level of decentralization, their security classification would automatically end. This provides developers with clear legal boundaries.

A deeper shift is in the SEC’s evolving attitude. In its 2026 review priorities, cryptocurrencies are removed from the standalone priority list and integrated into mainstream regulatory themes like data protection and privacy. This “de-risking” categorization reduces compliance concerns among corporate boards, making digital assets more acceptable to mainstream asset managers.

Three channels of institutional capital inflow are taking shape

If DAT can no longer provide sufficient capital, where will the real large-scale funds flow? The answer may lie in three maturing liquidity channels.

Channel 1: Tentative deployment by institutional investors

Global asset management firms are entering crypto via standardized tools like ETFs. After the US approved spot Bitcoin ETFs in January 2024, Hong Kong followed suit with approvals for spot Bitcoin and Ether ETFs. This regulatory convergence makes ETFs the preferred channel for international capital deployment.

But the real turning point is infrastructure development. Top-tier custodians like BNY Mellon have begun offering digital asset custody services. Platforms like Anchorage Digital, integrating middleware such as BridgePort, provide enterprise-grade settlement infrastructure for institutions. Investors are no longer asking “Can we invest?” but “How can we invest safely and efficiently?”

The most promising prospects are pension funds and sovereign wealth funds. Investor Bill Miller predicts that within three to five years, financial advisors will recommend allocating 1%-3% of portfolios to Bitcoin. While seemingly small, for trillions of dollars in global institutional assets, 1%-3% represents trillions of dollars in capital inflows.

Indiana has proposed allowing state pension funds to invest in crypto ETFs. UAE sovereign investors partnering with 3iQ have launched hedge funds attracting $100 million, targeting annual returns of 12%-15%. This institutionalized process ensures predictable, long-term capital flows—fundamentally different from the short-term speculation typical of DAT.

Channel 2: RWA tokenization as a structural opportunity

RWA (Real-World Asset) tokenization could be the most critical driver of future liquidity. Simply put, RWA involves converting traditional assets—bonds, real estate, art—into digital tokens on the blockchain.

As of September 2025, the global RWA market is valued at approximately $30.9 billion. According to Tren Finance, by 2030, this market could grow over 50-fold, reaching $4-30 trillion—far surpassing any existing crypto-native capital pools.

Why is RWA so vital? Because it bridges the “language gap” between traditional finance and DeFi. Tokenized US Treasuries, corporate bonds, and other assets enable both sectors to communicate in a common language. RWA brings stable, income-generating assets into DeFi, reducing volatility and providing institutional investors with non-native yield sources.

MakerDAO has attracted institutional capital by bringing US Treasuries on-chain as collateral. RWA integration has made MakerDAO one of the largest TVL protocols, with billions of dollars in US bonds backing DAI stablecoins. This demonstrates that when compliant, traditional assets with yields are available, traditional finance actively deploys capital.

Channel 3: Infrastructure upgrades

Whether capital comes from institutional allocations or RWA tokenization, efficient, low-cost settlement infrastructure is essential for large-scale adoption.

Layer 2 solutions process transactions off the Ethereum mainnet, significantly reducing gas fees and increasing confirmation speeds. Platforms like dYdX leverage Layer 2 to enable rapid order creation and cancellation—impossible on Layer 1. For markets handling high-frequency institutional capital flows, scalability is crucial.

Stablecoins are also central to infrastructure. According to TRM Labs, as of August 2025, on-chain stablecoin transaction volume exceeded $4 trillion annually, growing 83% year-over-year and accounting for 30% of all on-chain activity. By mid-2025, stablecoin market cap reached $166 billion, becoming a key pillar for cross-border payments.

Over 43% of B2B cross-border payments in Southeast Asia are conducted via stablecoins. As regulators like the Hong Kong Monetary Authority require stablecoin issuers to maintain 100% reserves, stablecoins’ status as compliant, highly liquid on-chain cash tools is solidified, enabling institutions to transfer and settle funds efficiently.

Short-, mid-, and long-term capital flow expectations

If these three channels truly open, how might the market evolve?

Short-term outlook (Q1 2026): policy-driven recovery

The end of QT and confirmation of rate cuts, along with the SEC’s “Innovation Exemption” implementation, could trigger risk capital reflows. This phase will be characterized by psychological recovery, high speculative activity, and volatility. However, the sustainability of this capital remains uncertain.

Mid-term outlook (2026-2027): steady institutional entry

As global ETF approvals and custody infrastructure mature, liquidity will mainly come from regulated institutional pools. Strategic allocations by pension funds and sovereign funds will take effect, characterized by patience and low leverage, providing a stable foundation unlike retail chasing short-term gains.

Long-term trend (2027-2030): RWA anchored structural growth

Sustained large-scale liquidity will ultimately depend on the continued expansion of RWA tokenization. RWA will bring traditional assets’ value, stability, and yield streams onto blockchain, pushing DeFi TVL into the trillions. At this stage, the crypto ecosystem will be directly linked to global asset balance sheets, ensuring long-term structural growth rather than cyclical speculation.

From speculation to infrastructure evolution

The last bull run was driven by retail leverage and market speculation. If the next one arrives, its drivers will be institutional reforms and infrastructure improvements.

The market is transitioning from the fringes to the mainstream. The question has shifted from “Can I invest in crypto?” to “How can I invest safely and effectively?”

As DAT signals the fading of the old model, new capital channels are gradually taking shape. They are not sudden inventions but are already being laid out. Over the next three to five years, they may open one after another. By then, the competition will no longer be for retail attention but for institutional trust and allocation capacity.

This is a shift from speculative finance to foundational infrastructure—a necessary path for the maturation of the crypto market.