ARK Invest: Bitcoin's Path to Institutionalization

Original Authors: David Puell, Matthew Mena

Original Compilation: Luffy, Foresight News

In 2025, Bitcoin continued to integrate into the global financial system. The launch and expansion of spot Bitcoin ETFs, the inclusion of digital asset-related listed companies into mainstream stock indices, and the ongoing clarification of the regulatory environment have propelled Bitcoin from a peripheral asset in the crypto industry to a new asset class worthy of institutional allocation.

We believe the core theme of the current cycle is Bitcoin's shift from an "optional" new monetary technology to a strategic allocation asset for a growing number of investors. The following four major trends are strengthening Bitcoin's value proposition:

• Macroeconomic and policy environments are boosting demand for scarce digital assets;
• Trending changes are occurring in the holding structures of ETFs, corporations, and sovereign institutions;
• The relationship between Bitcoin and gold, as well as the broader store-of-value system;
• Bitcoin's drawdowns and volatility are decreasing compared to previous cycles.

This article will examine these trends one by one.

2026 Macroeconomic Backdrop

Monetary Environment and Liquidity

Following a prolonged period of monetary policy tightening, the macroeconomic landscape is shifting: the US Quantitative Tightening (QT) ended in December last year, the Federal Reserve's rate-cutting cycle remains in its early stages, and over $10 trillion in low-yield money market funds and fixed-income ETFs may soon pivot towards risk assets.

Policy and Regulatory Normalization

Regulatory clarity remains both a constraint and a potential catalyst for institutional adoption. Policymakers in the US and globally are advancing frameworks to clarify digital asset regulation, standardize custody, trading, and information disclosure, and provide more guidance for institutional investors.

Taking the US CLARITY Act as an example, this bill would place digital commodities under the oversight of the Commodity Futures Trading Commission (CFTC) and digital securities under the Securities and Exchange Commission (SEC), potentially reducing compliance uncertainty for related businesses and institutions. The bill provides a compliance pathway for the entire lifecycle of digital assets and, through a standardized "maturity test," allows tokens to transition from SEC to CFTC oversight after achieving sufficient decentralization. Simultaneously, the dual registration system for broker-dealers reduces the legal gray areas that have long forced digital asset firms to relocate overseas.

The US government has also taken actions specifically targeting Bitcoin on multiple fronts:

• Discussions among lawmakers and industry leaders about incorporating Bitcoin into national reserves;
• Standardizing the handling of confiscated Bitcoin held by the federal government;
• States like Texas leading the way by adopting Bitcoin as a reserve asset.

Structural Demand: ETFs and Digital Asset Treasuries

ETFs as the New Structural Buyer

The scaling of spot Bitcoin ETFs has fundamentally altered market supply and demand dynamics. In 2025, the amount of Bitcoin absorbed by US spot Bitcoin ETFs and Digital Asset Treasuries (DATs) reached 1.2 times the total of newly mined Bitcoin plus reactivated dormant coins. By the end of 2025, ETF and DAT holdings accounted for over 12% of Bitcoin's total circulating supply.

Despite demand growth outpacing supply, Bitcoin's price still declined, primarily influenced by external factors: the large-scale liquidation event on October 10th last year, market concerns about Bitcoin's four-year cycle peaking, and negative sentiment surrounding quantum computing threats to Bitcoin's cryptography.

Comparison of Bitcoin's new circulating supply and institutional demand in 2025. Source: ARK Investment Management LLC and 21Shares

In the fourth quarter, Morgan Stanley and Vanguard successively integrated Bitcoin into their investment platforms:

• Morgan Stanley opened access to compliant Bitcoin products, including spot ETFs, for its clients;
• Vanguard, which had long resisted cryptocurrencies and commodities, now provides access to third-party Bitcoin ETFs.

As ETFs mature, they will increasingly serve as a structural bridge between the Bitcoin market and traditional capital.

Corporate Treasury Accumulation

Corporate adoption of Bitcoin has expanded from a few early adopters to a broader range. The S&P 500 and Nasdaq 100 have included stocks of companies like Coinbase and Block, allowing mainstream portfolios to gain indirect exposure to Bitcoin.

Strategy (formerly MicroStrategy), as a representative Digital Asset Treasury (DAT), has built a massive Bitcoin position, accounting for 3.5% of the total supply. By the end of January 2026, various Bitcoin DAT companies collectively held over 1.1 million BTC, representing 5.7% of the total supply, valued at approximately $89.9 billion, with the majority held by long-term holders.

Sovereign Institutions and Strategic Holdings

In 2025, following El Salvador's lead, the Trump administration utilized confiscated Bitcoin to establish the US Strategic Bitcoin Reserve (SBR). This reserve currently holds approximately 325,437 BTC, representing 1.6% of the total supply, valued at $25.6 billion.

Bitcoin vs. Gold: A Comparison of Store-of-Value Assets

Gold Leads, Bitcoin Follows?

In recent years, gold and Bitcoin have reacted differently to macro narratives such as currency debasement, negative real interest rates, and geopolitical risks. In 2025, driven by inflation, fiat currency debasement, and geopolitical risk concerns, the gold price surged 64.7%, while Bitcoin's price fell 6.2%, showing a significant divergence.

However, this is not the first time historically:

• In 2016 and 2019, gold price increases preceded Bitcoin's;
• After the initial pandemic shock in early 2020, gold rebounded first, followed by a massive Bitcoin rally fueled by fiscal and monetary liquidity injections.

Historically, Bitcoin appears to be a high-beta, natively digital, gold-like macro asset.

Bitcoin vs. Gold Price Comparison. Source: ARK Investment Management LLC and 21Shares

ETF Scale: Bitcoin's Growth Far Outpaces Gold

Looking at cumulative ETF fund flows, spot Bitcoin ETFs achieved in less than two years what took gold ETFs over 15 years. This suggests that financial advisors, institutions, and retail investors may be recognizing Bitcoin's role as a store of value, a portfolio diversifier, and a new asset class more readily.

Changes in Assets Under Management for Spot Bitcoin ETFs and Gold ETFs. Source: ARK Investment Management LLC and 21Shares

Notably, the return correlation between Bitcoin and gold remains low in the market cycle from 2020 to the present. However, gold may still serve as a leading indicator for Bitcoin.

Correlation Matrix of Major Assets

Market Structure and Investor Behavior

Drawdowns, Volatility, and Market Maturation

While Bitcoin remains volatile, the magnitude of its drawdowns is gradually narrowing. In previous cycles, peak-to-trough declines typically exceeded 70% to 80%. In the current cycle starting from 2022, as of February 8, 2026, Bitcoin's price has never fallen more than approximately 50% from its all-time high (as shown in the chart below), indicating increasing market participation and greater liquidity.

Long-Term Holding Outperforms Timing

Glassnode data shows that from 2020 to 2025, even the "worst investor" who bought $1,000 at the annual peak each year would have turned their $6,000 principal into approximately $9,660 by the end of 2025, a gain of about 61%. By the end of January 2026, they would still have had a gain of about 45%; even after the early February correction, as of February 8th, they would still have a gain of about 29%.

The conclusion is clear: Since 2020, holding period and position management have been far more important than market timing.

Bitcoin's Current Strategic Proposition

By 2026, Bitcoin's core narrative is no longer about "survival," but about the role it plays in a diversified portfolio. Bitcoin is:

• A scarce, non-sovereign asset in an environment of global monetary policy, fiscal deficits, and trade frictions;
• A high-beta extension of traditional store-of-value assets like gold;
• A globally liquid macro asset accessible through compliant instruments.

Long-term holders such as ETFs, corporate treasuries, and sovereign institutions have absorbed a significant portion of new Bitcoin supply, while improvements in regulation and infrastructure have further opened participation channels. Historical data shows Bitcoin's low correlation with other assets like gold, combined with reduced volatility and drawdowns in this cycle, suggests that allocating to Bitcoin may enhance a portfolio's risk-adjusted returns.

We believe that in 2026, the question for investors is no longer "whether to allocate," but "how much to allocate, and through which vehicles."