The green light from policy is already on, so why hasn't Bitcoin managed to break out of its bear market?

Original Author: Andjela Radmilac

Original Translation: Saoirse, Foresight News

Bitcoin hit an all-time high of $126,000 on October 6, 2025. At the time, the market broadly believed that cryptocurrency was on the verge of completing its institutional transformation. Bitcoin spot ETFs launched smoothly in the US, multiple listed companies raised capital to purchase Bitcoin, and the White House was committed to making America the global hub for the crypto industry, bringing an end to years of regulatory standoff.

However, by early August 2026, Bitcoin was trading at approximately $62,600, less than half of its all-time peak. Over the past ten months, US regulators have not resumed their crackdown—they haven't shut down spot ETFs or threatened sanctions against major US exchanges. Instead, they have continuously rolled out industry-supportive policies. With no further policy headwinds, the sustained decline in price remains unexplained. Most of the legal barriers that weighed on the industry a year ago have been dismantled, yet market demand has completely dried up. In the previous cycle, the crypto industry struggled under harsh conditions: regulatory uncertainty, banks unwilling to touch related businesses, soaring corporate legal costs, difficulty launching US-based crypto products, and major institutions shunning the sector entirely.

Back then, regulatory enforcement relied entirely on litigation rather than established codified rules; the cost of crypto asset custody was prohibitively high, and stablecoins had no federal regulatory framework to rely on. A token could circulate and trade for years before the SEC suddenly declared that all parties involved in trading it were operating unregistered securities businesses.

If companies couldn't determine whether their core business was legal, they couldn't reliably plan hiring, negotiate banking partnerships, or assess their own debt risks. Asset managers were unwilling to explain such novel enforcement risks to their investment committees, and banks wouldn't develop financial products that regulators might later pursue. In a rulemaking petition filed in 2022, Coinbase argued that the existing securities regulatory framework was ill-suited to most of the digital asset market; other corporate executives also warned that harsh regulation was driving talent, capital, and trading volume offshore.

Industry lobbyists often made extreme statements that were difficult to translate into practical solutions, but their core concerns were not without merit: heavy-handed regulation imposed extremely high operational costs on the entire industry.

Building on this, industry advocates formed a subjective assumption: if strict regulation suppresses industry activity, then a friendly and permissive regulatory environment should attract more users, bring in massive institutional capital, and drive up token valuations and prices. But the reality is that removing policy restrictions only lowers the barrier to holding assets—it doesn't create motivation for investors to increase their positions.

How Washington's Policy Stance Gradually Shifted

After Trump was re-inaugurated, the regulatory wind shifted almost immediately. An executive order signed in January 2025 recognized the legitimate use of public blockchains and stablecoins, established a presidential working group, and directed government departments to build a regulatory framework centered on US dominance in the digital asset industry.

In March of the same year, a second executive order introduced a Bitcoin strategic reserve mechanism: the federal government would no longer periodically auction off seized Bitcoin but would retain it in a unified manner, while directing officials to study ways to increase Bitcoin holdings without adding to the fiscal burden.

CryptoSlate's policy archive fully documents the dramatic reversal in government stance. Once upon a time, Washington's discussions of Bitcoin always revolved around money laundering, sanctions evasion, and consumer harm; now the US government plans to hold such assets long-term. Although the new policy did not include a federal open-market Bitcoin accumulation program, Bitcoin gained an official compliance status that would have been unimaginable just a few years ago.

The SEC also rolled out a series of easing measures: establishing a crypto asset task force and dismissing a large number of crypto-related lawsuits initiated by the previous commission. In February 2025, the SEC's lawsuit against Coinbase was dismissed, and subsequent enforcement actions against Kraken, Consensys, Cumberland, Binance, and others were all terminated. By April 2026, the SEC publicly stated that it had withdrawn seven crypto industry lawsuits brought by the previous administration.

Congress passed the first major federal crypto legislation in US history—the GENIUS Act—which was signed into law in July 2025, establishing a comprehensive set of regulatory requirements for payment stablecoins covering reserves, operating licenses, and disclosure. The Federal Reserve eliminated special reporting obligations for banks engaging in crypto business; the Office of the Comptroller of the Currency also made clear that all US banks can provide crypto asset custody and execution services to their clients.

However, not all of the industry's demands were fully met: the strategic reserve relies solely on confiscated Bitcoin, with no large-scale secondary market purchases by the government; Bitcoin spot ETFs had already been approved back in January 2024; and as Congress approached its summer recess in 2026, a comprehensive crypto bill covering the entire market structure remained stalled in the Senate.

Even so, the crypto industry now enjoys a friendly executive branch, an SEC with significantly restrained enforcement, unified national stablecoin regulations, open banking partnerships, and regular access to policymakers. Product teams can now make development decisions without worrying that every new feature will end up in federal litigation.

These policy changes represent a huge political victory for the industry—but they cannot force investors to keep buying Bitcoin at six-figure prices.

What the Bitcoin Market Really Needs Is Genuine Incremental Capital

On October 6, 2025, Bitcoin hit its all-time high. Four days later, global macro risk shocks combined with high market leverage triggered over $19 billion in forced liquidations within just 24 hours on October 10–11. Weakness in global equities can explain the severity of Bitcoin's initial crash, but it cannot account for the nine months of sustained weakness that followed.

As of July 1, 2026, Citigroup estimated that US Bitcoin spot ETFs had seen approximately $3.3 billion in cumulative net outflows year-to-date. The bank cut its 2026 ETF inflow estimate from $10 billion to zero and lowered its 12-month Bitcoin price target to $82,000.

Institutional access channels have remained fully open throughout, but institutional investment enthusiasm has long since evaporated.

Exchange data confirms the market retreat: Coinbase's Q2 earnings report showed trading revenue of $599.2 million, down sharply from $764.3 million in the same period last year; monthly transacting users fell from 8.7 million to 7.6 million, and the company recorded a net loss of $359.5 million. Although Coinbase has expanded into stablecoins, derivatives, and other diversified businesses, and its global trading share has actually increased, the data makes one thing clear: leading exchanges are merely carving up shares of a shrinking market.

CryptoSlate's mid-year market review showed Bitcoin falling to $58,600 in early July, down 33% for the year; in June alone, spot ETF net outflows reached $4.5 billion.

Spot ETFs were supposed to break Bitcoin's dependence on offshore exchanges and native crypto traders, and that goal has largely been achieved. Asset managers like BlackRock and Fidelity allow investors to allocate to Bitcoin through the same accounts they use for index funds, bonds, and retirement savings, sparing most investors the hassle of private keys, crypto wallets, and specialized custodians.

But this trading mechanism has also made selling completely frictionless. Advisors who once avoided Bitcoin because of cumbersome crypto custody processes can now buy in seconds—and sell just as easily. Institutionalization has pushed Bitcoin into competition with all liquid assets, yet it has not created a long-term, permanent-holding investment thesis.

In 2026, Bitcoin's competition for capital has further intensified: cash and Treasuries continue to generate steady returns; inflation and interest rate uncertainty have cooled enthusiasm for speculative assets; and significant capital has rotated into the AI sector. Investors who already hold Bitcoin indirectly through ETFs and public companies don't need new policy tailwinds to justify their positions—during the bull run, most had already reached their target allocation caps.

The outside world once assumed that institutional capital was a bottomless reservoir. The reality is a two-way trading market where investors' selling intentions match their buying intentions. Even while acknowledging that Bitcoin's regulatory environment has vastly improved, investors still consider prices above $100,000 to be overvalued.

The Corporate Treasury Accumulation Model Reverses Course

The market gave rise to a group of digital asset treasury companies, built on the premise that they would provide sustained buying power for Bitcoin even if retail interest waned. These companies raise capital through stock issuance, convertible bonds, and preferred shares, using all proceeds to purchase Bitcoin; as long as the company's secondary market valuation exceeds the value of its Bitcoin holdings, the business remains profitable. Issuing new shares doesn't dilute the Bitcoin backing per share—instead, it boosts the stock price, improves financing costs, and generates more capital to continue accumulating.

The core premise of this model is that investors are willing to pay a premium for the company's assets. Once that premium disappears, issuing new shares directly dilutes existing shareholders, while the company still must service debt and pay preferred dividends; falling Bitcoin prices continue to erode the company's asset base, and the entire business logic collapses.

Several treasury companies are now trading below the total value of their crypto holdings, and they are no longer willing to issue new shares to continue accumulating.

Strategy, the largest and most well-known representative of this model, perfectly demonstrates how the accumulation logic can flip into selling. Between June 29 and July 5, 2026, the company sold 3,588 Bitcoin, raising approximately $216 million to fund preferred share dividends and bolster its dollar cash reserves. Its SEC filing disclosed a Q2 digital asset impairment loss of $8.32 billion, nearly all of it unrealized paper losses from declining Bitcoin prices.

This loss does not mean the company burned $8.32 billion in cash—it still holds a massive Bitcoin position.

This sale is symbolic: the entire treasury accumulation craze was built on the consensus that these companies would endlessly absorb market selling pressure and never become sellers themselves. CryptoSlate's analysis of this transaction treats it as a stress test of a business model that took years to mature.

The US government can recognize and praise this accumulation model, even partially replicate it through the federal strategic reserve—but it cannot intervene in normal corporate capital operations, nor can it stop companies from facing real operational pressures like dividend obligations, rising financing costs, and the disappearance of valuation premiums.

What Has the Policy Shift Actually Changed

Despite the sharp market correction, the industry benefits of permissive policies have not disappeared with falling prices. US-based exchanges are now essentially safe from litigation-driven shutdowns; banks have clear authorization to provide custody and trading services; stablecoin issuers operate under a unified federal regulatory framework. Product development teams can plan their businesses around a stable and predictable regulatory environment; crypto companies looking to enter the US market no longer need to be on high alert for sudden regulatory strikes.

But the value of these policy benefits is barely reflected in Bitcoin's price. The GENIUS Act primarily regulates dollar stablecoins, payment companies, and Treasury-related businesses—it does nothing to boost market demand for Bitcoin or other unrelated crypto assets. Bitcoin holders receive no share of stablecoin reserves, issuer revenue, or payment fees.

The SEC's dismissal of lawsuits only improves exchanges' chances of survival; it doesn't make their products more attractive. Bank custody only reduces operational risk; it doesn't force investment committees to raise their Bitcoin allocations. Spot ETFs merely simplify private key management; they don't make pension funds ignore extreme price volatility. And the full-scale entry of banks and large asset managers actually compresses the trading fees that native crypto intermediaries used to earn.

Policy has only changed three things: industry licensing, institutional access channels, and compliance risk. The past ten months of price declines prove that the industry has long mistaken regulatory compliance dividends for long-term market demand and real commercial value.

Legal operating status, institutional investment channels, speculative capital demand, and everyday commercial adoption are not linear stages of development. An asset can be fully compliant yet unwanted, easy to buy yet bubble-valued, favored by hedge funds yet irrelevant to ordinary households; a public blockchain can settle trillions in value without creating any value for its native token; stablecoins can thrive simply because users need convenient dollar settlement, not because of crypto assets themselves.

The vast majority of investors prefer assets that generate cash flow—stocks, bonds, real estate. Bitcoin produces no ongoing yield, leaving it with an inherent valuation handicap: stocks are supported by earnings, bonds pay periodic interest, and real estate generates rental income. Bitcoin's value depends entirely on what subsequent buyers are willing to pay, with investors viewing it as a scarce digital asset, a macro hedge reserve, or some combination of the two.

Friendly policies can reduce the probability of a comprehensive Bitcoin ban, enhance holding security, and reinforce the investment thesis—but they cannot lock in a price range. At $20,000, allocators could see asymmetric upside; at $126,000, with crowded positioning, zero cash flow, and enormous downside risk, attracting incremental capital becomes extremely difficult.

Global liquidity, real interest rates, geopolitical conflicts, market leverage, and overall risk appetite—any one of these factors shifting can cancel out the policy tailwinds released by the SEC. The government can eliminate legal uncertainty around spot ETFs, but it cannot force fund managers to abandon cash, gold, bonds, and Nvidia stock in favor of Bitcoin ETF allocations.

The crypto industry spent years battling Washington, always with a clearly defined external adversary, and all its victories were quantifiable: hiring lobbying teams, funding political candidates, winning regulatory lawsuits, replacing hostile regulators, and passing targeted legislation.

But the challenges the industry now faces are far less clear-cut. Companies must prove that users will continue using their products even when prices aren't rising; that revenue can remain stable through bear markets; that asset security systems are reliable; and that balance sheets can stay healthy without relying on perpetually issuing equity at inflated prices.

Asset managers must demonstrate that institutional allocations can withstand drawdowns rather than merely chasing momentum after bull rallies; Bitcoin proponents must convince potential buyers based on the asset's own merits, rather than hoping the government will roll out new policies to boost prices.

Supportive policies haven't made Bitcoin valueless, and past regulatory suppression wasn't an industry fabrication. Washington has removed numerous policy constraints, only to expose the underlying industry problems that politicians cannot solve: weak marginal demand, high market leverage, cross-asset competition for capital, scarce real-world use cases, and investors willing to position only at lower price levels.

The crypto industry has won the argument over whether it can enter the US mainstream financial system. Now it must prove it has irreplaceable value within that system. The US government can allow Bitcoin to circulate, enact regulatory rules, open institutional investment channels, and establish federal reserve holdings—but it cannot dictate the price the next buyer is willing to pay.