Original author: Andjela Radmilac
Original translation: Saoirse, Foresight News
Bitcoin hit an all-time high of $126,000 on October 6, 2025. At that time, the market generally believed that cryptocurrency was about to complete its institutional transformation. Bitcoin spot ETFs were successfully launched in the United States, multiple listed companies raised funds to purchase Bitcoin, and the White House was committed to making the United States the global center of the crypto industry, bringing an end to years of regulatory standoff.
However, by early August 2026, Bitcoin's price was approximately $62,600, less than half of its historical peak. Over the past ten months, U.S. regulators have not resumed crackdowns, have not shut down various spot ETFs, and have not issued sanctions threats against major U.S. exchanges. Instead, they have continued to introduce policies supporting the industry. With no further negative policy news, it cannot explain the continued decline in coin prices. Most of the legal barriers that weighed on the industry a year ago have been removed, but market demand has completely dried up. In the previous cycle, the crypto industry struggled: regulatory policies were uncertain, banks dared not touch related businesses, corporate legal costs soared, U.S.-based crypto products were difficult to launch, and large institutions all avoided the sector.
At that time, regulatory enforcement relied entirely on litigation rather than mature written regulations; the cost of crypto asset custody was unbearably high, and stablecoins lacked a federal regulatory framework. A token could circulate and trade for years before the SEC suddenly claimed that all parties involved in trading were operating unregistered securities businesses.
If companies cannot determine whether their core business is legal, they cannot properly plan hiring, negotiate bank partnerships, or assess their debt risks. Asset managers are unwilling to explain such novel enforcement risks to investment committees, and banks will not develop financial products that regulators might later pursue. In a rulemaking petition submitted by Coinbase in 2022, it argued that the current securities regulatory framework cannot accommodate most digital asset markets; other corporate executives also warned that strict regulation was forcing talent, capital, and trading orders to continuously flow overseas.
Industry lobbyists often make extreme statements and fail to deliver practical solutions, but their core demands are not without merit: high-pressure regulation imposes extremely high operating costs on the entire industry.
On this basis, industry advocates formed a subjective prediction: since strict regulation suppresses industry activity, a friendly and lenient regulatory environment would attract more users, bring in massive institutional funds, and push up token valuations and prices. But the reality is that removing policy restrictions only lowers the threshold for holding assets, not the motivation for investors to increase holdings.
How Washington's Policy Stance Gradually Shifted
After Trump was re-elected as president, the regulatory direction almost immediately reversed. An executive order signed in January 2025 recognized the legitimate use of public blockchains and stablecoins, established a presidential working group, and required various government departments to build a regulatory framework centered on U.S. 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 confiscated Bitcoin but would retain it uniformly; it also instructed relevant officials to study ways to increase Bitcoin holdings without increasing fiscal burden.
CryptoSlate's policy archive fully documents the dramatic reversal in government stance. Once, Washington's discussions about Bitcoin always revolved around money laundering, sanctions evasion, and consumer harm; now the U.S. government plans to hold such assets long-term. Although the new policy did not introduce a federal open market purchase plan for Bitcoin, Bitcoin gained official compliance status that was unimaginable a few years ago.
The SEC also simultaneously introduced a series of lenient measures: establishing a crypto asset working group 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 subsequently, enforcement actions against Kraken, Consensys, Cumberland, Binance, and other companies were all terminated. As of April 2026, the SEC publicly stated that it had withdrawn seven crypto industry lawsuits initiated by the previous administration.
Congress passed the first major federal crypto law in the United States – the GENIUS Act – which was officially signed into law in July 2025, establishing comprehensive regulatory requirements for payment stablecoins, including reserves, operating licenses, and disclosure requirements. The Federal Reserve eliminated special reporting obligations for banks engaging in crypto business; the Office of the Comptroller of the Currency also clearly stated that all U.S. banks can provide crypto asset custody and transaction execution services to customers.
However, not all industry demands were fully realized: the strategic reserve relies solely on confiscated Bitcoin, with no large-scale secondary market purchases by the government; Bitcoin spot ETFs were approved as early as January 2024; and as the 2026 congressional summer recess approached, a comprehensive crypto bill covering the entire market structure remained stalled in the Senate.
Even so, the crypto industry now has a friendly executive branch, an SEC with significantly reduced enforcement, nationwide stablecoin regulations, smooth banking channels, and companies can routinely engage with policymakers. When making R&D decisions, corporate product teams no longer have to worry that every new feature will end up in federal litigation.
A series of policy adjustments represent a huge political victory for the industry, but they cannot force investors to continue buying Bitcoin at six-figure prices.
What the Bitcoin Market Really Needs is Substantial Incremental Capital
On October 6, 2025, Bitcoin hit its all-time high. Four days later, global macro risk shocks combined with high market leverage led to over $19 billion in forced liquidations within just 24 hours from October 10 to 11. Weakness in global stock markets can only explain the severity of Bitcoin's initial crash, but not the subsequent nine-month continuous weakness.
As of July 1, 2026, Citigroup estimated that U.S. Bitcoin spot ETFs had cumulative net outflows of approximately $3.3 billion year-to-date. The bank lowered its 2026 ETF inflow forecast from $10 billion to zero and cut its 12-month Bitcoin target price to $82,000.
Institutional entry channels are fully open, but institutional investment enthusiasm has long disappeared.
Exchange data also confirms the market retreat: Coinbase's Q2 earnings report showed trading revenue of $599.2 million, a sharp decline 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 is sufficient to show that top exchanges are merely carving up a shrinking market.
CryptoSlate's mid-year market review shows that Bitcoin's price fell to $58,600 in early July, down 33% year-to-date; in June alone, spot ETF net outflows reached $4.5 billion.
Spot ETFs were supposed to break Bitcoin's dependence on overseas exchanges and native crypto traders, and this has largely been achieved. Asset managers like BlackRock and Fidelity allow investors to allocate to Bitcoin using the same accounts they use to buy index funds, bonds, and retirement products, sparing most investors the cumbersome processes of private keys, crypto wallets, and professional custodians.
But this trading mechanism also makes selling effortless. Financial advisors who once avoided Bitcoin due to cumbersome custody processes can now buy in seconds, and selling is just as easy. Institutionalization has pushed Bitcoin into competition with all liquid assets, but it has not fostered a long-term, permanent holding investment logic.
In 2026, Bitcoin's competition for capital has further deteriorated: cash and government bonds continue to generate stable returns; inflation and interest rate trends are highly uncertain, dampening enthusiasm for speculative assets; and a large amount of capital has shifted to the AI sector. Investors who already hold Bitcoin indirectly through ETFs and listed companies do not need to wait for new policy support to maintain their positions – during the bull market rally, most had already reached their asset allocation limits.
The outside world once thought that the endless flow of institutional funds was a bottomless reservoir, but the reality is a two-way trading market: investors' willingness to sell is as strong as their willingness to buy. Even if they recognize that Bitcoin's regulatory environment has greatly improved, investors still believe that prices above $100,000 are overvalued.
The Reversal of Corporate Treasury Accumulation Model
A group of digital asset treasury listed companies emerged in the market, with the original intention of providing continuous purchasing power for Bitcoin even if ordinary retail investors lose interest. These companies raise funds by issuing stocks, convertible bonds, and preferred shares, using all proceeds to buy Bitcoin; as long as the company's secondary market valuation is higher than the value of the Bitcoin it holds, the company can continue to profit. Issuing new shares does not dilute the Bitcoin holdings per share, but can instead boost the stock price, optimize financing costs, and obtain more funds to continue accumulating coins.
The core premise of this model is that investors are willing to pay a premium for the company's assets. Once the premium disappears, issuing new shares directly dilutes existing shareholders' equity, and the company still needs to repay debt and pay preferred share dividends; falling Bitcoin prices will continuously erode the company's asset base, causing the entire business logic to collapse.
Many treasury-type listed companies now have stock prices below the total value of the crypto assets they hold, and companies are no longer willing to issue new shares to maintain coin accumulation.
Strategy, the largest and most well-known representative company in the industry, perfectly demonstrates how the accumulation logic has turned into selling. From June 29 to July 5, 2026, the company sold 3,588 Bitcoin, cashing out approximately $216 million, to pay preferred share dividends and supplement dollar cash reserves. Its financial report filed with the SEC disclosed a Q2 digital asset loss of $8.32 billion, almost entirely unrealized paper losses from the decline in Bitcoin prices.
This loss does not mean the company consumed $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 such companies would indefinitely absorb market selling pressure and never become sellers. CryptoSlate's analysis of this transaction views it as a stress test of this business model that has developed over years.
The U.S. government can recognize and praise this accumulation model, and even partially replicate it through the federal strategic reserve, but it cannot interfere with normal corporate capital operations, nor can it prevent companies from facing real operational pressures such as dividend payments, rising financing costs, and the disappearance of valuation premiums.
What Real Changes Has the Policy Shift Brought?
Despite the deep market correction, the industry dividends brought by the loose policy have not disappeared with the decline in coin prices. Now, U.S.-based exchanges basically will not be shut down due to lawsuits; banks have obtained clear qualifications to provide custody and trading services; stablecoin issuers have a unified federal regulatory framework nationwide. Product development teams can plan their business based on a stable and predictable regulatory environment; crypto companies planning to enter the U.S. market no longer need to be highly vigilant against sudden regulatory crackdowns.
But the value brought by the policy dividend is hardly reflected in Bitcoin's price. The GENIUS Act mainly regulates U.S. dollar stablecoins, payment companies, and Treasury-related businesses, and does not enhance the market demand for Bitcoin or other unrelated crypto assets. Bitcoin holders do not enjoy any rights to distribute income from stablecoin reserves, issuer revenues, or payment fees.
The SEC's dismissal of lawsuits can only increase the survival probability of exchanges, not optimize product appeal; bank custody can only reduce operational risks, not force investment committees to increase Bitcoin allocation ratios; spot ETFs only simplify private key operations, not make pension funds ignore violent price fluctuations; the full entry of banks and large asset managers will also compress the trading fees that native crypto intermediaries used to earn.
The policy has truly changed only three things: industry operating licenses, institutional entry channels, and compliance risks. The past ten months of coin price declines prove that the industry has long mistakenly equated policy compliance dividends with long-term market demand and actual commercial implementation value.
Legal operating qualifications, institutional investment channels, speculative capital demand, and daily commercial implementation are not linearly progressive development stages. An asset can be fully compliant yet unwanted, easy to buy but with severe valuation bubbles, heavily sought after by hedge funds yet irrelevant to ordinary households; a public chain can circulate trillions of funds but fail to create value for its native token; stablecoins can thrive simply because users need convenient dollar settlement, not because of crypto assets.
Most investors prefer assets that generate cash flow, such as stocks, bonds, and real estate. Bitcoin lacks sustained income and inherently has a valuation shortfall: stocks rely on earnings to support market value, bonds pay periodic interest, and real estate brings rental income; Bitcoin's value entirely depends on subsequent buyers willing to pay for it, and investors view it as a scarce digital asset, a macro hedge reserve, or a combination of the three.
Friendly policies can reduce the probability of Bitcoin being completely banned, enhance holding security, and strengthen the above investment logic, but they cannot lock in price ranges. At a price of $20,000, asset allocators can see asymmetric upside opportunities; but when the price rises to $126,000, the market is crowded, there is no cash flow income, and downside risks are huge, making it difficult to attract incremental capital.
Global liquidity, real interest rates, geopolitical conflicts, market leverage, and overall risk appetite—any change in these factors can offset the policy positives released by the SEC. The government can eliminate legal uncertainty for spot ETFs, but it cannot force fund managers to abandon cash, gold, bonds, and Nvidia stocks in favor of Bitcoin ETFs.
The crypto industry has been contending with Washington for years, having a clear external opponent, and all its victories are quantifiable: hiring lobbying teams, funding political candidates, winning regulatory lawsuits, replacing tough regulatory officials, and pushing special legislation through.
But the challenges the industry will face next are far less clear-cut. Companies must prove that even if coin prices no longer rise, users will still use their products; that revenue can remain stable during bear market cycles; that asset security systems are reliable; and that balance sheets can remain healthy without relying on continuous high-priced equity issuance.
Asset management institutions need to prove that institutional capital allocation can withstand market pullbacks, rather than only following the trend after a bull market rally; Bitcoin supporters must rely on the asset's own value to convince potential buyers, and can no longer hope that the government will introduce new policies to drive the market.
Supportive policies have not made Bitcoin lose its value, nor is the past high-pressure regulation a fabrication of the industry. Washington has removed many policy constraints, but it has exposed the underlying industry problems that politicians cannot solve: weak marginal incremental demand, high market leverage, cross-asset capital competition, scarce real-world application scenarios, and investors only willing to position at low price ranges.
The crypto industry has won the argument over "whether it can enter the U.S. mainstream financial system," and now it must prove that it has irreplaceable value within the financial system. The U.S. government can allow Bitcoin to circulate, issue regulatory rules, open institutional investment channels, and establish federal reserve holdings, but it cannot decide what price the next buyer is willing to pay.
