Tech • IA • Crypto
How much longer will the crypto bear market last?
9.4/10TL;DR
Crypto markets are stalled not by a lack of money, but by capital flowing to AI and incomplete institutional access, even as regulatory and banking infrastructure rapidly builds.
KEY POINTS
Abundant liquidity but weak price response
Global money supply (M2) is at a historic high, yet Bitcoin remains far below its peak. Historically, these two indicators moved in tandem, but they have now diverged sharply. This suggests that the issue is not the quantity of money available in the system.
Debate over “real” liquidity
Some analysts argue that true risk-taking liquidity includes central bank balance sheets, collateral values, and refinancing capacity, not just deposits. By this broader measure, liquidity may have peaked around mid-2025 and is now slowing. However, other indicators such as the Chicago Fed Financial Conditions Index still show relatively easy financial conditions.
Capital diverted դեպի artificial intelligence
The primary constraint appears to be allocation, not availability. Major technology firms including Microsoft, Amazon, Meta, Alphabet, and Oracle are investing roughly $700 billion in AI-related infrastructure, particularly data centers. This represents the largest coordinated capital deployment in history and has drawn funds away from crypto markets.
Crypto competing with higher-return narratives
Crypto is not competing with cash but with other high-risk, high-return opportunities. AI equities and upcoming IPOs have absorbed investor appetite for volatility. As a result, crypto has lost relative attractiveness despite unchanged fundamentals.
Signs of weakening AI momentum
Early cracks are emerging in AI-driven markets. A key South Korean index tied to memory chip producers fell over 30% in one month, while SK Hynix dropped 19% despite record earnings that failed to meet expectations. Such shifts may gradually redistribute risk appetite across markets.
Diminishing impact of Bitcoin halving cycles
The traditional four-year halving cycle is losing strength. Peak returns have declined from 92x (2012) to 30x (2016), 7.9x (2020), and about 1.9x in the current cycle. The latest all-time high in March 2024 even preceded the halving, largely due to the early impact of spot Bitcoin ETFs.
Institutional access remains constrained
Large investors such as pension funds and insurers face regulatory limits. In the United States, the proposed Clarity Act aims to define whether crypto assets are securities or commodities. Despite progress, the bill remains stalled in the Senate due to political disagreements unrelated to core market structure.
Rapid expansion of financial infrastructure
Major banks are moving ahead regardless of legislative delays. Bank of America now allows 15,000 advisors to recommend Bitcoin allocations of 1–4%, while Morgan Stanley suggests 2–4% exposure and has removed client restrictions. Around 60% of the top 25 U.S. banks already offer crypto-related services.
Global regulatory frameworks emerging
Countries are formalizing crypto rules. Russia has introduced a law recognizing crypto as a tradable asset under strict central bank oversight, allowing cross-border use while restricting domestic payments. This reflects a broader trend toward institutional normalization.
Key indicators to watch
Two forward-looking signals stand out: stablecoin market capitalization, which reflects deployable capital within crypto, and ETF flows, which recently shifted from sustained outflows to early signs of inflows. These metrics may signal renewed market momentum before price moves.
CONCLUSION
Crypto’s stagnation reflects capital competition and regulatory friction rather than structural weakness, while the rapid buildout of institutional access suggests the market is positioning for a stronger future cycle.