With the advent of spot ETFs and greater institutional adoption, many thought the rollercoaster years of sharp ups and downs were over for the major digital currencies. However, the crypto market has shown some of its classic volatility over the past few months, with Bitcoin and Ethereum going from highs of $124,310 and $4,830 respectively to local lows more than 35% below these levels around late November 2025. Since then, however, the bullish energy has been building steadily, with both gaining moderately in the new year, before correcting back down slightly to their current (8 January) respective prices of $90,366 and $3,125. While it’s easy to look at Q3 prices and call a market crash, it’s important to note that, even after the recent pullbacks from ATHs, prices of the two major cryptocurrencies have roughly doubled compared to just two-and-a-half years ago.
One of the main reasons for this steady and yet seemingly endless bull market is the accelerating adoption among legacy investment firms and institutions following the launch of a range of Bitcoin ETFs in January 2024. This, coupled with a stable equities market, a potential calming of the geopolitical situation globally, and potential legislative stimulus in the form of the Clarity Act, which is under discussion in the Senate and could provide a supportive framework, could help BTC retake its ATH and push on to new heights. In this article, we’ll see how all these factors could interplay, as we wait to see what will happen to crypto in 2026.
Mode of exchange
While of course individual retail investors still make up a large portion of total crypto holders, institutions have been coming in strong ever since the approval of spot Bitcoin ETFs this time two years ago. Indeed, ETF flows have become a key barometer for BTC demand and their large-volume, regular purchasing model has brought relative stability to a previously volatile market. In 2025, BTC-focused ETFs reached $120 billion in total assets under management, with peak inflows immediately preceding market tops in August (Bitcoin) and October (Ethereum). Conversely, we’ve seen sustained net outflows during Q4, which may have contributed to sizable correction noted over this same period. But, in a development that suggests renewed institutional interest, US-based Bitcoin ETFs recorded approximately $1.2 billion in net inflows across the first two trading days of 2026. Protracted ETF outflow periods have historically aligned with local market bottoms, and this pivot back into positive territory in conjunction with the recovering Coinbase premium would thus suggest that capitulation conditions are fading. Notable examples of precisely this trend include August 2024 when BTC fell to roughly $49,000, and Trump’s April 2025 tariff tantrum, which was punctuated by a local low of $76,000. But perhaps most promising is news that Morgan Stanley has filed with the SEC to launch its own set of crypto-based ETFs, according to reports, with the legitimacy and added trust that a bank entering the digital assets space will bring, hopefully leading to even faster and more widespread adoption.
The right conditions
Assets don’t really come more risk-on than crypto. However, sensitive individual stocks and equities ETFs might be to geopolitical uncertainty and legal factors, digital currencies are even more so. It’s no coincidence that the crest of gold’s meteoric rise coincided with the decline of crypto in Q4 2025; the world has been balanced on a knife edge. But major progress in bringing tensions both in Europe and South America to an end, coupled with a sustained dovish policy stance by the Federal Reserve, which, after delivering three rate cuts already in 2025, promises even more to come this year, is likely to reinvigorate risk assets. Another key to maintaining investors’ risk appetite is a stable equities market. Despite the negative geopolitical factors and worrying labor market data, the S&P 500 managed to post steady gains throughout 2025. The lack of a major crash or rally keeps market participants confident in risk but still on the look-out for faster, more impressive gains. Then, as Ryan Yoon, senior analyst at Seoul-based Tiger Research says: “Once a certain threshold of stability is reached, investors will naturally look toward the crypto market for higher returns”. All it will take for this to occur is a spark, which could come in the form of the passage of the much anticipated Clarity Act. White House crypto czar David Sacks previously stated that “we are closer than ever” to passing it, with the Senate apparently targeting 15 January. The strong legislative foundation would help to cement in law the positive regulatory atmosphere that we’ve seen under Trump, preventing its undoing by future administrations.
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