Bitcoin market observers believe that the recent price slump may actually reflect the asset’s wider adoption by institutions, which still don’t see it as a risk-off asset.
It’s been rough out there for crypto in recent months. Since October, when Bitcoin’s price reached a high of over $120,000, BTC has been gradually sliding. In recent weeks, it dropped sharply, down over 25% on the month.
Amid the sell-off, market observers have been looking for explanations. Bitwise chief investment officer Matt Hougan attributed the fall to the notorious four-year cycles that have previously defined crypto market price swings.
Others, including one US Federal Reserve governor, claim that the recent price movements show that institutions are risk-averse and that Bitcoin itself hasn’t reached the status of digital gold — yet.
Bitcoin still seen as risky, “not digital gold”
Institutional interest in Bitcoin and crypto could be one reason for the recent sell-off. While major financial institutions have lots of money to pour into the crypto market, their appetite for risk is much lower than retail investors, and Bitcoin is still broadly seen as a risky asset.
Chris Waller, a governor of the United States Federal Reserve, spoke to this effect at a recent monetary policy conference on Monday. He said that much of the “euphoria” around crypto that accompanied the new administration of President Donald Trump is now fading.
“I think there was a lot of sell-off just because firms that got into it from mainstream finance had to adjust their risk positions.”
These sentiments were echoed by Galaxy Digital CEO Mike Novogratz on Tuesday, who said in an interview with CNBC that the crypto industry has brought in “institutions where people have a different risk tolerance.”
“Retail people don’t get into crypto because they want to make 11% annualized … They get in because they want to make 30 to one, eight to one, 10 to one.”
Crypto asset manager Grayscale noted in a report that recent Bitcoin price action more closely correlates to software stocks with high enterprise values than to historically stable assets like gold. The investment company stated that short-term price movements have not been tightly correlated with gold or other precious metals.
Bloomberg commodity strategist Mike McGlone, also a noted Bitcoin bear, claimed that Bitcoin is still highly speculative. “[Bitcoin] has proven it’s neither digital gold nor leveraged beta,” he said, adding, “It’s a highly speculative [number]-on-the-screen tracking nothing with unlimited competition.”
Grayscale remained more optimistic about Bitcoin’s long-term prospects. “The network will likely continue operating well beyond our lifetimes and the asset may retain its value in real terms … in a wide range of outcomes for the economy and society,” it said.
The company also highlighted the central role institutions will have in the future success of the asset, which it noted was dependent on regulatory clarity, something the US hasn’t yet achieved.
Lack of progress on CLARITY signals risk
The CLARITY Act, which is currently under debate in the US Senate, would overhaul how crypto is regulated in the country, from the agencies that oversee rules for decentralized finance (DeFi).
The bill has stalled for weeks as crypto bigwigs like Coinbase and the bank lobby are at loggerheads over stablecoin interest: a core aspect of the exchange’s business model that banks feel could threaten financial stability.
Related: US crypto market structure bill in limbo as industry pulls support
Failure for Congress to deliver quickly on a crypto market structure bill has added to this insecurity, according to Waller. “The lack of passing of the CLARITY Act I think has kind of put people off on this,” he said.
Novogratz also emphasized the effect the bill could have on markets. He said that both Democrats and Republicans want to pass the bill and that “we need it for spirit back in the crypto market.”
Grayscale underscored the importance of CLARITY and the GENIUS Act in its report, the latter of which passed in July 2025. It stated that “improving regulatory clarity for the crypto industry is a structural trend much bigger than one piece of legislation.”
More favorable regulations will drive an increase in use cases in “stablecoins, tokenized assets, and other applications of public blockchain technology,” which in turn will “drive value to blockchain networks and their native tokens.”
High-level talks to clear the roadblocks on CLARITY are currently underway. On Tuesday, executives from the crypto and banking industries met at the White House for another closed-door meeting.
Ripple legal chief Stuart Alderoty said, “Compromise is in the air. Clear, bipartisan momentum remains behind sensible crypto market structure legislation.”
Meanwhile, analysts debate just how low the Bitcoin bear market can go. Kaiko Research shared a research note with Cointelegraph, which claimed that the $60,000 mark could be a “halfway point.”
“Analysis of on-chain metrics and comparative performance across tokens reveals a market approaching critical technical support levels that will determine whether the four-year cycle framework remains intact,” Kaiko said.
McGlone said that $60,000 is just a “speedbump on the way back down” to $10,000, citing a number of reasons. These include interest in crypto supposedly shifting from digital assets to stablecoins and the likelihood that “cheer-leader and chief, President Trump, will be a lame duck this time next year.”
A lame-duck president who is also pro-crypto may find it difficult to effect the change they want in Congress. It remains to be seen whether crypto will secure the regulatory clarity it wants for institutions to fully jump in.
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