A new reality for crypto

THE next phase of crypto could look very different from the boom years that made digital assets a mainstream investment story, with institutional money increasingly flowing into a smaller pool of established tokens, stablecoins and blockchain-based financial products rather than the wider crypto market.

At the same time, crypto exchanges are preparing for a tougher trading environment by expanding beyond digital assets, as Wall Street’s growing interest in blockchain infrastructure increasingly takes place alongside weaker liquidity in parts of the token market.

That divergence, according to a recent Bloomberg report, is forcing crypto businesses to rethink what the industry’s long-promised institutional era will actually look like.

Gracy Chen, chief executive of Bitget – the sixth-largest crypto exchange by trading volume according to CoinMarketCap – said institutional clients increasingly want to trade stocks, commodities and cryptocurrencies on the same platform, use equities as collateral and keep more of their assets in one place.

For Chen, however, diversification is also a defensive move.

“For nearly a year now, liquidity is not coming back, and I don’t see it coming back,” the Hong Kong-based executive tells Bloomberg. “That’s why we don’t want to be just a crypto exchange. I don’t want to just compete with Binance – we also consider Robinhood more of our peer.”

Her comments point to a potentially uncomfortable twist in crypto’s institutionalisation. While banks, asset managers and professional trading desks are becoming more comfortable with digital assets and blockchain infrastructure, that does not necessarily mean money will spread more evenly across the broader crypto market.

Instead, the next phase could be defined by concentration.

Higher institutional participation

Stani Kulechov, founder of crypto lending marketplace Aave, says real-world assets (RWAs) could eventually become more important on blockchains than traditional cryptoassets.

The shift is already starting to take shape as financial firms explore tokenised stocks, funds, deposits and other assets that can be traded or transferred on blockchain networks.

“We think RWAs will overgrow traditional cryptoassets (onchain) over the next three years, that’s where I think the space is going,” Kulechov says.

“We see tokenised stocks coming on chain, and that’s driving a little bit more traffic into crypto. But instead of the cryptoassets, a lot of this interest is going to go into tokenised stocks.”

Trading data from market maker Wintermute reinforces the point. Institutional counterparties accounted for 72% of its spot over-the-counter flow in the first half of 2026 (1H26), the highest proportion on record.

Yet, the increase in institutional participation has not translated into a similar explosion in the number of tokens being traded. The number of tokens traded by Wintermute’s institutional clients rose 24% between 1H24 and 1H26, compared with a 76% increase among retail clients.

Few winners, more laggards

Jasper De Maere, an over-the-counter trader at Wintermute, says institutions are becoming far more selective about where they put their money.

“With institutions, they are way more selective,” he says, adding that professional investors are gravitating towards a handful of tokens, including HYPE, which is linked to the popular derivatives exchange.

The implication for the next crypto cycle is significant. Rather than another broad rally where rising interest in bitcoin and other major tokens lifts a wide range of smaller coins, the market could become increasingly split between a few winners and a much larger group of laggards.

“It will not be a rising tide lifting all boats, which we saw in previous cycles.

“A few coins will do exceptionally well, and then there will be a large set of laggards,” De Maere says.

The growing institutional presence is also changing the market’s volatility profile. Bitcoin’s one-year annualised volatility fell to 42% in early August, from 48% a year earlier and 69% in 2022, according to Glassnode data cited by Bloomberg.

That matters because lower volatility could make crypto more attractive to institutions, but less exciting for retail traders looking for quick and outsized gains. Some retail investors have already shifted their attention towards faster-moving themes such as artificial intelligence and prediction markets.

Institutions also tend to be less willing to chase market narratives indefinitely.

“With institutions, they are way more selective,” De Maere says. “They chase narratives for a significantly shorter period of time.”

Adoption accelerating

Yet, institutional adoption of blockchain infrastructure is accelerating. Nick Ducoff, head of institutional growth at the Solana Foundation, tells Bloomberg that seven of the 29 global systemically important banks now build on Solana, up from two or three about a year ago.

Their applications include trade finance, funds and custody, suggesting that the institutional blockchain story is increasingly about financial infrastructure rather than speculative token trading.

More favourable regulation in the United States under President Donald Trump and the Genius Act, the stablecoin legislation signed into law last year, have also helped accelerate adoption.

“With the passage of the Genius Act, I point to that as the starting gun, and everyone started racing,” Ducoff says.

That could set up a markedly different crypto market heading into the next few years.

Banks and financial institutions can increase their use of blockchains, stablecoins and tokenised assets even if retail participation and liquidity in smaller cryptocurrencies remain weak.

JPMorgan Chase, for instance, uses the ethereum blockchain for tokenised deposits, allowing clients to exchange funds and post collateral more quickly.

State Street Investment Management and a partner also offer a tokenised private liquidity fund designed to provide 24-hour onchain cash management through a stablecoin on Solana.

Harder to defend

For crypto exchanges, that changing landscape is making the traditional business model harder to defend.

Bitget already generates about 20% of its average daily trading volume from non-crypto assets, up from zero a year ago, Chen says.

The exchange is part of a wider push among crypto platforms to become “everything exchanges”, allowing customers to trade stocks, commodities and digital assets under one roof.

The strategy could become increasingly important if crypto’s current downturn deepens. Chen says liquidity in altcoins has fallen sharply and that market conditions in 2026 increasingly remind her of the turmoil of 2022, when a series of crypto lenders and the FTX exchange collapsed.

“That’s the reality we’ve seen. In 2026, it does feel like 2022,” Chen says. “I feel the worst part of 2026 is probably not there yet. Things could be even worse.”

Bitcoin is also trading at roughly half its all-time high reached in October, according to the Bloomberg report, adding to the pressure on a market that had been expected to benefit from greater institutional participation.

The key variable from here may, therefore, be retail demand.

“The big question which will decide the direction is whether retail will return,” De Maere says.

For exchanges such as Bitget, the answer may determine how quickly they need to move beyond crypto.

“That’s how we can survive the current bear market,” Chen says.