Bitcoin (BTC) momentum reversed sharply in the fourth quarter. Analysts had expected Bitcoin to hit new all-time highs, but many doubt whether Bitcoin will even be able to regain its previous highs. Forecasts have been revised downward due to weak business results.
This economic downturn occurred despite a supportive macro environment. Demand appears to be cooling, market forces are weakening, and confidence is eroding. So what has changed? BeInCrypto spoke with Ryan Chow, co-founder of Solv Protocol, to unpack the changes in investor behavior and explore what Bitcoin will need to win in 2026.
How Bitcoin attracted and lost demand from institutional investors in 2025
Historically, the fourth quarter has been Bitcoin’s strongest period, with an average return of 77.26%. Expectations for 2025 have become even more ambitious as institutional adoption accelerates and more publicly traded companies add Bitcoin to their reserves.
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Instead, the market reversed course. Bitcoin is down 20.69% so far in the fourth quarter, bucking its previous strongest period.
According to Chow, early 2025 was defined by onboarding within the organization.
“Spot ETFs, ETPs, and new mandates created an access shock, financial institutions simply set their baseline Bitcoin allocations appropriately, and mechanical inflows drove up prices,” he said.
But by late 2025, the landscape had changed. Chou revealed that structural buyers have already built positions, forcing Bitcoin to compete directly with rising real yields.
As cryptocurrencies stopped hitting new highs, chief investment officers began to question the rationale for holding non-yielding assets, such as government bills, corporate bonds, and even AI-driven stocks, when they could earn money by simply staying invested.
“I think the market is finally facing a truth that has been clear for a long time: Passive holding has reached its limit. Retailers are diversifying, corporations are stopping accumulation, and financial institutions are pulling back. This time it is not because they have lost faith in Bitcoin, but rather that the current market design does not justify large allocations in a high interest rate regime,” Chow added.
The executive also emphasized that the Bitcoin market structure is changing. After the halving of ETFs and trading, Bitcoin moved into crowded macro positions. He noted that the asset has moved from a structural repricing phase to a carry-and-basis environment and is now dominated by professional traders.
The simple theory that “ETF plus halving will increase the numbers” has effectively come to an end. He said the next phase of implementation will be driven by proven practicality and risk-adjusted yield. He told BeInCrypto:
“The first half of 2025 was about access, with everyone rushing to secure baseline Bitcoin exposure. The second half was about opportunity cost, and now Bitcoin has to earn its place in portfolios versus assets you actually pay to hold.”
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Bitcoin, also known as digital gold, has long been touted as an inflation hedge. Chow acknowledged that the asset is likely to maintain its identity as a store of value. However, he stressed that this narrative alone is no longer enough for institutional investors.
Experts reveal Bitcoin’s key to taking back financial institutions in 2026
Chow warned that markets may be significantly underestimating the scale of macroeconomic changes in 2026. He argued that unless Bitcoin evolves into a form of productive capital, it will remain a cyclical, liquidity-dependent asset.
In that scenario, institutions would view and treat it as just that, rather than as a strategic long-term allocation.
“Bitcoin can no longer win on narrative alone. If it doesn’t earn yield, it will be structurally discounted. The volatility we’re seeing now is the market forcing Bitcoin to grow,” he said.
So what are the safe, regulated yield products that will revive financial institutions in 2026? Chau pointed out that the real sweet spot lies in regulated cash-plus-Bitcoin strategies that resemble traditional investment products, featuring clear legal packaging, audited reserves, and easy-to-understand risk profiles.
He outlined three categories.
Bitcoin-backed cash-plus fund: BTC is placed in eligible custody and deployed in an on-chain Treasury bill or repo strategy, targeting 2-4% incremental yield. Overcollateralized BTC Loans and Repos: A regulated means of lending to quality borrowers using Bitcoin as collateral. On-chain monitoring, conservative LTV, and bankruptcy-insulated structure support this. Overlay of outcome-defined options: Strategies such as covered calls built into familiar regulatory frameworks such as UCITS and 40-Act vehicles. Sponsored Sponsored
In all of this, some requirements remain non-negotiable. These include regulated custodians, segregated accounts, proof of reserves, and compatibility with existing institutional custody infrastructure.
“Products that take back financial institutions are not uncommon. They are things like Bitcoin-backed cash-plus funds, repo markets, pay-as-you-go strategies, familiar wrappers, familiar risk management, only internally powered by Bitcoin,” Chow argued.
He further emphasized that financial institutions do not need a 20% DeFi APY, which is often a red flag. The 2-5% annual net return achieved through a transparent collateral strategy is enough to transform Bitcoin from a “nice to have” to a “core reserve asset.”
“Bitcoin doesn’t need to become a high-yield product to remain relevant; it just needs to move from zero percent to a conservative and transparent ‘cash-plus’ profile for CIOs to stop treating Bitcoin as dead capital,” the Solve co-founder told BeInCrypto.
What does the actual Bitcoin yield look like?
Chow elaborated that Bitcoin’s transformation into productive capital will move it from a static gold bar to high-quality collateral that can fund government bills, credit, and multiple financing vehicles. In this model, companies park their BTC in a regulated on-chain vault and receive a yield-bearing claim in return, maintaining clear line-of-sight to the underlying assets.
Bitcoin also serves as collateral for repo markets, margin for derivatives, and backing for structured notes, supporting both on-chain investment strategies and off-chain working capital needs.
As a result, Bitcoin has become a multi-purpose product that functions simultaneously as a reserve asset, a funding asset, and a yield-producing asset. This mirrors the function currently performed by the Treasury, but operates within a global 24/7 programmable environment.
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“If we get this right, financial institutions will talk less about ‘holding Bitcoin’ and more about ‘funding a portfolio with Bitcoin.’ This becomes a neutral collateral that secretly provides T-bills, credit, and liquidity in both traditional and on-chain markets,” Chow commented.
Institutions seek yield: Can Bitcoin provide yield without compromising its principles?
While the applications are very attractive, the question arises whether Bitcoin can support regulated, risk-adjusted yields at scale without compromising its fundamental principles.
According to Chow, the answer is “yes” if the market respects Bitcoin’s hierarchy.
“The base layer remains conservative, and yields and regulations reside in the upper layers with strong bridges and transparency standards. Bitcoin L1 remains simple and decentralized, but the production layer resides on the L2, sidechain, or RWA chain, where wrapped Bitcoins interact with tokenized treasuries and credits,” he said.
The executive acknowledged that some technical challenges need to be addressed. He emphasized that the ecosystem needs to evolve from reliable multisig setups to institutional-level bridging. In addition, a wrapper supporting standardized 1:1 needs to be established and a real-time risk oracle needs to be developed.
“The ideological challenge is even more difficult. After the collapse of CeFi, skepticism runs deep. The bridge is radical transparency, on-chain proof of reserves, disclosed obligations, and no hidden leverage. Importantly, productive Bitcoin remains an option. “We need to build a disciplined financial layer on top of it that institutions and cypherpunks can rely on,” the executive elaborated.
In the end, Chow’s message is clear. Bitcoin’s next phase will be defined not by narrative or speculation, but by disciplined financial engineering. If the industry can achieve a structure with transparent and regulated yields without compromising Bitcoin’s core principles, financial institutions will return as long-term allocators rather than momentum traders.
The path to 2026 demonstrates the practicality, reliability, and ability of Bitcoin to compete in a world where capital demands productivity.
