The US policy has given full green light, why is Bitcoin still in a bear market quagmire?

According to Woofun AI, the launch of the Bitcoin Spot ETF was seen as a turning point for the industry. The White House and Trump administration actively promoted the US to become the center of the global crypto industry, but this series of favorable policies did not translate into price support. Instead, the market has fallen into a deep divergence: the policy green light is in full swing, yet the currency price continues to be under pressure. This break between macro narratives and micro prices reveals a huge gap between improving the compliance environment and actual market demand.

The passage of time clearly portrays this gap. Bitcoin hit an all-time high of $126,000 on October 6, 2025, when the market was immersed in the illusion of institutional transformation. However, by early August 2026, the price had dropped to around $62,600, less than half of its peak. Over the past ten months, although the supervisory authorities have not applied any further pressure or even continued to introduce support policies, the unilateral downward trend in currency prices shows that removing legal barriers is not the same as automatically injecting liquidity. The exhaustion of market demand has made previously optimistic expectations pale and weak.

Looking back at the previous cycle, the crypto industry struggled under high-pressure regulation dominated by lawsuits. The SEC's enforcement approach lacks mature written regulatory support, leading to high escrow costs and stablecoins to lack federal regulatory support. Businesses face huge uncertainty: a token could be in circulation for several years, then suddenly defined by the SEC as an unregistered security.

In this environment, companies are unable to properly plan recruitment, banking cooperation, or debt risk. Asset management institutions are unwilling to explain such enforcement risks to investment committees, and banks refuse to develop financial products that could be held accountable. In a petition filed in 2022, Coinbase stated that the current securities regulatory framework is incapable of adapting to the digital asset market; the rest of the business executives warned that strict regulations are forcing talent, capital, and orders to flow overseas. Although the rhetoric of industry lobbyists is biased, their core appeal is reasonable: high-pressure supervision brings extremely high operating costs and inhibits industry activity.

Washington's policy stance was then dramatically reversed. Following Trump's return to the presidency, the regulatory landscape immediately changed. An executive order signed in January 2025 recognizes the legal use of public chains and stablecoins, and establishes a presidential task force to establish a regulatory framework centered on the dominance of the US digital asset industry. In March of the same year, a second executive order introduced a Bitcoin strategic reserve mechanism, stipulating that the federal government will no longer regularly auction confiscated bitcoins, but instead keep them uniformly, and instruct officials to study plans to increase holdings without increasing financial burdens.

This shift marks Bitcoin's transformation from being accused of being a money launderer to a strategic asset receiving official compliance status.

The specific implementation of regulations further confirms this trend. The SEC set up a special working group on crypto assets to undo a number of lawsuits from the previous team. In February 2025, the lawsuit against Coinbase was dismissed, and all subsequent prosecution procedures against companies such as Kraken, Consensys, Cumberland, and Binance were terminated. As of April 2026, the SEC publicly stated that it had dropped seven crypto industry lawsuits. Congress signed the GENIUS Act into effect in July 2025, which establishes a full set of regulatory requirements for reserves, operating licenses, and information disclosure for payment stablecoins. Furthermore, the Federal Reserve has lifted special reporting obligations for banks to carry out crypto business, and the Monetary Supervisory Service has made it clear that banks across the US can provide customers with crypto asset custody and trading services. Although the Bitcoin Spot ETF was approved in January 2024 and the comprehensive crypto bill is still pending in the Senate, the industry already has a moderate administration, relaxed enforcement, and smooth channels for banking cooperation.

However, policy dividends did not translate into capital increases; on the contrary, market funding continued to deteriorate. Within four days after Bitcoin hit an all-time high on October 6, 2025, global macro risk shocks compounded high leverage, resulting in over $19 billion of positions being forcibly closed in just 24 hours from October 10 to 11. The weakening of global stock markets explains the severity of the first round of sharp declines, but it cannot explain the continued weakness for the next nine months. As of July 1, 2026, Citigroup estimated the cumulative net outflow of the US Bitcoin Spot ETF during the year was approximately $3.3 billion. The bank lowered its 2026 ETF inflow forecast from $10 billion to 0, while lowering the 12-month price target for Bitcoin to $82,000. Institutional entry channels are unhindered, but investment enthusiasm has long since subsided.

Exchange data further confirmed the declining trend in the market. According to the second-quarter earnings report released by Coinbase, transaction revenue was US$599.2 million, down sharply from US$764.3 million in the same period last year; monthly trading users fell from 8.7 million to 7.6 million, and the company recorded a net loss of US$359.5 million. Although Coinbase has maintained its share of global transactions by expanding stablecoins, derivatives and other businesses, this only shows that leading exchanges are sharing their stock in a shrinking market.

According to the CryptoSlate mid-year market review, the price of Bitcoin fell to $58,600 in early July, a decrease of 33% during the year; in June alone, the net outflow of funds from spot ETFs reached $4.5 billion. Although asset management institutions such as BlackRock and Fidelity have simplified the allocation process so that investors can use the same account to trade bitcoins, this mechanism also makes the selling operation unimpeded. Institutionalization did not spawn the logic of long-term holding; on the contrary, it exposed Bitcoin to competition with other liquid assets.

The reversal of the corporate treasury increase model has become a landmark event for the deepening bear market. As the largest and most well-known representative enterprise in the industry, Strategy's operating logic shifts from hoarding coins to selling. From June 29 to July 5, 2026, the company sold 3,588 bitcoins and cashed out approximately US$216 million to pay out preferred stock dividends and replenish cash reserves in US dollars. The financial report submitted to the SEC revealed that digital assets lost $8.32 billion in the second quarter, almost all of which were unrealized book losses due to falling Bitcoin prices. This sell-off broke the consensus that treasury companies could indefinitely bear market pressure. When the stock price falls below the value of assets held, issuing additional new shares will dilute shareholders' equity. Companies face real pressure from dividend payments and rising financing costs, and the business logic of hoarding coins collapses.

Data compiled by Woofun AI shows that after the valuation premium disappeared, such companies were forced to return to normal capital operation logic and become net sellers in the market.

The limitation of policy dividends is that compliance does not equal demand and lacks cash flow support. The GENIUS Act mainly regulates US dollar stablecoins, payment companies, and treasury bond-related businesses, and has not boosted market demand for Bitcoin. Bitcoin holders do not have the right to distribute stablecoin reserve income or payment fees. The SEC's withdrawal of the lawsuit only increases the probability of the exchange's survival, bank escrow only reduces operational risks, and spot ETFs only simplify private key operations. These measures cannot force investment committees to increase allocation ratios, nor can pension funds ignore currency price fluctuations. When the price is at $20,000, asset allocators can see asymmetric upward opportunities; however, when the price rises to $126,000, market positions are congested and there is no cash flow return, so the downside risk is huge, making it difficult to attract incremental capital. Investors prefer Nvidia stocks, bonds, or real estate that generate cash flow. The value of Bitcoin depends entirely on subsequent buyers' willingness to pay, and there are naturally valuation shortcomings.

The crypto industry has won the debate to enter the mainstream financial system in the US, but the next step is to prove its irreplaceable value within the system. Washington lifted a large number of policy restrictions, yet revealed the underlying problems that politicians could not solve: weak marginal incremental demand, high market leverage, intense competition for cross-asset capital, and a lack of practical application scenarios. The US government can allow Bitcoin to circulate, introduce regulatory rules, open institutional investment channels, and set up federal reserve positions, but it cannot decide how much the next buyer is willing to bid. Shifting from game regulation to proving intrinsic value will be a new and more serious challenge facing the industry.