ETF Breakthrough? Wintermute Warns: Market Recovery Requires Three Key Catalysts

The cryptocurrency market is undergoing unprecedented structural changes. The traditional four-year cycle pattern has become invalid, the market is highly centralized, and capital flows like a funnel toward a few leading assets.

In 2025, the expected bull market failed to materialize, and the trading behaviors of institutions and retail investors have undergone fundamental changes. Bitcoin and Ethereum now dominate the majority of market liquidity, while the broader market struggles to keep up.

01 Deep Causes of Market Segmentation

In 2025, the digital asset market has experienced an unprecedented structural differentiation. According to Wintermute’s latest report, the cryptocurrency market is transitioning from a market driven by speculation with obvious cyclical fluctuations to a mature market shaped by capital structure, product design, and macroeconomic factors.

The market’s capital flow mechanism has already changed. In the past, the cryptocurrency market followed a clear four-year cycle: Bitcoin halving brought liquidity influx, capital gradually flowed into high-beta assets, and prices rose accordingly. However, this traditional pattern was broken in 2025.

Instead, an extremely centralized market structure has emerged. Wintermute’s OTC trading data shows that Bitcoin and Ethereum together account for half of the nominal trading volume, with funds highly concentrated in a few large crypto assets.

02 Transformation of Retail and Institutional Behaviors

The behavior patterns of institutional investors are undergoing profound changes. Although institutional participation continues to increase, their trading strategies have become more cautious and rational. They no longer blindly chase upward trends but adopt strategic trading, locking in profits in advance and maintaining high liquidity.

Retail investors are showing similar trends. On October 11, 2025, after $19 billion worth of leveraged positions were wiped out, retail funds quickly flowed back into Bitcoin and Ethereum.

This phenomenon marks the first consensus between retail and institutional investors in liquidity and risk resistance in years. Historically, extreme volatility in cryptocurrencies has often been exacerbated by divergent operations between institutions and retail investors. The current alignment of interests, however, has brought relative stability.

03 Shortening and Differentiation of Trading Cycles

The changes in the altcoin market are particularly evident. In 2024, the average rebound cycle for altcoins lasted 60 days, but in 2025, this number sharply dropped to just 20 days.

Pricing for different tokens is showing clear divergence. A few top assets absorbed the vast majority of new funds, while the broader market struggled. Behind this centralization phenomenon, the influence of ETFs cannot be ignored.

These regulated products have brought in substantial new funds to the crypto market but also created a “closed garden”—they mainly invest in approved assets, making it difficult to transmit liquidity to the wider market.

04 Three Recovery Paths in Wintermute’s Report

Wintermute’s report explicitly states that to break through the current limitations of top assets and achieve a full recovery, at least one of the following three conditions must occur:

ETFs and digital asset trust funds must expand their investment scope. The current ETF structure restricts institutional funds to flow into only a few assets. When new cryptocurrencies (such as SOL and XRP) receive ETF approval, a large amount of liquidity will be released.

Secondly, leading assets like BTC and ETH need to lead strongly, creating a wealth effect that spills over into the broader market. As seen in the 2024 market performance, rising prices of mainstream crypto assets can boost overall market sentiment.

Retail investors’ attention also needs to shift back from traditional stock markets to the crypto market. In 2025, retail interest has clearly shifted toward traditional fields like artificial intelligence, rare earths, and quantum computing. If this trend reverses, it will bring new funds and stablecoin issuance to cryptocurrencies.

05 New Market Structure and Investment Logic

Activity in the derivatives market indicates a state of relative market stability. Wintermute’s OTC options trading is mainly driven by yield strategies and hedging strategies, rather than pure speculative upward movements.

Investors are selling volatility, managing risk exposure, and waiting to profit. This behavior is driving significant changes in market risk conditions. We are seeing for the first time a sustained demand for downside risk insurance and a notable decline in expectations for sharp price swings.

Bitcoin’s volatility surface increasingly resembles that of mature stock indices like the S&P 500, rather than early speculative assets. This shift suggests that the crypto market is accelerating its institutionalization and normalization process.

06 Market Observation and Response on Gate Platform

On the Gate exchange, trading patterns also reflect this structural change. Institutional investors are becoming more cautious, and retail investors are beginning to adopt similar risk management strategies. This consistency may indicate that the market has entered a new development phase.

The crypto market is more institutionalized and regulated than ever before, with more substantial funds. The next rally will be calmer and more selective.

For traders active on the Gate platform, understanding capital flows and the impact of structural changes will be key to formulating investment strategies for 2026. Investors waiting for traditional cycles to return may need to adapt to new market logic.

Future Outlook

Bitcoin’s volatility surface is increasingly approaching that of the S&P 500 index, no longer exhibiting characteristics of early speculative assets. In real-time data from the Gate exchange, Bitcoin’s price on January 20, 2026, remains around $91,000, with a daily decline of 1.77%. This relative stability reveals that the crypto market is moving toward a new phase of institutionalization and regulation.

The market’s differentiation pattern requires a shift in investment logic. On the Gate platform, savvy investors are no longer seeking broad bets but are precisely analyzing capital flows and structural changes to capture the next more selective yet equally lucrative opportunities.