Bitcoin’s recent struggles to grow in tandem with U.S. stocks has sparked a flurry of explanations, ranging from concerns about Michael Saylor’s (MSTR) Bitcoin sales strategy to questions about whether institutional demand is starting to fade.
Charles Schwab Director of Digital Currency Research and Strategy Jim Ferraioli sees a simpler explanation: Bitcoin is losing commercial momentum.
“Bitcoin has been in a bear market since October,” Ferraioli said in an interview. “I don’t want to say it’s that simple, but it’s pretty simple than that.”
These comments contrast with market discourse which remains largely focused on positive developments. Over the past year, crypto has gained approval for spot ETFs, attracted billions of dollars in institutional capital and moved closer to regulatory clarity in Washington. Yet despite these developments, Bitcoin has struggled to sustain the type of explosive rally many investors expected.
Instead, capital flowed elsewhere.
“We found a bottom in early February, and since then another major Wall Street firm has successfully launched an ETF, and so you’ve seen this kind of return to the institutional adoption narrative,” Ferraioli said.
This rebound helped Bitcoin recover from its February lows. But unlike previous crypto cycles, the rally stalled before turning into a vast speculative frenzy.
This is because crypto investors are not fundamentally motivated, but are looking for momentum, he said. According to him, the problem with Bitcoin is not the lack of optimistic news. It’s competition.
Historically, crypto has benefited when it became the most attractive speculative opportunity in the market. When prices rise, traders rush. When another asset class begins to attract attention, capital often follows.
“Historically, crypto investors go where the momentum is,” Ferraioli said. “And the momentum is no longer tied to crypto at the moment.”
Destinations in this capital have changed over the past year.
Some investors have turned to precious metals. Gold has attracted significant inflows as investors seek alternatives to stocks and cryptocurrencies. Others are increasingly focusing on artificial intelligence, which has become the dominant growth narrative in financial markets.
The AI boom has created a new class of speculative opportunities that did not exist in previous crypto cycles. Public companies related to AI infrastructure, data centers and advanced computing have generated strong returns, while anticipated IPOs from companies such as OpenAI and Anthropic have become focal points for investors looking for the next growth story.
According to Ferraioli, crypto investors are also part of this shift.
“I think people who are excited about momentum are also excited about IPOs,” he said. “Then you can access some of them private shares on these decentralized exchanges on Hyperliquide.”
This trend is important because it highlights how crypto-native trading infrastructure is increasingly allowing investors to speculate in assets beyond cryptocurrencies themselves.
Platforms such as Hyperliquid (HYPE) have introduced perpetual contracts tied to private companies, commodities, and other non-crypto assets, giving traders new places to deploy capital.
For bitcoin, this means that it no longer competes only with other cryptocurrencies.
It competes with all the major speculative narratives in the market.
Ferraioli also downplayed concerns over Strategy’s recent sale of 32 bitcoins, a transaction that sparked debate among investors due to Saylor’s long-standing reputation as one of bitcoin’s most committed advocates.
“The talk is they’ll never sell,” Ferraioli said. However, he believes that the impact of the transaction itself on the market has been overestimated. “But I don’t think [the sale] that’s what really motivates him,” he said.
Instead, he views the sale as a convenient narrative attached to a larger trend already underway.
Part of this trend may be related to investor cost bases and many ETF investors are still recovering from the sharp swings of the past year and see the current price level as an opportunity to exit their positions rather than add to them.
“I think when you get to those levels, you get people saying, ‘Hey, I got my money back, maybe I’ll come back to it later,'” Ferraioli said.
This dynamic has helped create a market very different from the euphoric phases of previous cycles.
Ferraioli argues that institutional adoption, while real, remains lower than many market participants believe. Bitcoin ETFs have expanded access to crypto, but much of the asset class remains dominated by retail investors and momentum-driven traders.
“Again, this is first and foremost a commercial asset,” he said.
The distinction is important because retail investors often react differently from traditional institutional allocators. Rather than building positions based on discounted cash flow models or long-term framework valuations, they tend to follow trends.
This behavior partly explains why Bitcoin has struggled to take advantage of positive regulatory developments.
The crypto industry is awaiting the potential passage of the Clarity Act, a bill that many in the industry believe could provide a clearer framework for digital assets in the United States. Longer term, Ferraioli believes such developments could support adoption.
In the short term, however, regulation alone may not be enough to reverse the current trend.
“There is even more demand for downside protection,” he noted elsewhere in Schwab’s Market Outlook, although that pressure has started to ease in recent weeks.
Seasonality can also contribute to the slowdown. Summer has historically been one of Bitcoin’s weakest periods as trading activity wanes and investors divert their attention elsewhere.
“People know that for bitcoin, summer is the weakest time,” Ferraioli said.
This leaves the market in a delicate position.
Institutional adoption is improving. Regulatory clarity is progressing. Large financial companies continue to create crypto products. Yet none of these developments guarantee higher prices if investors’ attention is elsewhere.
“There’s no reason to buy here when there are other things you can choose from,” Ferraioli said.
For now, he argues, the biggest challenge facing Bitcoin isn’t Saylor, regulation or even macroeconomics.
This is because investors have found something else to pursue.
