ARK Invest: The Path to Institutionalization of Bitcoin

Author: David Puell, Matthew Mena

Original compilation: Luffy, Foresight News

By 2025, Bitcoin will continue to integrate into the global financial system. The launch and expansion of spot Bitcoin ETFs, the inclusion of digital asset-related publicly traded companies into mainstream stock indices, and a steadily clarifying regulatory environment are driving Bitcoin from an edge asset in the crypto industry to a new asset class worth institutional allocation.

We believe that the core theme of the current cycle is Bitcoin shifting from an “optional” new monetary technology to a strategic allocation asset for more and more investors. The following four major trends are reinforcing Bitcoin’s value proposition:

• Macroeconomic and policy environments boosting demand for scarce digital assets;
• Structural changes in ETF, corporate, and sovereign holdings;
• The relationship between Bitcoin, gold, and broader value storage systems;
• Compared to previous cycles, Bitcoin’s drawdowns and volatility are decreasing.

This article will analyze these trends one by one.

2026 Macroeconomic Background

Monetary Environment and Liquidity

After a prolonged period of monetary tightening, the macroeconomic landscape is changing: the US quantitative tightening (QT) ended last December, and the Federal Reserve’s rate cut cycle is still in its early stages. Over $10 trillion in low-yield money market funds and fixed income ETFs may soon shift toward risk assets.

Policy and Regulatory Normalization

Regulatory clarity remains a constraint for institutional adoption but also a potential catalyst. Policymakers in the US and globally are advancing frameworks to clarify digital asset regulation, custody standards, trading, and disclosure requirements, providing more guidance for institutional investors.

For example, the US CLARITY Act proposes to have the Commodity Futures Trading Commission (CFTC) regulate digital commodities, while the Securities and Exchange Commission (SEC) oversees digital securities. This could reduce compliance uncertainties for related companies and institutions. The bill provides a compliance pathway across the digital asset lifecycle and introduces a standardized “maturity test” that allows tokens to transition from SEC to CFTC regulation after decentralization. Additionally, the dual registration system for broker-dealers reduces the legal vacuum that has long pushed digital asset companies overseas.

The US government is also taking targeted actions on Bitcoin from multiple levels:

• Legislators and industry leaders discussing including Bitcoin in national reserves;
• Regulating the handling of confiscated Bitcoin controlled by the federal government;
• States like Texas adopting Bitcoin and incorporating it into reserve assets.

Structural Demand: ETFs and Digital Asset Reserves

ETFs as New Structural Buyers

The scaling of spot Bitcoin ETFs has fundamentally changed the market supply and demand structure. By 2025, the Bitcoin held by US spot Bitcoin ETFs and digital asset funds (DAT) reached 1.2 times the total of newly mined and dormant coins re-entering circulation. By the end of 2025, ETF and DAT holdings accounted for over 12% of Bitcoin’s total circulating supply.

Despite demand outpacing supply growth, Bitcoin prices still declined, mainly due to external factors: the large liquidation event on October 10 last year, market fears of a four-year cycle top, and negative sentiment around quantum computing threatening Bitcoin’s cryptography.

2025: Comparison of new circulating supply of Bitcoin and institutional demand, sources: ARK Investment Management LLC and 21Shares

In Q4, Morgan Stanley and Vanguard began including Bitcoin in their investment platforms:

• Morgan Stanley opened compliant Bitcoin products, including spot ETFs, to clients;
• Vanguard, which had previously rejected cryptocurrencies and commodities for years, now also offers third-party Bitcoin ETFs.

As ETFs mature, they will increasingly serve as a structural bridge between Bitcoin markets and traditional capital.

Corporate Reserves Accumulation

Corporate adoption of Bitcoin has expanded from early pioneers to a broader range. Companies like Coinbase and Block (formerly Square) are included in the S&P 500 and Nasdaq 100, indirectly allocating Bitcoin in mainstream portfolios.

Strategy (formerly MicroStrategy), as a representative of digital asset funds (DAT), has built a large Bitcoin holding, accounting for 3.5% of the total supply. By the end of January 2026, various Bitcoin DAT companies collectively held over 1.1 million BTC, representing 5.7% of the total supply, worth approximately $89.9 billion, mainly held by long-term holders.

Sovereign and Strategic Holdings

In 2025, after El Salvador, the Trump administration used confiscated Bitcoin to establish the US Strategic Bitcoin Reserve (SBR). Currently, this reserve holds about 325,437 BTC, representing 1.6% of the total supply, valued at $25.6 billion.

Bitcoin vs. Gold: A Comparison of Value Storage Assets

Gold as a Precursor, Bitcoin Following?

In recent years, gold and Bitcoin have responded differently to macro narratives such as currency devaluation, real negative interest rates, and geopolitical risks. In 2025, driven by inflation, fiat devaluation, and geopolitical concerns, gold prices surged 64.7%, while Bitcoin declined 6.2%, showing a clear divergence.

But this is not the first time in history:

• In 2016 and 2019, gold outperformed Bitcoin during price rallies;
• After the COVID-19 pandemic shock in early 2020, gold led the rebound, followed by a sharp rise in Bitcoin amid liquidity injections from fiscal and monetary policies.

Historically, Bitcoin is a high-beta, digitally native gold-like macro asset.

Bitcoin vs. gold price comparison, sources: ARK Investment Management LLC and 21Shares

ETF Size: Bitcoin’s Growth Outpaces Gold

From cumulative ETF fund flows, Bitcoin spot ETFs took less than two years to surpass the over 15-year growth trajectory of gold ETFs. This indicates that financial advisors, institutions, and retail investors increasingly recognize Bitcoin as a store of value, diversification tool, and new asset class.

Changes in assets under management (AUM) for spot Bitcoin ETFs and gold ETFs, sources: ARK Investment Management LLC and 21Shares

Notably, during the current market cycle since 2020, Bitcoin and gold returns have remained weakly correlated. However, gold may still serve as a leading indicator for Bitcoin.

Correlation matrix of mainstream assets

Market Structure and Investor Behavior

Drawdowns, Volatility, and Market Maturity

Bitcoin’s volatility remains high, but its drawdowns are gradually narrowing. In previous cycles, peak-to-trough declines often exceeded 70-80%. In the current cycle, since 2022, as of February 8, 2026, Bitcoin’s price has never fallen more than about 50% from its all-time high (see chart below), indicating increasing market participation and liquidity.

Long-term Holding Outperforms Timing

Glassnode data shows that from 2020 to 2025, even the “worst investors” who bought $1,000 at the peak each year saw their $6,000 principal grow to about $9,660 by the end of 2025, a return of approximately 61%. By the end of January 2026, they still had about 45% gains; even after the early February correction, they still had about 29% gains.

The conclusion is clear: since 2020, holding period and position management have been far more important than timing.

Current Strategic Narrative for Bitcoin

By 2026, Bitcoin’s core narrative is no longer about “survival,” but about what role it plays in diversified portfolios. Bitcoin is:

• A scarce non-sovereign asset amid global monetary policies, fiscal deficits, and trade tensions;
• A high-beta extension of traditional value storage assets like gold;
• A globally accessible, highly liquid macro asset that can be engaged through compliant tools.

Long-term holders such as ETFs, corporate treasuries, and sovereign institutions have absorbed significant new Bitcoin holdings, and improved regulation and infrastructure further open participation channels. Historical data shows low correlation between Bitcoin and assets like gold, and with decreasing volatility and drawdowns in this cycle, adding Bitcoin to a portfolio can enhance risk-adjusted returns.

We believe that by 2026, investors’ questions will no longer be “whether to allocate,” but “how much to allocate and through what tools.”