Bitcoin The recent struggles to rally alongside U.S. stocks have sparked a wave of explanations, from concerns about Michael Saylor’s (MSTR) strategy for selling bitcoin to questions about whether institutional demand is starting to fade.
Charles Schwab, head of digital currency research and strategy, Jim Ferraioli sees a simpler explanation: Bitcoin is losing trading momentum.
“Bitcoin has been in a bear market since October,” Ferraioli said in an interview. “I don’t want to say it’s as simple as that, but it is that simple.”
The comments contrast with a market narrative that has remained largely focused on positive developments. Over the past year, cryptocurrencies have gained spot ETF approvals, attracted billions of dollars in institutional capital, and moved closer to regulatory clarity in Washington. However, despite those developments, Bitcoin has struggled to maintain the type of explosive rally that many investors were expecting.
Instead, capital has been flowing elsewhere.
“We found a fund in early February, and since then another big Wall Street firm had a successful ETF launch, so you saw this kind of return to the institutional adoption narrative,” Ferraioli said.
That bounce helped bitcoin recover from its February lows. But unlike previous crypto cycles, the rally stalled before turning into a broad speculative frenzy.
This is because cryptocurrency investors are not fundamentally driven, but rather chasing momentum, he said. In his opinion, the problem with bitcoin is not the lack of bullish news. It’s competition.
Historically, cryptocurrencies have benefited when they become the most attractive speculative opportunity on the market. When prices rise, traders pile in. When another asset class begins to attract attention, equity often follows.
“Historically, cryptocurrency investors just go wherever the momentum is,” Ferraioli said. “And the momentum for cryptocurrencies has run out at this point.”
The destinies of that capital have changed during the last year.
Some investors have shifted toward precious metals. Gold has attracted significant inflows as investors look for alternatives to both stocks and cryptocurrencies. Others have increasingly focused on artificial intelligence, which has become the dominant growth narrative in financial markets.
The rise of AI has created a new class of speculative opportunities that did not exist in previous crypto cycles. Public companies linked to artificial intelligence infrastructure, data centers and advanced computing have generated strong returns, while early IPOs of companies like OpenAI and Anthropic have become focal points for investors looking for the next growth story.
According to Ferraioli, cryptocurrency investors are also participating in that change.
“I think people who are excited about momentum are also excited about IPOs,” he said. “So some of them can be accessed as private shares on these decentralized exchanges on Hyperliquid.”
That trend is significant because it highlights how crypto-native trading infrastructure increasingly allows investors to speculate in assets beyond cryptocurrencies themselves.
Platforms like 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, that means it no longer competes solely against other cryptocurrencies.
You are competing against all the major speculative narratives in the market.
Ferraioli also downplayed concerns surrounding 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 narrative has been that they will never sell,” Ferraioli said. However, he believes the market impact of the transaction has been exaggerated. “But I don’t think [the sale] is what really drives it,” he said.
Instead, it sees the sale as a convenient narrative attached to a broader trend that was already underway.
Part of that trend may be tied to investors’ cost bases, and many ETF investors are still recovering from last year’s wild swings and see the current price as an opportunity to exit positions rather than add to them.
“I think when you get to those levels, you find people saying, ‘Hey, I got my money back, maybe I’ll check it out later,'” Ferraioli said.
That dynamic has contributed to the market feeling very different from the euphoric phases of previous cycles.
Ferraioli maintains that institutional adoption, while real, remains lower than many market participants assume. Bitcoin ETFs have expanded access to cryptocurrencies, but much of the asset class remains dominated by retail investors and momentum-driven traders.
“Again, this is primarily a retail asset,” he said.
The distinction is important because retail investors often react differently than traditional institutional allocators. Instead of creating positions based on discounted cash flow models or long-term valuation frameworks, they tend to follow trends.
That behavior helps explain why Bitcoin has struggled to capitalize on positive regulatory developments.
The cryptocurrency industry is awaiting the possible passage of the Clarity Act, a bill that many industry participants believe could provide a clearer framework for digital assets in the US. In the long term, Ferraioli believes such developments could support adoption.
However, in the short term, regulation alone may not be enough to reverse the current trend.
“There is still more demand for downside protection,” he noted elsewhere in Schwab’s market outlook, although that pressure has begun to ease in recent weeks.
Seasonality may also be contributing to the slowdown. Summer has historically been one of bitcoin’s weakest periods, as trading activity slows and investors turn their attention elsewhere.
“People know that for bitcoin summer is the weakest season,” Ferraioli said.
That leaves the market in an awkward position.
Institutional adoption is improving. Regulatory clarity is advancing. Major financial companies continue to create crypto products. However, none of those developments guarantee higher prices if investors’ attention is focused elsewhere.
“There’s no reason to shop here when there are other things you can choose from,” Ferraioli said.
For now, he maintains, the biggest challenge facing Bitcoin is not Saylor, regulation or even macroeconomics.
It’s just that investors have found something else to chase.
