In 2025, Bitcoin continued its integration into the global financial system. Following the launch and growth of spot Bitcoin ETFs in 2024 and 2025, the inclusion of publicly traded companies with digital asset exposure in major equity indices, and ongoing regulatory clarification, Bitcoin is transitioning from the "crypto fringe" towards a new asset class that we believe merits inclusion in institutional investment allocations. We believe the core theme of the current cycle is Bitcoin's shift from an "optional" novel monetary technology to a strategic allocation for a growing number of investors. Four major trends are strengthening Bitcoin's value proposition: 1. The macro and policy backdrop driving demand for scarce digital assets. 2. Structural holding trends by ETFs, corporations, and sovereign entities. 3. Bitcoin's relationship with gold and the broader store-of-value ecosystem. 4. Evidence of declining drawdowns and volatility compared to previous cycles. This article elaborates on these trends. **The 2026 Macro Backdrop: Monetary Conditions and Liquidity** The macro environment is shifting after a period of prolonged tight monetary policy: the U.S. quantitative tightening (QT) program ended last December, the Federal Reserve's rate-cutting cycle remains in its early stages, and over $10 trillion in low-yielding money market and fixed-income ETFs may be poised to rotate into risk assets. **Policy and Regulatory Normalization** Regulatory clarity remains both a limiting factor and a potential catalyst for institutional adoption. In the U.S. and elsewhere, policymakers are advancing frameworks to clarify digital asset regulation, standardize custody, trading, and disclosure, and provide more guidance for institutional investors. For example, the proposed **CLARITY Act** in the U.S. designates the CFTC to regulate digital commodities and the SEC to regulate digital securities, reducing compliance uncertainty for firms and institutions allocating to digital assets. The Act provides a compliance roadmap for the digital asset lifecycle and standardizes a "maturity test," allowing tokens to transition from SEC to CFTC oversight as decentralization increases. A dual-registered broker-dealer regime also addresses the legal uncertainty that historically drove digital asset firms overseas. U.S. government actions related to Bitcoin include: - Discussions between lawmakers and industry leaders on including Bitcoin in government reserves. - Management of seized Bitcoin, currently largely held federally. - State-level Bitcoin adoption, such as Texas purchasing Bitcoin for its reserves. **Structural Demand: ETFs and Digital Asset Treasuries (DATs)** **ETFs as New Structural Buyers** The expansion of spot Bitcoin ETFs has reshaped market supply and demand dynamics. In 2025, U.S. spot Bitcoin ETFs and Digital Asset Treasuries (DATs) absorbed 1.2 times the combined amount of newly mined Bitcoin and re-activated dormant Bitcoin. By the end of 2025, ETFs and DATs held over 12% of the total Bitcoin supply. Despite demand growth outpacing supply growth, the Bitcoin price declined, primarily due to external factors—a software glitch on October 10 triggering a mass liquidation event, concerns over the Bitcoin four-year cycle, and negative sentiment surrounding quantum computing threats to Bitcoin's cryptography. In Q4, Morgan Stanley and Vanguard added Bitcoin to their investment platforms. Morgan Stanley expanded client access to regulated Bitcoin products, including spot ETFs; Vanguard, after years of excluding crypto and all commodities, unexpectedly added third-party Bitcoin ETFs to its platform. As ETFs mature, they will increasingly serve as a structural bridge between the Bitcoin market and traditional capital pools. **Index Inclusion, Corporate Adoption, and Bitcoin Treasuries** Corporate Bitcoin adoption has expanded beyond early adopters. The S&P 500 and Nasdaq 100 now include stocks of companies like Coinbase and Block, introducing Bitcoin-related exposure to mainstream portfolios. MicroStrategy (now Strategy) has built a substantial Bitcoin treasury, holding approximately 3.5% of the total supply. Furthermore, Bitcoin Treasury Companies now collectively hold over 1.1 million BTC, representing 5.7% of the total supply, with a market value of approximately $89.9 billion as of end-January 2026. These treasuries are predominantly long-term holders. **Sovereign and Strategic Holdings** In 2025, following El Salvador's national adoption, the Trump administration established a U.S. Strategic Bitcoin Reserve (SBR) composed of seized Bitcoin. The SBR currently holds approximately 325,437 BTC, or 1.6% of the total Bitcoin supply, valued at around $25.6 billion. **Bitcoin's Store-of-Value Relationship with Gold** **Gold Leads, Bitcoin Follows?** In recent years, gold and Bitcoin have reacted differently to macro narratives like currency debasement, negative real yields, and geopolitical risks. In 2025, gold prices rose 64.7%, driven by concerns over inflation, fiat debasement, and geopolitical risk; in contrast, Bitcoin prices fell 6.2%. This divergence, while unexpected, has historical precedents. In 2016 and 2019, gold price increases often preceded Bitcoin price increases. During the early 2020 COVID shock, a gold price rally foreshadowed a subsequent Bitcoin rally amid a sharp increase in fiscal and monetary liquidity. In 2017 and 2018, this gold-Bitcoin pattern was even more pronounced. Is history rhyming? Based on historical relationships, Bitcoin acts as a higher-beta, digitally native extension of the same macro trade logic. *Source: ARK Investment Management LLC and 21Shares, 2026, based on data from Glassnode and TradingView as of January 31, 2026.* **ETF AUM: Bitcoin's Growing Share** Cumulative ETF net flows offer another comparative perspective between Bitcoin and gold. According to Glassnode and the World Gold Council, spot Bitcoin ETFs achieved in less than two years the market penetration that took gold ETFs over 15 years, as illustrated below. In other words, financial advisors, institutional investors, and retail investors appear increasingly receptive to Bitcoin's role as a store of value, portfolio diversifier, and new asset class. Interestingly, over the last market cycle since 2020, the correlation between Bitcoin and gold returns has been very low, as shown in the table below. Yet, historically, gold may still serve as a leading indicator. **Market Structure and Investor Behavior** **Drawdowns, Volatility, and Market Maturity** Bitcoin is a high-volatility asset, but the magnitude of its drawdowns has declined over time. In past cycles, peak-to-trough declines often exceeded 70-80%. In the current cycle starting in 2022, as of February 8, 2026, declines from all-time highs have not exceeded approximately 50%, suggesting progressively deeper market participation and improved liquidity—even during significant corrections, such as the decline in the first week of February 2026. These observations suggest Bitcoin is transitioning from a speculative asset towards a globally traded macro instrument, with increasingly diverse holders supported by robust trading, liquidity, and custody infrastructure. **Time in the Market vs. Timing the Market** According to Glassnode data, between 2020 and 2025, a hypothetical "worst" Bitcoin investor—who invested $1,000 annually at the year's peak—would have seen their investment grow from approximately $6,000 to about $9,660 by December 31, 2025, and to about $8,680 by January 31, 2026, representing returns of approximately 61% and 45%, respectively. Even accounting for the early February correction, as of February 8, the investment would still be approximately $7,760, a gain of about 29%. This data illustrates that since 2020, holding period and position size have mattered more than precise timing: investors focused on Bitcoin's long-term value rather than its volatility have achieved superior returns. **The Strategic Question for Bitcoin in 2026** In 2026, the discussion around Bitcoin is no longer "if it will survive," but its role within diversified portfolios. Bitcoin's characteristics include: - A scarce, non-sovereign asset in an environment of evolving global monetary policy, government deficits, and trade imbalances. - A higher-beta extension of traditional store-of-value assets like gold. - A regulated instrument tradable in global liquid markets. - Supply absorption by long-term holders (including ETFs, corporate treasuries, and sovereign entities), with broader investment access enabled by improved regulation and infrastructure. - Historical data suggesting potential for improved risk-adjusted returns when included in portfolios due to low correlation with other assets, including gold. - Reduced volatility and drawdowns over a full market cycle to date. Therefore, the question for investors in 2026 is not "whether to invest in Bitcoin," but "how much" and "through which vehicles."