Wintermute: Three Necessary Conditions for the 2026 Crypto Market Recovery

Author: Wintermute

Translation: Deep潮 TechFlow

Deep潮 Guide:

The four-year halving cycle, once considered the “iron law” of the crypto market, is facing unprecedented challenges. Top market maker Wintermute pointed out in its latest 2025 annual report that the traditional cycle narrative has become invalid, and market logic has shifted from “seasonal rotation” to “liquidity lock-in.”

2025 did not see the widespread rally as expected, but instead showed extreme emotional polarization: on one hand, BTC and ETH are entering institutionalization with ETF support; on the other hand, the explosive power of altcoins has sharply decreased, and their lifecycle has shortened.

Facing 2026, can the crypto market break the current stockpile dilemma? Wintermute has outlined three core variables to break the status quo.

The main text is as follows:

2025 did not bring the anticipated broad rally, but this may be seen by future generations as the beginning of the transition of cryptocurrencies from speculative tools to mature asset classes.

The traditional four-year cycle is becoming outdated. Market performance is no longer dominated by self-fulfilling timing narratives but depends on the flow of liquidity and the concentration of investor attention.

What changed in 2025?

Historically, crypto-native wealth has manifested as an alternative pool of funds. Bitcoin’s (BTC) returns spill over into Ethereum (ETH), then flow into blue-chip stocks, and finally reach altcoins.

Wintermute’s OTC flow data indicates that this transmission mechanism significantly weakened in 2025.

Spot ETFs and Digital Asset Trusts (DATs) have evolved into a “siege.” They provide sustained demand for large-cap assets but do not naturally rotate funds into the broader market.

As retail interest was attracted to the stock market, 2025 became a year of extreme polarization.

The average duration of altcoin rebounds in 2025 was 20 days, far shorter than the 60 days in 2024.

A few mainstream assets absorbed the vast majority of new funds, while the broader market struggled.

Three paths for 2026

To expand market participation beyond mainstream assets and further grow, at least one of the following three things needs to happen:

1. Expansion of Institutional Mandates

Currently, most new liquidity remains confined to institutional channels. A full market recovery requires institutional investors to expand their investable asset scope.

Early signs have already appeared through ETF applications for Solana (SOL) and XRP.

2. Wealth Effect from Mainstream Assets

A strong rebound in Bitcoin or Ethereum could generate a wealth effect, spilling over into the broader market, similar to 2024.

How much capital ultimately flows back into digital assets remains uncertain.

3. Rotation from Equities

Retail investors’ attention may rotate back from stocks (such as AI, rare earths, quantum computing, etc.) to cryptocurrencies, bringing in fresh capital and stablecoin issuance.

Although this is the least likely scenario, it would significantly increase market participation.

The future outcome will depend on whether these catalysts can effectively diffuse liquidity beyond a few large-cap assets or whether this centralization trend will continue.

Understanding capital flows and the structural changes needed will determine which strategies can succeed in 2026.