Bitcoins recent struggles to rise in tandem with U.S. stocks have sparked a flurry of explanations, from concerns about Michael Saylor’s ( MSTR ) strategy in selling bitcoin to questions about whether institutional demand is starting to fade.
Charles Schwab Director of Research and Strategy for Digital Currencies Jim Ferraioli sees a simpler explanation: Bitcoin is losing its momentum trade.
“Bitcoin has been in a bear market since October,” Ferraioli said in an interview. “Not to say it’s as simple as that, but it’s kind of simple like that.”
The comments contrast with a market narrative that has been largely focused on positive developments. Over the past year, crypto has secured spot ETF approvals, attracted billions of dollars in institutional capital and moved closer to regulatory clarity in Washington. Despite these developments, bitcoin has struggled to sustain the type of explosive rally that many investors expected.
Instead, capital has flowed elsewhere.
“We found a bottom in early February, and since then another big Wall Street firm had a successful ETF launch, and so you saw this kind of return to the institutional adoption narrative,” Ferraioli said.
That rebound helped bitcoin recover from its February lows. However, unlike previous crypto cycles, the boom stalled before developing into a broad speculative frenzy.
That’s because crypto investors are not fundamentally driven but chasing momentum, he said. In his view, bitcoin’s problem is not a lack of bullish news. It’s competition.
Historically, crypto has benefited when it becomes the market’s most compelling speculative option. When prices rise, traders flock in. When another asset class begins to attract attention, capital often follows.
“Crypto investors historically just go wherever the momentum is,” Ferraioli said. “And momentum is out of crypto at the moment.”
The destinations for that capital have changed over the past year.
Some investors have gravitated toward precious metals. Gold has attracted significant inflows as investors seek alternatives to both stocks and crypto. Others have increasingly been focused on artificial intelligence, which has emerged as the dominant growth narrative across financial markets.
The AI boom has created a new class of speculative opportunities that did not exist in previous crypto cycles. Public companies tied to AI infrastructure, data centers and advanced computing have generated strong returns, while anticipated IPOs from firms such as OpenAI and Anthropic have become focal points for investors looking for the next growth story.
According to Ferraioli, crypto investors are also participating in that shift.
“I think people who get excited about momentum get excited about IPOs,” he said. “So some of these you can actually access the private stocks on these decentralized exchanges on Hyperliquid.”
This trend is significant because it highlights how crypto-native trading infrastructure is increasingly allowing investors to speculate on 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, this means that it no longer competes solely against other cryptocurrencies.
It rivals any major speculative narrative on the market.
Ferraioli also played down concerns surrounding Strategy’s recent sale of 32 bitcoin, a transaction that sparked debate among investors due to Saylor’s longstanding reputation as one of bitcoin’s most committed advocates.
“The narrative has been that they will never sell,” Ferraioli said. Still, he believes the market impact of the transaction itself has been overstated. “But I don’t think so [the sale] is what really drives it, he said.
Instead, he sees the sale as a convenient narrative tied to a broader trend that was already underway.
Part of this trend may be tied to investors’ cost bases, and many ETF investors are still recovering from sharp swings over the past year and see the current price point as an opportunity to exit positions rather than increase them.
“I think you get to those levels and you get people saying, ‘Hey, I made my money back, maybe I’ll see it again later,'” Ferraioli said.
That dynamic has contributed to a market that feels very different from the euphoric phases of previous cycles.
Ferraioli argues that institutional adoption, while real, remains smaller than many market participants assume. Bitcoin ETFs have widened access to crypto, 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 building positions based on discounted cash flow models or long-term valuation frameworks, they tend to chase trends.
This behavior helps explain why bitcoin has struggled to capitalize on positive regulatory developments.
The crypto industry is awaiting the potential passage of the Clarity Act, a bill that many industry participants believe could provide a clearer framework for digital assets in the United States. In the longer term, Ferraioli believes that such a development can support the adoption.
In the short term, however, regulation 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. The summer has historically been one of bitcoin’s weaker periods, as trading activity slows and investors shift their attention elsewhere.
“People know that for bitcoin, seasonally, summer is the weakest time,” Ferraioli said.
That leaves the market in an awkward position.
Institutional adoption is improving. The legislative clarity is advancing. Major financial companies continue to build crypto products. Still, none of these developments guarantee higher prices if investors’ attention is focused elsewhere.
“There’s a lack of a reason to buy here when there are other things you can choose,” Ferraioli said.
For now, he argues, the biggest challenge to bitcoin is not Saylor, regulation or even macroeconomics.
It’s that investors have found something else to chase.
