Bitcoin’s recent struggles to rise in tandem with U.S. stocks has sparked a wave of explanations, from concerns about Michael Saylor’s Strategy (MSTR) selling bitcoin to questions about whether institutional demand is beginning to fade.
Charles Schwab director of digital currencies research and strategy Jim Ferraioli sees a simpler explanation: Bitcoin is losing the 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 as that.”
The comments stand in contrast to a market narrative that has remained 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. Yet despite those developments, bitcoin has struggled to sustain the type of explosive rally many investors expected.
Instead, capital has been flowing elsewhere.
“We found a bottom in early February, and since then another large 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. But unlike previous crypto cycles, the recovery stalled before developing into a broad speculative frenzy.
That’s because crypto investors are not fundamentally driven, but chase momentum, he said. In his view, bitcoin’s problem isn’t a lack of bullish news. It’s competition.
Historically, crypto has benefited when it becomes the market’s most compelling speculative opportunity. When prices rise, traders pile in. When another asset class begins attracting 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 equities and crypto. Others have become increasingly 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 didn’t 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 participating in that shift as well.
“I think people that are excited about momentum are getting excited about IPOs,” he said. “Then some of these you can actually access the private shares on these decentralized exchanges on Hyperliquid.”
That trend is significant because it highlights how crypto-native trading infrastructure is increasingly allowing investors to speculate on assets beyond cryptocurrencies themselves.
Platforms such as 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 is no longer competing solely against other cryptocurrencies.
It is competing against every major speculative narrative in the market.
Ferraioli also downplayed concerns surrounding Strategy’s recent sale of 32 bitcoin, a transaction that sparked debate among investors because of Saylor’s long-standing reputation as one of bitcoin’s most committed advocates.
“The narrative has been that they’ll never sell,” Ferraioli said. Yet he believes the market impact of the transaction itself has been overstated. “But I don’t think [the sale] is what’s really driving it,” he said.
Instead, he views the sale as a convenient narrative attached to a broader trend that was already underway.
Part of that trend may be tied to investor 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 that are saying, ‘Hey, I made my money back, maybe I’ll revisit it 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 expanded 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 matters because retail investors often react differently than traditional institutional allocators. Rather than building positions based on discounted cash flow models or long-term valuation frameworks, they tend to chase trends.
That behavior helps explain why bitcoin has struggled to capitalize on positive regulatory developments.
The crypto industry is awaiting potential passage of the Clarity Act, a bill that many industry participants believe could provide a clearer framework for digital assets in the U.S. Over the longer term, Ferraioli believes such developments could support adoption.
In the short term, however, 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, though 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 weaker periods, as trading activity declines and investors shift 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. Regulatory clarity is advancing. Major financial firms continue building crypto products. Yet none of those developments guarantee higher prices if investor attention is focused elsewhere.
“There’s a lack of a reason to be buying here when there’s other things you can choose,” Ferraioli said.
For now, he argues, the biggest challenge facing bitcoin isn’t Saylor, regulation or even macroeconomics.
It’s that investors have found something else to chase.
