Crypto Reset Needed Before Next Bull Run
March 28, 20267m read1Standard
Fazen Markets Research
AI-Enhanced Analysis
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The crypto industry is in the middle of a structural realignment that, according to a CoinDesk opinion piece published on March 28, 2026, requires a reset before the next durable bull market can form (CoinDesk, Mar 28, 2026). Price volatility and episodic liquidity crises have driven capital away from speculative segments and into infrastructure and compliance-focused businesses during the past several years. Institutional participants now demand clearer regulatory frameworks, consistent custody solutions, and transparent on-chain metrics before scaling allocations. That migration is changing where value is being created within the ecosystem: protocol infrastructure, settlement layers, and regulated financial linkages increasingly attract attention relative to high-beta token speculation.
The history of crypto cycles provides context for why a reset is plausible and arguably necessary. Bitcoin’s drawdown from its November 2021 peak of approximately $69,000 to a low near $16,000 in November 2022 represented an approximate 75% decline in price (CoinDesk price data). Over the same interval, total crypto market capitalization contracted from roughly $3 trillion to below $1 trillion (CoinMarketCap historical data), a dramatic compression that exposed leverage, counterparty risk, and poor liquidity hygiene in numerous parts of the market. For institutional allocators and risk managers, these outcomes underscored the need for stronger governance, higher-quality counterparties, and products that clearly separate custody from lending and trading risks.
In practical terms, a reset is less about a single price event and more about structural adjustments: capital flight from low-quality tokens, consolidation among custodians and exchanges, and a reallocation toward assets or services with demonstrable revenue models. These adjustments are already visible in capital formation patterns and M&A activity across 2024–2026, where investors have favored custody, compliance, and infrastructure startups that promise recurring revenue and enterprise-ready integrations. For investors tracking this evolution, the focal question is not if a reset is occurring, but how deep it will be and which business models will emerge stronger as a result.
Aggregate price and market-cap metrics capture the headline-level severity of the last cycle, but on-chain and capital-flow data provide more actionable insight into the nature of the reset. On-chain transaction counts and active addresses, for example, increased during certain phases even as prices declined, indicating continued utility in selected use cases. According to industry trackers through 2024, weekly active addresses on major chains remained within a broad band despite price declines, suggesting user activity shifted toward different protocols rather than evaporating entirely (chain analytics platforms, 2024). Such bifurcation — persistent user activity in payments, gaming, or L2 settlement layers while speculative token volumes collapse — is a classic signature of market maturation.
Capital flows into venture-backed crypto companies also offer concrete data points. While headline venture totals peaked in 2021, later rounds have concentrated on infrastructure: custody, oracle services, and Layer-2 scaling solutions. Publicly reported funding figures indicate venture investment into crypto companies fell materially from 2021 levels, and although exact year-to-year figures vary by source, industrywide funding was down by a substantial margin by 2022–2023 (Crunchbase/Bloomberg reporting). That retrenchment forced startups to prioritize revenue generation and operational discipline, accelerating product-market fits in enterprise-facing segments. The result is a narrower but potentially deeper pool of investable infrastructure opportunities compared with the frothier token issuance market of prior cycles.
A third measurable dimension is liquidity concentration on regulated venues. Post-2022, trading volumes on regulated, self-custodial or custody-segregated platforms rose as a proportion of total market volume, reflecting institutional preference for venues that mitigate counterparty and operational risk. Regulatory actions and enforcement increased scrutiny on certain token listings and trading practices, which in turn shifted some order flow away from unregulated markets. These measurable shifts in venue share and protocol-level usage are meaningful: they suggest a transition from a market where liquidity provision was driven by retail margining and cross-exchange arbitrage to one increasingly anchored by custodial liquidity and institutional desks.
A structural reset reshapes winners and losers across crypto sectors. Layer-1 speculative tokens that rely primarily on narrative-driven demand typically suffer valuation compression first; protocols that can demonstrate consistent on-chain activity, fee capture, or enterprise revenue models tend to retain investor interest. For example, projects that provide settlement rails, tokenization infrastructure, or regulatory-compliant asset custody have seen relative resilience in valuations and financing access compared with purely speculative utility tokens. This is a pattern consistent with earlier markets where infrastructure investment is the underpinning of subsequent broad-based adoption.
Service providers — custody firms, compliance tooling vendors, and institutional-grade market-makers — are positioned to capture outsized share during and after the reset because they address the primary frictions that deter capital: counterparty risk, regulatory uncertainty, and the operational complexity of custody and settlement. Anecdotal and reported deal flow in 2024–2026 shows consolidation tendencies as larger custodians absorb smaller peers or acquire technology to expand institutional capability. This consolidation reduces fragmentation in the short term and may increase operational resilience, but it also concentrates systemic exposure within a smaller set of entities, an aspect that will invite regulatory oversight.
Retail-oriented protocols and decentralized finance segments face a bifurcated future. Many products that proved economically attractive during a high-liquidity regime will need to rationalize tokenomics, on-chain governance, and risk modeling to survive a lower-liquidity environment. Protocols that can pivot to fee-generating services, embed compliance, or align token incentives with real revenue capture will likely outperform peers. This is not merely theoretical: market participants have historically rotated into protocols with durable economic primitives following resets, a pattern we expect to repeat if current structural pressures persist.
A reset carries idiosyncratic and systemic risks that institutional investors must weigh. Idiosyncratically, projects with tenuous tokenomics, limited cash runway, or centralized control risk insolvency in a prolonged deleveraging environment. Historic cycles show that many speculative tokens and early-stage ventures failed to secure follow-on funding after 2022’s drawdown, leaving creditors and token holders exposed. Systemically, concentration of custody and clearing services increases single-point-of-failure risk; should a dominant custodian face solvency or operational issues, knock-on effects could be severe for market confidence.
Regulatory risk remains elevated and is a central component of the reset. Jurisdictional actions — ranging from halting certain token sales to enforcing securities laws — have the potential to reshape market structure rapidly. Regulators’ push to classify certain tokens or require more stringent custody standards for digital assets can enhance long-term investor protection but also compress short-term liquidity and narrow the set of permissible products for institutional allocators. These outcomes are not mutually exclusive: greater regulatory clarity can both increase institutional inflows over time and cause near-term dislocations as participants adapt.
Macro-financial linkage risk should not be ignored. Increased correlation between digital-asset markets and conventional risk assets during stressed episodes introduces portfolio-level considerations for investors. While crypto historically offered idiosyncratic return profiles limitedly correlated to equities, drawdown periods have shown correlation spikes that erode diversification benefits. That dynamic — observed in 2022 when risk assets broadly sold off — argues for explicit stress testing of crypto exposures under multiple macro scenarios.
Fazen Capital views the required reset not as a failure of the asset class but as an overdue market correction that could produce a healthier long-term investment landscape. Our analysis suggests that the market is transitioning from a valuation regime dominated by narrative and leverage to one anchored on fee-bearing infrastructure and enterprise adoption metrics. This implies a potential re-rating where protocol- and service-level economics — for example, fee yields on settlement layers or recurring revenue for custody providers — become primary valuation drivers rather than speculative token velocity.
Contrary to common narratives that treat resets purely as tail risks, we see them as selection mechanisms that can compress multiplicative failures and surface durable business models. In practical terms, that means opportunities will be concentrated, initially, in regulated custody, interoperable settlement layers, and middleware that enables institutional workflows. Investors allocating to the asset class should therefore broaden their lens beyond simple token price exposure to include infrastructure equity, structured products that isolate custody from trading risk, and direct exposure to fee-capture mechanisms.
We also believe regulatory engagement will be a competitive moat for firms that invest in compliance early. The market is likely to reward platforms that demonstrate transparent governance, audited custody arrangements, and clear contractual segregation of client assets. The paradox of a reset is that near-term contraction often precedes long-term expansion once the foundational plumbing and standards are improved; that sequence played out in earlier financial-market innovations and we expect something analogous in digital assets.
Looking forward, the pace and depth of the reset will be determined by three observable variables: the flow of institutional capital into regulated venues, on-chain activity in fee-bearing protocols, and the cadence of regulatory rulemaking across major jurisdictions. If institutional venue share and custody inflows rise meaningfully while on-chain economic activity shifts to settlement and application layers, the reset will likely culminate in a healthier, more investable market structure. Conversely, if regulatory fragmentation increases without clear safe harbors, liquidity may remain constrained for an extended period.
Timing remains uncertain. Historical cycles suggest that material resets can span 12–36 months from peak to stabilization depending on macro liquidity and policy responses; the last major compression from late 2021 through 2023 suggests the upper-bound timescale of that range is plausible. Market participants should therefore prepare for a multi-stage transition where early winners emerge in infrastructure and compliance, followed by a broader reflow into consumer-facing products once trust and liquidity are restored.
For market practitioners and allocators, the practical implication is to prioritize transparency and operational resilience in counterparties, demand audited proof of reserves, and consider instruments that separate custody risk from market exposure. Robust due diligence — grounded in on-chain telemetry and operational reviews — will differentiate managers who navigate the reset successfully from those who underappreciate structural risk.
Q: How might a reset change institutional custody flows?
A: A reset tends to concentrate custody flows toward regulated, audited custodians that offer segregation and proven controls. Historically, custodial consolidation follows volatility shocks as institutions favor counterparties that can demonstrate independent audits, insurance programs, and regulatory dialogue. This pattern can be measured through increased share of volume on regulated exchanges and growth in assets-under-custody reported by major custodians.
Q: What indicators would signal the end of the reset and a return to a sustainable bull market?
A: Leading indicators include sustained inflows into regulated custody platforms, rising on-chain fees and active addresses on fee-bearing settlement layers, and convergent regulatory frameworks across key jurisdictions that reduce legal uncertainty. A material and persistent shift of trading volume from unregulated venues to regulated venues would be a particularly strong signal that institutional confidence is returning.
A structural reset in crypto is underway and, if it completes, should leave the market with stronger infrastructure, tighter governance, and clearer channels for institutional capital. Investors and stakeholders should focus on operational resilience, fee-bearing economic models, and regulatory alignment as the principal axes of value in the next cycle.
Disclaimer: This article is for informational purposes only and does not constitute investment advice.
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