Market pressures, shrinking liquidity and falling demand for smaller cryptocurrencies have prompted several asset managers to close existing investment funds or abandon plans to launch new products, as institutional interest focuses on a limited range of major coins and tokenized assets, according to a Bloomberg report.
Fund closures and billions of dollars in outflows
Grayscale Investments withdrew plans to launch exchange-traded funds linked to Cardano’s ADA, Polkadot’s DOT and Hedera’s HBAR, reflecting the declining economic viability of products tied to alternative cryptocurrencies.
Similarly, Bitwise Asset Management closed two cryptocurrency-focused funds, while REX Advisers and Direxion halted a number of specialized funds. Trump Media & Technology Group also scrapped plans to launch a fund investing in Bitcoin and Ether.
Bitcoin has fallen about 28% since the start of the year, while an index of smaller cryptocurrencies has lost more than 40%. Coins including Solana, Dogecoin and ADA have lost nearly half their value, as 4.7 billion dollars flowed out of Bitcoin exchange-traded funds and 1.5 billion dollars out of Ether funds, according to data compiled by Bloomberg.
Vanishing liquidity revives fears of 2022
Gracie Chen, chief executive of Bitget, said liquidity had not returned to the cryptocurrency market for about a year, likening current conditions to those the sector experienced in 2022 following the collapse of FTX.
The worst may yet be to come.
Chen added that Bitget was no longer restricting its activity to cryptocurrency trading, but was working to provide a multi-asset platform allowing stocks, commodities and cryptocurrencies to be traded in one place, in response to rising institutional demand for the model.
Institutions focus on major and tokenized assets
Despite the market downturn, financial institutions continue to adopt blockchain technologies. Analysts, however, say their entry has not produced a broad cryptocurrency recovery, but has instead concentrated liquidity in major coins and tokenized assets rather than distributing it across alternative cryptocurrencies.
Stani Kulechov, founder of Aave, said real-world assets tokenized on the blockchain (RWAs) could outperform traditional crypto assets over the next three years, predicting that tokenized stocks would grow at a faster pace than digital currencies themselves.
Data from Wintermute showed that institutional investors accounted for 72% of over-the-counter spot-market trading during the first half of 2026, the highest share on record. But the number of coins traded by institutions grew only 24% over two years, compared with 76% among retail investors, indicating the limited range of assets on which institutions are focused.
At the beginning of August, Bitcoin’s annualized volatility fell to 42%, compared with 48% a year earlier and 69% in 2022. Some retail investors, meanwhile, turned to artificial-intelligence markets, betting markets and prediction markets.
Banks expand use of digital infrastructure
The use of digital-asset infrastructure has spread to the banking sector. An official at the Solana Foundation said 7 of the 29 global systemically important banks were building applications on the Solana network for trade finance, fund management and custody, driven by an improved regulatory environment in the United States.
These shifts point to the digital-asset market entering a phase in which broad speculation on alternative cryptocurrencies is receding, while institutional uses linked to payments and tokenized assets are expanding. The market’s prospects remain tied to the return of liquidity and retail investors.
