After the terrifying night of October 11th, confidence in the crypto market plummeted to a freezing point. Despite numerous bullish counterattacks during the period of bottoming out, these attacks ultimately collapsed due to weak buying, leaving the market in a state of turmoil. Notably, while the crypto market was volatile and weakening, US stocks, A-shares, and commodities generally maintained strong gains. This stark contrast further exacerbated market concerns that the October 11th crash could have deeper and more widespread repercussions. Unlike the LUNA crash, which primarily impacted institutions and triggered a systemic wave of liquidations, the October 11th crash was more of a structural purge targeting leveraged retail investors. The hardest hit were concentrated among small and medium-sized investors who had engaged in highly leveraged long positions in altcoins and circular loan arbitrage. This effectively isolated the risks within the retail speculator sector, preventing them from spreading to institutions and triggering a systemic credit collapse or a widespread liquidity crunch. However, because the liquidated altcoin positions generally had low leverage, the $40 billion liquidation resulted in exceptionally heavy actual losses. This "rootless" market liquidation not only resulted in a dramatic destruction of wealth but also severely weakened short-term purchasing power, leading to a prolonged period of volatility and consolidation. Despite the severe market impact of the October 11 crash, institutional confidence remained unshaken. In a sense, this deep correction was seen as a rare "gold mine," providing an opportunity for institutions to invest in the long term. First, during the week of the crash, the crypto DAT company BitMine bucked the trend by increasing its holdings by 203,826 ETH, bringing its share of Ethereum's supply to 2.7%. Its buying pace was unaffected by market panic. Meanwhile, BlackRock's Spot Bitcoin ETF (IBIT) saw a net inflow of $210.9 million on October 22nd, following the market crash. Institutional investors are investing heavily through compliant channels. BitMine Chairman Tom Lee stated that Ethereum's supercycle will not be interrupted by deleveraging, and that the current price dislocation presents a "very attractive risk-reward opportunity." Secondly, following the October 11th crash, Morgan Stanley announced that it would allow its financial advisors to offer cryptocurrency investments to all clients, regardless of risk tolerance or net worth, across all account types, including retirement plans. Previously, this option was limited to clients with at least $1.5 million in assets, a high risk appetite, and taxable brokerage accounts. It's worth noting that Trump had just lifted restrictions on 401(k) cryptocurrency investments in August. The market correction at this time feels like a "backward approach." Meanwhile, Citigroup announced it would provide custody and tokenization services to select institutional clients. This means that some clients can hold and trade Bitcoin and Ethereum on Citi's platform. More importantly, JPMorgan Chase will soon support institutional clients using Bitcoin and Ethereum as loan collateral, marking a milestone as major Wall Street banks take more substantial steps to integrate cryptocurrencies into the core operations of the traditional financial system. Currently, global sovereign wealth funds and pension funds hold extremely low, almost negligible, allocations to cryptocurrencies. An August 2025 survey showed that only 9% of pension fund managers surveyed had structured allocations, while the weighted average allocation for all surveyed institutions was a mere 0.3%. Sovereign wealth funds are generally more cautious, with an overall allocation of less than 0.1%. Despite this, the market recently achieved a symbolic breakthrough: in October 2025, the Luxembourg Intergenerational Sovereign Wealth Fund (FSIL) announced that it would allocate 1% of its assets to a Bitcoin ETF, becoming the first national fund in the Eurozone to publicly invest in a Bitcoin ETF, marking a historic shift in mainstream institutional asset allocation. In a February 2025 research report, Standard Chartered Bank revealed that the Abu Dhabi sovereign wealth fund already holds approximately 4,700 Bitcoins in BlackRock's Spot Bitcoin ETF (IBIT) and expects this allocation to increase further. The report also noted that the Czech National Bank is actively considering allocating 5% of its massive foreign exchange reserves to Bitcoin, demonstrating the growing acceptance of digital assets among traditional reserve managers. If 401(k) and sovereign wealth funds ultimately allocate 1%-3% of their cryptocurrency holdings, this could bring hundreds of billions of dollars to the market. In the current macroeconomic environment, with the Federal Reserve's interest rate cuts putting continued pressure on US Treasury yields and the S&P 500 index nearing a 20-year high, traditional asset allocations are facing significant returns challenges. Faced with this structural shift, incorporating cryptocurrencies into 401(k) asset allocations has evolved from a fringe option to a strategic necessity in order to achieve its long-term return target of 7%-8%. The return potential of a traditional 60/40 stock/bond portfolio is shrinking, while cryptocurrencies, with their unique high growth potential, offer new possibilities for boosting overall portfolio returns. While these assets are highly volatile, allocating 1%-3% of assets to mainstream crypto assets like Bitcoin can optimize risk-return structure by leveraging their low correlation with traditional assets without posing a substantial threat to the long-term stability of the portfolio. In an era of weakening traditional income sources, ignoring high-growth assets like cryptocurrencies could become a major risk hindering the achievement of long-term return goals.
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