Crypto is in a full bear market, tokenized bonds could be the next bullish trend — BitMEX CEO

In an exclusive interview with FXStreet at the Proof of Talk conference, BitMEX CEO Stephan Lutz stated that the crypto market has entered a full bear phase, marked by declining activity across both crypto-native and real-world asset (RWA) sectors. He added that Bitcoin's four-year cycle remains intact, pushing back against growing industry claims that the market has evolved beyond the trend.

Trading volumes decline as activity slows

Lutz pointed to a sharp contraction in market participation, noting that trading volumes across crypto and tokenized assets have dropped sharply in recent months.

"If you look at the pure business numbers and the whole industry, trading volumes, even with traditional assets and RWAs, are basically down by —depending on how you count — 40 to 60%," Lutz told FXStreet.

He added that volatility, a key driver of crypto markets, has also declined since October, while RWA markets have seen relatively higher volatility and drawn more interest. As a result, investors have grown increasingly cautious, with many remaining on the sidelines.

Despite the current downturn, Lutz expressed optimism that conditions could improve later in the year, predicting a potential recovery in the fourth quarter.

On what key driver could fuel the next wave of growth, Lutz dismissed the idea of a single dominant narrative.

"There's not one narrative," he stated.

Lutz signals stablecoins, regulatory progress as growth drivers

Instead, he pointed to the growing integration of blockchain technology and stablecoins into traditional finance as a key catalyst for renewed interest in crypto, particularly Bitcoin. He explained that broader adoption by financial institutions could make capital flows more efficient within the ecosystem.

Lutz also emphasized the role of regulation in shaping the crypto industry's next phase. He stated that it could create a divide between those who embrace regulatory frameworks and those who prioritize decentralization ideals.

"We will have a little bit of a divide, but overall I think the ones that come on are way bigger, there's way more volume, so, net positive," Lutz said.

He pointed specifically to the CLARITY Act as a development that remains underappreciated outside the United States, arguing that "it provides clarity for the banking system that they need to hop on to blockchain infrastructure."

"It is a regulation that will enable the TradFi players to actually enter the crypto world technologically, and this is something that cannot be underestimated," Lutz added.

The BitMEX CEO also weighed in on the US political landscape, stating that recent policy shifts under President Donald Trump have been more supportive of the crypto sector compared to previous administrations. He noted that these changes have encouraged founders to return to the US and reduced barriers to innovation.

However, he stressed that market behavior has evolved, with price action now driven more by real-time geopolitical developments than forward-looking speculation. TradFi is also following a similar pattern.

"The volumes you see in TradFi are not based on trust. Everyone is super anxious, everyone is super paranoid..."

Tokenized bonds seen as next market opportunity

Looking ahead, Lutz identified tokenized bonds as a potential major opportunity within the digital asset space, particularly benchmark instruments such as US Treasuries or European equivalents. He suggested that shorter-duration instruments may be more suitable for crypto-native markets.

"I think that's the next big one," Lutz said.

He added that the next closest options in the tokenized assets race are energy markets, bandwidths and data storage.

Regarding tokenization, Lutz said the technology addresses long-standing barriers to accessing traditional financial markets, particularly for retail participants.

"You have new distribution channels to the classical players and issuers. You have actually solved access to markets that you couldn't access as a retail or an investor, even as an executioner sometimes, and you have efficiency gains in that."

Bitcoin and the broader crypto market are down by 5% and 3.8% over the past 24 hours, respectively, at the time of writing.