Zhu Su's Crypto Moat Thesis: Flow Data vs. Tech Performance

The divergence between crypto and the broader market is stark. Bitcoin has fallen roughly 30 percent below the October peak above 126,000 dollars, formally entering a bear market. This contrasts sharply with the S&P 500, which delivered mid-teens gains in 2025. The performance chasm is not just about direction but also volatility; Bitcoin's 1-year volatility of 40.42% is more than double the S&P 500's 18.97%.

This extreme turbulence has defined the year. While the S&P 500's 2025 returns were positive, Bitcoin's were deeply negative, with the asset finishing the year around 6 percent for the year. The volatility gap means crypto is a far more volatile ride, with its price swings often dwarfing those of the equity benchmark. This sets up a classic risk-reward trade for investors.

The bottom line is a market in structural transition but tactical stalemate. Bitcoin's price action shows a clear bearish trend from its highs, while the S&P 500's steady climb highlights a different, more stable growth path. This chasm is the core of Zhu Su's thesis: navigating this volatility and positioning for a potential reset in flows.

Capital Flows and the Regulatory Moat

The flow of capital tells a story of de-risking and anticipation. U.S. spot Bitcoin ETFs have seen outflows of $4.57 billion during November and December 2025, their worst two-month stretch on record, with a week of $1.33 billion in redemptions in January marking the largest weekly withdrawal since early 2025. This follows a massive $3.48 billion in profit-taking in November, indicating a clear rotation out of the asset as it fell from its highs. The data shows institutions are pulling back, not just taking profits.

Yet, a regulatory catalyst could reverse this trend. The expected passage of the Clarity Act is seen as a potential game-changer, with estimates suggesting it could facilitate $50 billion in institutional inflows by mid-2026. This anticipated policy shift creates a stark contrast: current flows are negative and de-risking, but the forward view hinges on a regulatory moat that could open a new channel for capital.

This regulatory angle underpins Zhu Su's core argument. He stated that cryptocurrency is the only vertical in Western technology that holds a moat against China. In a world of escalating tech competition, this structural advantage is framed as a long-term capital driver. The current outflows are tactical, but the thesis is that a clear regulatory framework in the West will solidify this moat, attracting institutional money that views crypto as a uniquely positioned asset class. The flow data shows the present pressure; the regulatory promise is the future catalyst.

Catalysts for a Flow Reversal

The path to a flow reversal hinges on three specific events. First, the key bullish signal is a sustained shift in U.S. spot Bitcoin ETF flows from redemptions to consistent inflows. The recent record outflows of $4.57 billion in November and December 2025 and the largest weekly redemption since February 2025 show a clear de-risking trend. A credible reversal would require these outflows to stop and turn positive, signaling that institutions are re-entering the market.

Second, regulatory decisions like the expected Clarity Act are critical for institutional capital allocation. The act is estimated to facilitate $50 billion in institutional inflows by mid-2026. This policy catalyst could open a new channel for capital that views crypto as a uniquely positioned asset class, directly countering the current outflows and providing a structural reason for a flow reset.

Third, the market must see a subsiding of the macroeconomic factors that drove the recent selloff. Bitcoin's decline is attributed to macroeconomic uncertainties, risk-off sentiment, and diminishing institutional flows. The asset has behaved like a high-beta tech stock, falling with equities when risk appetite wanes. For a sustained recovery, these headwinds need to ease, allowing Bitcoin to decouple from broader market volatility and re-establish its own flow dynamics.