From what I've read, it seems like the bulk of them are stored in two custodial institutions:

Coinbase and Fidelity Custody.

I looked up how they both work:

On Coinbase they are said to be using Coinbase Prime. Which is like a service for high level customers.

Basically, Coinbase Prime uses its own cold storage kept offline by Coinbase, in the form of hardware wallets, and use multi-signatures on behalf of their customer.

Coinbase promises also that the cash balances of those accounts are kept 1:1 with their partner crypto banks.

On Fidelity they say they keep 98% of their clients Bitcoins in cold storage. The hardware wallets are kept in vaults with electromagnetic shielding, guarded by 24 hour security. They also use multi-signatures.

Some of the key weak points I'm seeing:

Custodial storage still depends on trusting that institution.

Nobody really knows how many people have access to the keys and multi-sig.

Neither of these institutions has been able to show proof of reserves.

These institutions are not immune to government seizures on suspicions about your funds.

There are still multiple potential weak points with the app access, hardware wallet, institution's own security.

These high security cold wallet vaults have still shown in the past that they are not completely immune to exploits, like with Zilliqa, Bitfinex, QuadrigaCX.

Employee exploit can still be an issue. Like that time when a Coinbase employee was bribed to get the customer's logs and details.

There is the issue of these large cash balances needing a functioning crytpo bank to get your funds. Even if the coins were safe on-chain, the institution still needs to get the funds out of their crypto bank to pay you. If there is a crypto bank failure, and the exchange was to fail, they won't have the cash to pay you. Crypto assets and stablecoins do not qualify for FDIC insurance.

We've had a lot of different bull narratives over the years. Every bull cycle has had its main drivers to help push a "this time we're really gonna make some serious money".

Sure, narrative isn't everything. Cycles seemed to have been the main self fulfilling driving force.

But you still need a narrative for people who buy in so they can rationalize that they made a smart investment choice.

Something that will still make it make sense. Something they can tell their colleagues at the coffee machine without being too much laughed at, or just use to convince themselves that they aren't just blindly gambling.

But it would probably have to be a bigger narrative than ETFs and a crypto President. Since neither of those really produced that big of a bang in the last bull cycle. We experienced the weakest and most disapointing bull cycle. It's gonna make it harder to get people excited about the next one.

For those still not sure what's MSTR and STRC:

MSTR is a tech company stock that has pivoted primarily into a "BTC treasury", primarily using leveraged debt to buy BTC.

STRC is a hybrid stock/perp bond instrument pegged at $100, that pays dividend every month (11% APY).

The purpose is to raise cash to buy BTC, to help MSTR.

The feedback loop that everyone keeps talking about:

If STRC de-pegs, Strategy will need to raise the dividend to get people back in to try to re-peg to regain confidence and avoid a "bank run".

If the dividend is raised, it can come with a risk of less capital to pay the dividend over time, and less cash to buy BTC, less capital and assets for leverage, as the raised dividend drains more cash more quickly.

If there's less cash to buy BTC, and STRC loses its ability to raise capital, MSTR loses its incentive and value.

If MSTR loses its incentive and value, that's less money for capital and leverage.

If that happens, Strategy will have to either dilute shares of MSTR to raise capital, making it lose more of its value, or sell more BTC.

If that happens, it will negatively affect STRC's incentive and make it de-peg more once again, and the loop goes back in a circle.

So when does this feedback loop turn into a death spiral?

If BTC drops enough, for a long enough period of time, then it's gonna increase the chances of the feedback loop to turn into a death spiral.

More people could panic out of MSTR and STRC. Which can amplify the feedback loop, which will get even more people to panic out.

If MSTR and STRC tank too much, and start having to take drastic action, like selling BTC, then BTC's price could tank more, which could make MSTR and STRC tank even more.

Not written with AI (despite being more than 1 paragraph and having titles).

Bitcoin's cycles have been lowering in intensity, and the price action has been a curve, not a straight line.

Even the Rainbow Chart has been too optimistic and hasn't been curving properly to the reality:

https://preview.redd.it/utopceagikyg1.jpg?width=1062&format=pjpg&auto=webp&s=89b05796ea171dafe4caacea6b37bb049f7d7d83

You can already see that as the price is starting to settle lower than expected.

They had to add a color to make the chart fit.

We saw in the bear market in 2022, the bottom hit $15K, below the $19K ATH of 2017. A first for a cycle.

How soon will we see the first bull cycle peak lower than a previous cycle's peak?

Returns of bull cycles have been vastly diminishing:

Cycle	BTC returns (approximate)	Peak (approximate)
2011	41771x	$32
2013	621x	$1,175
2017	130.5x	$19,600
2021	22.1x	$69,000
2025	8.2x	$126,000

Given the average rate, *√0.169×0.371​≈√*0.0627​≈0.25

If the diminishing return continue at roughly the same ratio, the next return should fall roughly around 2.05.

Essentially 2x.

Volatility could boost the ratio higher, if it doesn't slow down and is driven back for any number of reasons. But in a best case scenario, we'd still be looking at roughly 4.0 returns from the previous 8.2x.

What are the potential peaks for the 2029 bull cycle:

If 2026 bear cycle bottom stops at	bull cycle peak at ~2.0 ratio (current ratio)	bull cycle peak at ~4.0 ratio (high volatility ratio)
$60K	~$110-130K	~$230-250K
$50K	~$90-110K	~$190-210K
$40K	~$70-90K	~150-170K
$30K	~$50-70K	~110-130k

These are rough estimates and simplified for illustration purposes.

There are many other elements affecting the market that can change the price.

Conclusion:

If the cycles continue at the same current ratio, same diminishing returns, then there is a high likelihood of 2029 having a lower peak, and be just shy of a new ATH.

If volatility kicks off higher again, and reverses the tapering for some reason, then we will be able to see higher peaks.

Cycles peak have been highly dependent on volatility, and that volatility has been slowing. It would take a lot to reverse that trend.