Bitcoin (BTC-USD) is clawing its way back from the brink, but a full recovery now hinges on calculated, structural shifts rather than retail hype.

“In this current environment, it’s going to be regulatory clarity, particularly if the Clarity Act does get passed,” John D’Agostino, Coinbase’s (COIN) head of institutional strategies, told Yahoo Finance’s Opening Bid.

The digital asset saw a sharp sell-off from record highs in 2025. The “crypto flash crash,” as D’Agostino describes it, saw roughly $19 billion in long positions wiped out on Oct. 10. after President Trump’s announcement of 100% tariffs on Chinese imports triggered a mass liquidation. Bitcoin plunged over 14% in hours, and altcoins like Cosmos (ATOM-USD) briefly collapsed to near zero on some exchanges.

Read more: How to navigate a crypto meltdown: ‘Be willing to hold on’

D’Agostino explained that the crash represented a failure of the plumbing, otherwise known as crypto’s trading infrastructure. In crypto, unlike equities, market makers aren’t legally obligated to provide liquidity. When things got “scary,” they “just exited the market,” leaving retail investors to fall through the “violent gaps” in pricing, he said.

According to D’Agostino, bitcoin’s path back to its $126,000 peak rests on two factors: the stabilization of professional market makers who survived the October carnage and the passage of the Digital Asset Market Clarity Act (or CLARITY Act).

The bill, which has received vocal support from President Trump as part of a plan to make the US the “crypto capital of the world,” aims to end “regulation by enforcement” by providing an official framework for regulating digital assets. That includes designating the Commodity Futures Trading Commission as the primary regulator of digital commodities and creating clear asset classification definitions and market participant rules.

While retail sentiment remained “horrific” for months, the view from Coinbase was starkly different.

“What was happening at Coinbase was we were noticing, well, institutions were just gaining interest,” D’Agostino noted, characterizing the period from October to December 2025 as one of the most active institutional buying windows on record.

For the smart money, the “flash crash” wasn’t a death knell, but a stress test that bitcoin passed. Unlike the FTX era, there was “no major insolvency,” D’Agostino noted.

“These big institutions, while they got a little wobbly that day, they were risk managing properly,” he said.