Hotcoin Research | Frenzy, Stampede, and Reconstruction: The 2025 Crypto Market Under Regulatory Easing and Institutional Adoption, with a 2026 Outlook

Introduction

2025 was one of the most eventful years in the history of the cryptocurrency market. Supported by an improving macroeconomic backdrop and increasingly favorable policy signals, Bitcoin and Ethereum surged to new all-time highs in the first half of the year. Institutional capital entered aggressively, while Digital Asset Treasury (DAT) companies emerged as a defining theme across global capital markets.

Market sentiment, however, reversed sharply after mid-year. In mid-October, the so-called “October 11 Panic Night” triggered a broad deleveraging cascade. Bitcoin prices fell precipitously, while altcoins experienced near-total collapses. Overall, the market followed a classic “up first, down later” trajectory, marked by extreme volatility and sharp regime shifts.

This report reviews the 2025 crypto market across multiple dimensions, including macroeconomic conditions, regulatory developments, institutional participation, price action, sector narratives, and on-chain data. Based on this analysis, we outline key structural trends and potential opportunities heading into 2026. The objective is to distill the underlying logic of market movements and provide investors with a forward-looking analytical framework.

I. Macroeconomic Shift and Policy Tailwinds: The Wind at Crypto’s Back

1. Improving Global Macro Conditions

The global macro environment improved meaningfully in 2025. Easing inflation pressures prompted major central banks to pivot toward a more accommodative stance. The U.S. Federal Reserve concluded its two-year rate-hiking cycle in the first half of the year and initiated rate cuts before year-end. Its quantitative tightening program, launched in 2022, officially ended on December 1, 2025.

Expectations of declining borrowing costs lifted risk appetite across asset classes. U.S. equities entered an AI-driven bull market led by technology stocks, with the S&P 500 repeatedly setting new highs. At the same time, the strength of U.S. equities partially diverted capital away from crypto, resulting in relative underperformance of digital assets versus equities during parts of the year.

In commodities, a weaker U.S. dollar and heightened geopolitical risks pushed gold prices steadily higher, repeatedly setting record highs amid strong safe-haven demand. Oil and other commodities rose more moderately as global demand recovered.

Overall, macro conditions were broadly supportive of crypto through the first three quarters of 2025. A weaker dollar and peaking interest rates provided a favorable liquidity backdrop. However, in the fourth quarter, rising global volatility and a sharp increase in U.S. Treasury yields reignited risk-off sentiment, temporarily pressuring high-beta assets such as cryptocurrencies.

2. Regulatory Easing in the United States

Following the conclusion of the 2024 U.S. presidential election, Donald Trump — widely viewed as crypto-friendly — returned to the White House and took office in January 2025. His administration moved quickly to deliver a decisive regulatory shift, sending the strongest pro-crypto policy signals seen to date.

The passage of the GENIUS Act established a clear regulatory framework for U.S. dollar stablecoins, defining reserve requirements and compliant issuance standards. In parallel, bipartisan lawmakers advanced a new digital asset market structure bill that clarified the regulatory boundary between securities and commodities, formally recognizing the legal status of major assets such as Bitcoin and Ethereum. Together, these measures marked a shift away from enforcement-driven suppression toward a more pragmatic, rules-based regulatory approach.

Regulatory agencies also adjusted their posture. Both the SEC and CFTC emphasized clearer guidance and industry collaboration while maintaining consumer protection objectives. Notably, the CFTC adopted a more open stance toward prediction markets, treating them as event-based derivatives and allowing compliant platforms to operate.

Improved U.S. regulatory clarity produced global spillover effects. Europe formally implemented the MiCA framework in 2025, introducing unified standards for issuance, trading, and custody. Hong Kong rolled out a comprehensive virtual asset exchange licensing regime and advanced stablecoin regulation, positioning itself as a regional crypto hub. Jurisdictions such as Singapore and the Middle East further optimized tax and compliance policies to attract crypto capital and talent. In contrast, mainland China maintained its strict prohibition on crypto trading and reiterated its anti-speculation stance toward the end of the year, underscoring growing global regulatory divergence.

Overall, the global regulatory environment for crypto improved significantly in 2025. U.S. policy easing enabled large-scale entry of compliant capital and encouraged other jurisdictions to accelerate regulatory experimentation, laying a solid foundation for the market expansion seen in the first half of the year.

3. Traditional Finance Embraces Crypto

Alongside regulatory progress, traditional financial institutions accelerated their adoption of crypto assets in 2025, pushing the industry further into the mainstream.

Spot Bitcoin ETFs scaled rapidly following U.S. approval at the end of 2024. ETF inflows surged throughout 2025. By December 25, total assets under management of U.S. spot Bitcoin ETFs reached approximately USD 117.3 billion, representing more than 1.21 million BTC, or about 6.13 percent of total supply. Ethereum ETFs reached roughly USD 17.1 billion in AUM. In the second half of the year, an “altcoin ETF wave” emerged, with products linked to XRP, SOL, LTC, DOGE, HBAR, LINK, and others gaining approval.

Source: https://www.coinglass.com/bitcoin-etf

Accounting rule changes allowing crypto assets to be marked at fair value further accelerated adoption. A growing number of small- and mid-cap public companies followed MicroStrategy’s playbook by allocating treasury reserves to Bitcoin and Ethereum, effectively transforming into Digital Asset Treasury firms. According to CoinGecko, 193 listed companies announced crypto treasury strategies, collectively raising over USD 120 billion to acquire assets such as BTC, ETH, SOL, and BNB. In several cases, equity valuations surged sharply following disclosure of crypto holdings.

Source: https://www.coingecko.com/en/treasuries/companies

Institutional demand expanded further. Products such as Grayscale trusts continued to attract secondary-market inflows, while reports indicated that sovereign wealth funds in the Middle East and Asia accumulated Bitcoin during the Q4 drawdown. In addition, the U.S. Department of Labor loosened restrictions on retirement plans investing in digital assets, allowing limited allocations to approved crypto funds or ETFs. This change opened a long-term pathway for retirement capital to enter the crypto market.

At the same time, traditional capital markets began experimenting with on-chain equity issuance. Nasdaq and other institutions launched pilot programs to issue tokenized equities on permissioned blockchains, while platforms such as xStocks and Ondo rolled out tokenized stock products integrated with major trading venues. These developments point to accelerating convergence between traditional securities markets and blockchain infrastructure.

Taken together, 2025 marked a turning point in which traditional finance embraced crypto across regulation, products, and capital allocation. Crypto assets are increasingly integrated into mainstream portfolios, signaling the early stages of sustained liquidity convergence between Wall Street and the crypto ecosystem.

II. Market Performance Review: A Roller-Coaster Shift Between Bull and Bear

1. Overall Market Characteristics: Sharp Rises and Abrupt Reversals

The crypto market in 2025 followed a pronounced boom-and-bust trajectory. Building on momentum from late 2024, major assets such as Bitcoin and Ethereum advanced steadily and reached new all-time highs around the third quarter. However, in the fourth quarter, the market reversed sharply amid leverage compression and panic-driven deleveraging, resulting in a clear “front-loaded highs, back-loaded declines” annual pattern.

Source: https://www.coinglass.com/currencies/BTC

After Bitcoin broke above USD 100,000 at the end of 2024, prices continued to rise through inertia. In January 2025, MicroStrategy announced another large-scale BTC purchase, briefly pushing prices close to USD 107,000. The market then entered a consolidation phase in February and March, with Bitcoin pulling back modestly but consistently holding above USD 80,000 — laying the groundwork for the next advance.

As U.S. regulatory tailwinds strengthened, ETF inflows persisted, and expectations grew around Bitcoin’s potential recognition as a strategic reserve asset, BTC resumed its uptrend in the second quarter. From roughly USD 95,000 at the start of the year, Bitcoin climbed to around USD 120,000 by early Q3, representing a seven- to eight-fold increase from the 2022 bear-market low near USD 16,000.

Unlike previous cycles, this rally was relatively orderly and lacked extreme vertical price expansion. Incremental capital was largely concentrated in Bitcoin and a small group of top-tier assets, rather than broadly distributed across the altcoin market — reflecting a more selective and institutionally driven allocation pattern.

The inflection point arrived abruptly. In early October, Bitcoin surged on heavy volume to an all-time high near USD 126,000 without a clear negative catalyst. On October 11, market liquidity suddenly reversed. Multiple centralized exchanges experienced unusually large sell orders almost simultaneously, triggering a cascading liquidation event. Within days, Bitcoin fell through the USD 120,000, USD 100,000, and USD 90,000 psychological levels, bottoming near USD 80,000 — nearly a 37 percent drawdown from the peak. Ethereum declined in parallel, falling from around USD 5,000 to approximately USD 3,000.

Altcoins suffered significantly deeper losses. Data indicate that most non-BTC tokens retraced between 80 percent and 99 percent from their 2025 highs, with many smaller assets effectively collapsing. This event — comparable in severity to the May 2021 and March 2020 sell-offs — became known within the industry as the “10/11 Panic Night,” marking a decisive end to the bull phase.

Following the sell-off, the market entered a prolonged stabilization period. Bitcoin briefly tested levels near USD 80,000 in mid-November before gradually recovering. By year-end, BTC traded around USD 90,000, while Ethereum hovered slightly above USD 3,000 — close to its level at the start of the year. Altcoins, however, remained structurally impaired, with many second- and third-tier tokens posting annual losses exceeding 50 percent.

In contrast, traditional risk assets such as U.S. equities experienced only limited pullbacks and remained near annual highs. This divergence suggests that the depth of the crypto drawdown in 2025 was driven primarily by internal leverage unwinding and market structure fragility, rather than a broad-based macroeconomic shock.

2. Structural Signals Beneath the Volatility

Behind the sharp price fluctuations, on-chain data provided a clearer picture of capital allocation, user behavior, and structural shifts within the crypto ecosystem in 2025.

First, specialization across major blockchains became more entrenched. Ethereum continued to function as the primary settlement layer and the largest liquidity base, while Solana, BNB Chain, and Base increasingly served as high-throughput “traffic chains” for trading-intensive and consumer-facing applications. From a DeFi TVL perspective, Ethereum maintained its dominant position throughout the year, with on-chain stablecoin supply remaining decisively ahead of other networks.

Source: https://defillama.com/chains

Second, trading activity and user engagement showed clear signs of migration. Solana repeatedly competed with Ethereum for the top position on a weekly transaction basis and briefly surpassed it during peak periods. BNB Chain absorbed substantial spot trading and liquidity demand through core applications such as PancakeSwap, while transaction cost efficiency improved markedly, enabling cheaper and more frequent activity. Base followed a more product-driven growth trajectory; by year-end, it exhibited the classic profile of high transaction counts combined with a growing active address base, establishing itself as one of the strongest new entry points within the Ethereum ecosystem.

Third, fee and revenue generation increasingly shifted toward the application layer. In 2025, on-chain fees were no longer driven solely by L1 or L2 infrastructure usage. Instead, trading venues, wallets, and consumer applications contributed a growing share of network revenue, signaling a transition from an “infrastructure-led” narrative toward a “cash-flow-driven” one. This shift also helps explain why liquidity in Q4 displayed rapid inflow-and-outflow dynamics once macro or risk events emerged.

Fourth, stablecoins and yield strategies acted as core binding agents within the ecosystem. Ethereum remained the primary hub for stablecoin issuance and yield products, while 2025 saw a notable expansion of yield-bearing stablecoins and structured strategies. Ethena’s USDe retained a multi-billion-dollar scale by year-end, emerging as a representative on-chain “yield-enhanced dollar.” Yield markets such as Pendle accumulated tens of billions in TVL by mid-year, with many composable strategies built around yield-bearing stablecoins like sUSDe — accelerating recursive loops of deposit, yield generation, restaking, and leverage.

Fifth, staking and lending continued to serve as the main conduits for large pools of capital. On Ethereum and Solana, protocols such as Lido and Jito advanced the financialization of staked assets. In lending markets, competition increasingly centered on capital efficiency using stablecoins and blue-chip collateral, with leading protocols absorbing both collateral and borrowing demand to support leverage and yield strategies.

Finally, centralized exchanges expanded aggressively into on-chain trading access. Binance Alpha integrated asset discovery and on-chain execution directly within the exchange interface, lowering barriers related to wallets and gas fees. Bybit Alpha pursued a similar account-based on-chain trading model, while Bitget emphasized unified multi-chain access. These hybrid models — where centralized platforms manage user experience and risk controls while blockchains handle settlement — amplified asset velocity during bull phases but also contributed to more synchronized liquidity withdrawals during the sharp Q4 risk-off move.

3. Investor Sentiment and Capital Flows: From Euphoria to Extreme Caution

Investor sentiment in 2025 underwent a rapid transition from exuberance to deep caution. During the first half of the year, retail participation rebounded, crypto-focused social platforms regained activity, and narrative-driven themes — from AI-related tokens to meme assets — rotated rapidly. Compared with previous cycles, however, the lifespan of these narratives shortened significantly. Themes that once sustained momentum for months often peaked and faded within days, reflecting faster capital rotation and lower tolerance for prolonged speculation.

Following the October drawdown, market sentiment deteriorated sharply. Fear-and-greed indicators fell into extreme fear territory, and by year-end, Bitcoin’s 30-day realized volatility had declined to multi-year lows — signaling widespread risk aversion and reduced leverage.

At the same time, on-chain data revealed a notable divergence beneath the surface. After the October sell-off, the number of large Bitcoin addresses — typically associated with holdings exceeding 10,000 BTC — began to increase. This pattern suggests that long-term, institutionally aligned capital, including sovereign and quasi-sovereign investors, accumulated exposure during periods of market stress.

Looking ahead, these dynamics imply that the 2026 market may be structurally more mature than 2025. Investment behavior could gradually shift away from short-lived narrative chasing toward longer-term value allocation. Such a transition would likely reduce extreme volatility while laying the groundwork for more sustainable price appreciation.

III. Key Themes in the Crypto Industry in 2025

Despite sharp price volatility, 2025 was not merely a year defined by market fluctuations. The crypto industry continued to deliver meaningful technological progress, application-level innovation, and structural shifts that are likely to shape its long-term trajectory.

1. Institutionalization and Compliance: Crypto Comes of Age

For many market participants, 2025 marked crypto’s long-anticipated “coming of age,” signaling a transition from retail-driven speculation toward an institution-led infrastructure phase. Institutions increasingly became marginal price setters for crypto assets. In the fourth quarter alone, weekly inflows into U.S. spot Bitcoin ETFs exceeded USD 3.5 billion, far surpassing net retail trading flows.

Institutional participation introduced a dual effect. On one hand, long-term capital with lower turnover reduced volatility and improved price discovery. On the other hand, institutional capital proved more sensitive to macroeconomic conditions, tightening the linkage between crypto markets and global liquidity cycles. As a result, periods of monetary tightening exerted more immediate pressure on crypto prices than in previous cycles.

Compliance emerged as a key competitive moat. Platforms with licenses, robust risk controls, and mature regulatory-technology infrastructure gained institutional trust and expanded market share, while non-compliant venues were increasingly marginalized or shut down. U.S.-regulated exchange Coinbase, for example, reported record user growth and revenues, while a new wave of compliant decentralized financial infrastructure — such as trust-minimized custody solutions on Ethereum — began to take shape.

2. Stablecoins: Legislative Clarity and Expanding Use Cases

The passage of U.S. stablecoin legislation required issuers to hold high-quality short-term assets as reserves and submit to regular audits. This significantly enhanced the credibility of major stablecoins such as USDC and USDT, while encouraging broader participation from traditional financial institutions.

On-chain stablecoin transaction volume reached approximately USD 46 trillion in 2025, reinforcing stablecoins as crypto’s most widely adopted application. At the same time, several risk events highlighted persistent structural vulnerabilities. Yield-driven or algorithmic stablecoins such as XUSD collapsed due to excessive reliance on endogenous leverage, with prices falling as low as USD 0.18. These failures resulted in nearly USD 93 million in user losses and approximately USD 285 million in protocol bad debt, underscoring the risks associated with overly complex stablecoin designs.

Overall, fiat-backed stablecoins further strengthened their dominance. By year-end, the circulating supply of USD-denominated stablecoins continued to grow steadily, alongside expanding real-world use cases. Enterprises increasingly used stablecoins for cross-border trade settlement to bypass the cost and latency of SWIFT; consumers paid via third-party payment rails; and residents in high-inflation regions such as Latin America and Africa treated USD stablecoins as a store of value. Industry forecasts projected stablecoins would become ubiquitous in 2026, penetrating deeper into traditional finance and corporate treasury operations.

3. Real-World Assets (RWA): From Narrative to Scale

In 2025, tokenized real-world assets transitioned from conceptual hype to scalable deployment, becoming a meaningful segment of crypto capital markets. As institutions sought access to traditional yield on-chain, assets such as government bonds, real estate, and equities were increasingly tokenized. By year-end, total RWA token market capitalization exceeded USD 19 billion, with roughly half backed by U.S. Treasuries and money market funds.

Source:https://app.rwa.xyz/

BlackRock issued approximately USD 500 million in tokenized U.S. Treasuries via its BUIDL product. Meanwhile, established Wall Street institutions including JPMorgan and Goldman Sachs moved RWA infrastructure from pilot stages into production. Platforms such as JPM’s Onyx and Goldman Sachs’ GS DAP began processing real transactions on-chain, including corporate loans and receivables.

Stablecoin issuers also benefited from the RWA trend. USDT and USDC issuers increased allocations to short-term U.S. Treasuries to enhance transparency and yield. MakerDAO introduced on-chain commercial paper and Treasury assets into DAI collateral pools, anchoring stablecoin issuance to real-world income. Treasury-backed stablecoins increasingly functioned as digital dollar instruments rather than purely crypto-native constructs.

Perhaps the most significant shift was in investor mindset. Rather than purchasing synthetic assets pegged to off-chain prices, investors increasingly favored assets natively issued on-chain. The RWA expansion catalyzed a new class of infrastructure providers specializing in asset issuance, settlement, compliance, and custody. Oracles played a critical role, enabling reliable valuation of off-chain assets and driving closer collaboration between oracle networks and traditional data providers.

RWA adoption also expanded DeFi’s collateral base. Whereas DeFi lending historically relied almost exclusively on crypto-native assets, select protocols began accepting rigorously risk-managed RWA tokens — particularly Treasury-backed instruments — as collateral for borrowing and stablecoin issuance. This integration bridged on-chain and off-chain capital markets, enhancing system stability.

4. Artificial Intelligence × Blockchain: Toward an AI-Native Economy

The convergence of AI and blockchain advanced from proof-of-concept to early-stage deployment in 2025. Of particular significance was the emergence of AI agents as economic actors capable of interacting directly with crypto-native infrastructure.

Driven by companies such as Coinbase, Google, and Salesforce, the X402 protocol gained rapid traction. X402 enables AI systems to autonomously pay for web resources in real time, supporting low-cost, high-frequency microtransactions. This design aligns naturally with AI workloads. Startups built around X402 explored use cases including autonomous data marketplaces for model training, IoT devices paying for maintenance services, and machine-to-machine commerce.

Beyond payments, AI adoption expanded into governance and investment. AI-assisted DAOs emerged, using models to analyze proposals, detect contract vulnerabilities, and automate operational decisions. AI trading agents attracted strong interest from quantitative investors, with funds training models to analyze on-chain sentiment and macro indicators to execute arbitrage and hedging strategies. While challenges around transparency and regulation persisted, AI’s advantages in speed and data processing became increasingly evident.

New token economic models also emerged. Some AI networks issued utility tokens granting access to compute or inference services, while content platforms combined AI-generated works with NFTs, allowing holders to benefit from iterative model improvements. Although many AI-crypto projects saw valuations compress after early hype, leading projects — particularly in security auditing and risk modeling — demonstrated real revenue generation and sustainable demand.

5. DeFi Ecosystem: The Rise of Perp DEXs and Prediction Markets

Decentralized perpetual futures exchanges (Perp DEXs) became a major force in crypto derivatives markets. Platforms such as Hyperliquid and Aster recorded record trading volumes in 2025, supported by incentives including trading rewards and fee rebates. Aggregate decentralized derivatives volume reached all-time highs, marking DeFi derivatives’ transition from niche experimentation to systemically relevant infrastructure.

Source: https://defillama.com/perps

Prediction markets also experienced a breakout year. Supported by relatively permissive regulatory conditions and surging user interest, platforms such as Polymarket saw explosive growth, becoming one of the fastest-growing DeFi verticals. Beyond entertainment-focused political or sports betting, prediction markets were increasingly used for corporate risk hedging and macro uncertainty management, expanding DeFi’s functional scope.

Another notable trend was the rise of yield-focused and structured DeFi products. Traditional financial institutions experimented with DeFi lending protocols to improve capital efficiency in trade finance. At the same time, structured yield products combining options and lending emerged to meet institutional demand for stable or enhanced returns, segmenting yield exposure into fixed and leveraged tranches.

However, security risks persisted. In 2025, Balancer V2 and its forks suffered exploits totaling approximately USD 128 million. Complex yield aggregators and algorithmic strategies collapsed during the market downturn due to excessive leverage and opaque controls, with some tokens effectively going to zero. Information finance (InfoFi) platforms also experienced boom-and-bust cycles, as unsustainable incentive models and low-quality AI-generated content eroded user trust.

6. SocialFi and NFTs: New Attempts at Content and Distribution

SocialFi experimentation continued in 2025, with initiatives such as creator DAOs enabling transparent revenue sharing through NFT-based funding models. However, no breakthrough applications achieved mass adoption, and most users continued to rely on centralized platforms for crypto information.

The NFT market became more rational. Following the 2021 bubble and the 2022–2023 downturn, 2025 saw no new systemic NFT mania, though several niches performed well. High-end art and luxury NFTs gained institutional acceptance, with major auction houses hosting dedicated NFT sales and blue-chip collections maintaining relative price stability.

Utility-driven NFTs — such as those tied to music rights and ticketing — expanded by offering ongoing benefits rather than purely speculative value. Gaming NFTs also evolved, with models emphasizing free access and optional in-game purchases, using on-chain interoperability to enhance retention.

IV. Outlook for 2026: A Market Rebuilding Momentum

After the sharp rally and subsequent correction of 2025, the key question facing the crypto market is the nature of the landscape it will enter in 2026. Based on prevailing macroeconomic trends and structural developments within the industry, the following forward-looking assessment outlines the most likely dynamics shaping the next phase.

1. Macroeconomic Environment: Liquidity Reshaping Opportunities

Expectations around the U.S. Federal Reserve’s rate-cutting cycle are likely to continue materializing in 2026. Should U.S. economic growth decelerate more materially, the magnitude of rate cuts could exceed current market expectations. A looser monetary environment would provide renewed liquidity support for risk assets, including Bitcoin, and could contribute to a broader re-expansion of global liquidity.

At the same time, geopolitical and trade-related uncertainties remain elevated, even as fiscal stimulus is expected to play a supporting role. Overall risk appetite may therefore remain constructive. However, traditional markets — particularly U.S. equities — have already accumulated substantial gains, and certain segments, such as AI-related equities, show signs of valuation stress. If traditional asset markets experience a correction in 2026, short-term spillover pressure on crypto assets cannot be ruled out.

As a result, macroeconomic forces are likely to exert a dual influence on crypto markets. On one hand, accommodative liquidity conditions and the potential for renewed inflation support the store-of-value narrative for major crypto assets. On the other hand, sharp risk-off moves driven by equity market corrections could still weigh on crypto prices in the short term. Overall, the macro backdrop for 2026 appears more constructive than in 2025, though cross-market risk transmission will warrant close monitoring.

2. Policy and Regulation: Deepening Global Competition and Coordination

The United States is expected to remain the key directional signal for global crypto regulation in 2026. The Trump administration is likely to maintain the relatively supportive stance established in 2025 and may pursue additional initiatives. These could include renewed discussion around recognizing Bitcoin as part of national reserves, as well as advancing legislative clarity on the definition of security tokens and the respective jurisdictions of the SEC and CFTC — providing regulatory certainty for projects previously operating in gray areas.

In Europe, early discussions around a potential “MiCA 2.0” framework may emerge, extending regulatory coverage to DeFi and NFTs. Hong Kong and Singapore are expected to intensify competition for Web3 companies through more attractive licensing regimes and tax incentives, while Japan and South Korea may selectively relax token listing restrictions to revitalize domestic crypto ecosystems. At the same time, international regulatory coordination is likely to strengthen, particularly around anti-money laundering standards and cross-border stablecoin oversight.

Looking ahead, 2026 may see early efforts to establish shared global standards for stablecoin regulation, alongside discussions on coexistence frameworks between central bank digital currencies and privately issued stablecoins. As crypto markets grow in size and interconnectedness with traditional finance, systemic importance is likely to become a more prominent regulatory consideration. Authorities may begin incorporating crypto into macroprudential oversight frameworks and developing contingency plans for extreme market scenarios.

Overall, the regulatory tone in 2026 is likely to shift toward normalization. Crypto assets may no longer be treated as anomalies requiring exceptional responses, nor as speculative novelties deserving blanket promotion, but rather as components of the broader financial system subject to proportionate oversight. This evolution should support long-term industry health, although localized regulatory tightening remains possible in response to major fraud or compliance failures.

3. Institutional Deepening: Advancing Mainstream Integration

Institutional participation is expected to broaden further in 2026, both in scale and in form. One notable development could be the formal rollout of Bitcoin and Ethereum allocation options within retirement products such as 401(k) plans, subject to regulatory approval. Even a modest allocation — on the order of one percent of U.S. pension assets — could translate into hundreds of billions of dollars in potential inflows, representing a powerful structural demand driver.

Sovereign wealth funds and commercial banks are also likely to expand their engagement with digital assets. Some national reserve funds may follow the examples of Singapore or the UAE by allocating to Bitcoin ETFs or supporting domestic digital asset initiatives. Large Western banks may introduce compliant digital asset custody, brokerage, and advisory services, formally incorporating crypto into wealth management offerings.

At the same time, the industry is likely to see continued refinement on both product and regulatory fronts. A wider range of structured products — such as volatility-linked ETFs or yield-bearing tokenized instruments — may emerge to meet diverse risk preferences. Exchanges and custodians are also expected to strengthen transparency, capital adequacy, and risk controls, reducing the likelihood of disorderly deleveraging events.

As institutional participation deepens, market structure will continue to evolve. Trading activity may increasingly concentrate in OTC markets and ETFs, volatility could moderate further, and Bitcoin’s role as a macro-linked asset and hedge may become more pronounced. Broader institutionalization may gradually erode the sharp four-year boom-and-bust cycle, replacing it with a more extended and incremental growth trajectory. While this may reduce the frequency of outsized speculative gains, it enhances the asset class’s durability and appeal to long-term capital.

4. Technology and Applications: Six Structural Forces Shaping the Next Phase

Six key structural forces are likely to shape the evolution of the crypto market in 2026:

1. Store-of-value assets and financialization
Bitcoin and Ethereum are expected to undergo further financialization, with more mature derivatives and lending markets aligning their behavior closer to that of traditional assets such as gold. As volatility declines, these assets may attract more conservative capital allocations and achieve broader global adoption. While the impact of the halving cycle may diminish, Bitcoin’s role as “digital gold” is likely to become more entrenched.

2. Stablecoin expansion
Stablecoins may enter a phase of broad-based adoption in 2026. Large technology firms could develop proprietary stablecoin ecosystems, while additional jurisdictions may allow banks to directly hold and settle stablecoins. Payment networks such as Visa and Mastercard may further integrate stablecoins into clearing and settlement processes, enabling seamless on- and off-chain payments. At the same time, market consolidation is likely, with weaker projects exiting and liquidity concentrating around leading issuers such as USDT, USDC, PYUSD, and similar large-scale offerings.

3. Asset tokenization
The tokenization of real-world assets is expected to accelerate. Large exchanges and blockchain platforms may collaborate to launch tokenized securities trading segments with extended trading hours and global investor access. Financial product innovation is also likely to advance, with more hybrid ETFs and tokenized funds emerging to provide diversified exposure.

4. Convergence of DeFi and traditional finance
Deeper integration between DeFi protocols and traditional financial institutions may become increasingly common. Banks could begin offering DeFi-based lending products, while enterprise payment platforms may adopt smart contract infrastructure for settlement and reconciliation. DeFi-native features such as dynamic yield mechanisms and prediction markets may be embedded into traditional financial services, enhancing efficiency and risk management.

5. Deeper integration of AI and crypto
Early forms of the AI-driven crypto economy are already emerging. In 2026, AI agents may participate more actively in economic activity, with protocols such as X402 potentially becoming industry standards for automated micropayments in IoT and web services. AI-powered on-chain investment tools and risk models are likely to mature further, transitioning from experimental concepts to commercially viable solutions.

6. Privacy and security infrastructure
With increasing institutional and mainstream adoption, demand for privacy-preserving technologies is likely to grow. Advances in zero-knowledge proofs and multi-party computation may reach production readiness, enabling compliant, privacy-enhanced transactions and data sharing. Regulators may permit limited privacy-focused financial instruments within defined frameworks. On the security front, continued attention will be required for cryptographic upgrades in response to potential quantum computing threats, as well as evolving challenges related to social engineering and on-chain surveillance.

V. Outlook and Conclusion

Market Outlook: Bull Market, Bear Market, or Structural Transformation?

Views on the 2026 market outlook remain divided. Some argue that the market peaked in October 2025 and that the traditional four-year cycle remains intact, implying that 2026 could mark the onset of a prolonged bear market. Under this view, Bitcoin could retrace toward the USD 50,000–60,000 range as the market digests prior excesses. This perspective emphasizes macroeconomic lag effects, cyclical investor behavior, and the assumption that institutional capital will ultimately follow similar cycle dynamics.

In contrast, institutionally oriented and long-term asset managers argue that the current cycle has not yet concluded and may instead be extended. They contend that persistent institutional demand could lengthen the cycle to four and a half or even five years. From this standpoint, the roughly 30 percent drawdown in Q4 2025 represents a standard mid-cycle correction rather than a definitive market top, with bullish momentum potentially extending through 2026 and driving Bitcoin to new highs.

Our assessment aligns more closely with a third scenario: the emergence of a “weak-cycle, long-bull” paradigm. Rather than repeating the extreme boom-and-bust patterns of prior cycles, the crypto market in 2026 is more likely to experience several moderate drawdowns driven by macro fluctuations, while the overall price center of gravity continues to rise. In practical terms, assuming no severe global recession or systemic shock, major assets such as Bitcoin and Ethereum are more likely than not to trade above their early-2026 levels by year-end.

This view is broadly consistent with positioning from major asset managers. Strategy reports from institutions such as BlackRock suggest that as volatility declines, crypto assets may increasingly be incorporated into traditional portfolio allocation frameworks. Even in the absence of explosive price appreciation, 2026 could represent a year of continued structural rebuilding and normalization. That said, investors should remain attentive to key risks, including regulatory uncertainty tied to political cycles, technological vulnerabilities, and unpredictable macroeconomic events.

Conclusion

Looking back on 2025, the crypto market oscillated sharply between euphoria and capitulation. The year delivered both new all-time highs and sudden, severe drawdowns. Greed and fear alternated in dominance, while innovation and structural change continued to accumulate beneath the surface. Regulatory realignment, accelerating institutional participation, and the rise of new narratives such as real-world assets, AI-driven crypto applications, and prediction markets all point to an industry progressing steadily toward maturity.

As the market enters 2026, it may no longer exhibit the same extremes of collective excitement or despair seen in previous cycles. Instead, progress is more likely to unfold through rational capital allocation and incremental construction. For investors, this shift may prove constructive rather than disappointing: fewer speculative windfalls, but stronger foundations for long-term value creation; fewer illusions, but more tangible adoption and real-world integration.

As excesses fade, resilient projects and assets will become more visible. With cautious optimism and disciplined analysis, the market now approaches its next phase of evolution. The coming year may not be defined by spectacle, but by substance — and in that sense, the next chapter of the crypto market is just beginning.

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Hotcoin Research, the core research and investment arm of Hotcoin Exchange, is dedicated to turning professional crypto analysis into actionable strategies. Our three-pillar framework — trend analysis, value discovery, and real-time tracking — combines deep research, multi-angle project evaluation, and continuous market monitoring.

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