The year 2025, when the old script fails
The year 2025 is coming to a close, yet the cryptocurrency market is presenting an unprecedented "split" phenomenon: Bitcoin (BTC) has repeatedly hit new highs driven by institutional funds, reaching as much as $125,000; Ethereum (ETH) is struggling around $2,800, still with a significant gap from its historical peak; while the once "rising tide lifts all boats" altcoins have fallen into the abyss, with most projects plummeting 80-95% from their 2021 highs, unable to recover even against the backdrop of BTC hitting new highs.
This is a complete departure from the classic narrative of the cryptocurrency market over the past decade. The traditional "four-year cycle" script — "BTC rises first → ETH follows → altcoins surge" — seems to have completely failed in 2025. The strategies familiar to old players, such as the "carving the boat to seek the sword" approach, have now become a joke of "carving the boat to seek fish."
Meanwhile, 2026 outlook reports released by institutions such as Grayscale and CoinShares further reinforce a harsh reality: the "class solidification" in the crypto market is accelerating—BTC is becoming the "digital gold" of institutional asset allocation, while altcoins are becoming the "twilight of the gods" due to liquidity depletion.
Is this a temporary failure of the cycle or a permanent change in market structure? This article will analyze this ongoing "crypto paradigm shift" from four dimensions: observation of phenomena, underlying mechanisms, institutional behavior, and liquidity structure.
I. Phenomenon Observation: The "Significant Divergence" Between BTC and Altcoins
1.1 Data Doesn't Lie: Unprecedented Performance Divergence
The crypto market in 2025 can be aptly described as a "tale of two extremes".
1. Bitcoin's "Never-Setting Sun":
Solid price performance: It rose from about $70,000 at the beginning of the year to a high of $125,000 (+78%), and even after the pullback, it has remained in the $86,000-$88,000 range.
Institutional funds are pouring in: net inflows of tens of billions of dollars into spot ETFs, with products like BlackRock's IBIT dominating the market.
The supply of BTC is highly concentrated: ETFs hold over one million BTC, while MicroStrategy holds approximately 670,000 BTC (3.2% of the circulating supply).
Increased market dominance: BTC's market capitalization share has surged from 50% at the beginning of 2024 to the current 59-60%, a new high in recent years.
2. Ethereum's "midlife crisis":
Significantly lagging behind in gains: Limited year-to-date gains, currently priced at around $2,800, far underperforming BTC.
Relative value collapse: The ETH/BTC exchange rate has fallen to its lowest level in recent years, more than 60% lower than its all-time high.
Institutional interest is minimal: the total AUM of spot ETFs is far lower than that of BTC ETFs, and there have been periods of capital outflow.
On-chain activity is sluggish: Gas fees have dropped significantly, reflecting weak user activity and network demand.
3. The "Ragnarok" of Altcoins:
Seasonal indicator collapses: The Altcoin Season Index remained below 20 throughout the year (above 50 indicates an altcoin season), marking the longest slump in history.
Generally underperforming the market: Most of the top 100 projects by market capitalization have underperformed BTC this year, with many projects falling more than 80% from their 2021 highs.
New Coins Immediately Fall Below Initial Offering Price: In 2025, it became common for new coins launched on major centralized exchanges (CEXs) to immediately fall below their initial offering price, with VC coins becoming "poison pills."
Liquidity depletion: Daily trading volume of altcoins has plummeted by more than 70% compared to 2021, and insufficient liquidity on centralized exchanges means that any selling pressure can trigger a collapse.
1.2 Historical Comparison: This Time It's "Really Different"
Looking back at the past three bull markets, the rotation logic of "BTC→ETH→altcoins" is almost an ironclad rule of the market:
The 2017 Bull Market: A Classic Three-Stage Rocket
BTC rose from $1,000 to $20,000 (+1,900%)
ETH surged from $8 to $1,400 (+17,400%)
The ICO bubble burst, and altcoins generally saw price increases of 50 to 500 times.
The 2020-2021 Bull Market: The DeFi and NFT Frenzy
BTC rose from $10,000 to $69,000 (+590%).
ETH rose from $200 to $4,800 (+2,300%).
The DeFi Summer and NFT craze have driven altcoins to generally increase by 10-100 times.
2024-2025 Bull Market: Transmission Mechanism Failure
BTC has surged from its lows to $125,000 (+78%).
ETH saw limited gains, hovering around $2,800.
Altcoins collectively faltered, even continuing to fall when BTC hit a new high.
The core difference is obvious: In 2025, BTC's gains no longer "spilled" into ETH and altcoins; funds seemed to be blocked within the BTC ecosystem by an invisible wall. This wall is called "institutionalization."
II. Underlying Mechanisms: How Institutional ETFs "Rewrite the Rules of the Game"
2.1 Bitcoin becomes the "shadow of US tech stocks"
In January 2024, the U.S. SEC approved a spot BTC ETF, marking the beginning of the "institutional era" in the crypto market. However, a side effect of this milestone was that BTC gradually detached itself from the native crypto narrative and became a "satellite asset" of traditional finance.
High linkage with Nasdaq
In 2025, the 30-day correlation coefficient between BTC and the Nasdaq 100 index remained stable in the range of 0.75-0.85, reaching a record high; while the correlation with gold dropped below 0.2. When US tech stocks (such as Nvidia and Tesla) surged, BTC ETF inflows accelerated; when US stocks corrected, BTC fell in tandem.
A fundamental shift: BTC is no longer "digital gold" (a safe-haven asset), but rather "digital technology stock" (a risky asset). Its pricing power has shifted from crypto natives to Wall Street fund managers.
The "one-way siphon effect" of institutional buying
Clients of traditional asset management giants like BlackRock and Fidelity (pensions, family offices, high-net-worth individuals) only recognize BTC and avoid altcoins. The reason isn't necessarily a deep understanding of crypto technology, but rather a synergy of "regulatory compliance + sufficient liquidity + brand recognition."
There are SEC-approved spot ETFs for BTC.
BTC has CME futures and a well-developed derivatives market.
BTC has 15 years of brand building experience.
In contrast, altcoins are still considered "unknown assets" by institutions, with regulatory risks, liquidity risks, and project risks overlapping, making them impossible to pass the due diligence of traditional financial institutions.
The structural solidification of capital flows: In 2025, of the tens of billions of dollars flowing into BTC ETFs, more than 95% were locked in the BTC ecosystem, with less than 5% flowing into ETH/altcoins through over-the-counter trading or DeFi bridging. This is in stark contrast to the past "capital spillover effect".
MicroStrategy's "Unlimited Ammo" Mode
Michael Saylor's MicroStrategy has become another dominant force in the BTC market. Through convertible bond issuance and stock offerings, the company has consistently bought BTC, currently holding approximately 670,000 coins (at a cost of about $30 billion).
More importantly, MSTR's stock price has consistently traded at a 2-3 times premium to the value of its BTC holdings, making it a proxy tool for retail investors to "leverage long BTC." This creates a positive feedback loop:
MSTR stock price rises → market capitalization expands → increased debt issuance capacity → more BTC is bought → pushing up BTC price → MSTR stock price rises again.
This "corporate hoarding" model further siphons funds that could have flowed into altcoins, strengthening BTC's dominance.
2.2 Why is ETH "falling behind"? Layer 2's "vampire attack"
Ethereum's weak performance is not only due to institutional lack of support, but also due to internal conflicts within its own ecosystem.
Layer 2 liquidity dispersion dilemma
The total value locked (TVL) of Layer 2 networks such as Arbitrum, Optimism, Base, and zkSync has exceeded tens of billions of dollars, approaching 60% of the mainnet's total. However, the problem is that these L2 tokens (ARB, OP, etc.) have not brought sufficient value capture to ETH, but instead have diverted users and funds.
The core contradiction is that when users transact on L2, the gas fees they pay are in L2 tokens or stablecoins, not ETH. The economic model of L2 is structurally decoupled from the ETH mainnet—the more successful L2 becomes, the lower the demand for ETH. This is a classic "vampire attack."
The "Prisoner's Dilemma" of Staking Rewards
After ETH switched to PoS, the annualized staking yield is approximately 3-4%. Although liquidity staking derivatives (such as Lido's stETH) account for a significant proportion of the total staking volume, this has not driven up the price of ETH.
The paradox is that while locked-up staked ETH reduces circulating supply (which should theoretically benefit prices), it also reduces speculative demand (effectively suppressing prices). ETH has been downgraded from a "programmable currency" to an "interest-bearing bond," but its 3-4% yield cannot compete with the 4.5% yield of US Treasury bonds, and it fails to attract crypto investors seeking high returns.
The narrative vacuum of lacking killer apps
The DeFi Summer and NFT craze of 2021 made Ethereum synonymous with "world computer." But by 2025:
DeFi total value locked has halved from its peak.
NFT transaction volume plummeted by 90%
Emerging applications such as AI Agents and on-chain games have not yet achieved economies of scale.
The narrative contrasts sharply: BTC has a clear positioning as "digital gold + institutional allocation", Solana has a market consensus as "high-performance public chain + meme culture", while ETH's positioning is ambiguous - it is neither "hard currency" nor "sexy".
2.3 The "Liquidity Black Hole" of Altcoins
If BTC is the "empire on which the sun never sets" and ETH is experiencing a "midlife crisis," then altcoins are undergoing a true "twilight of the gods"—former star projects are falling one after another, and new projects are dying in the womb.
The "High FDV, Low Circulation" Death Trap of VC Coin
In 2024-2025, a large number of VC-backed projects launched with extremely high valuations (FDV often ranging from $1 billion to $5 billion), but the circulating supply was only 5-10%. This model was destined to fail.
Retail investors bought at high prices
The selling pressure from VCs and teams will last for 1-3 years.
Prices have been declining for a long time, and even valuable projects cannot escape this fate.
Typical case: When a well-known Layer 1 project launched, its FDV was $3 billion, while its circulating market capitalization was only $300 million. Six months later, the price plummeted by 80%, but the FDV still stood at $1 billion—the valuation remained inflated, while retail investors had lost everything.
Meme Coin's "Ponzi Game" and Market Fatigue
In 2025, the Meme tokens in the Solana ecosystem (such as BONK, WIF, and POPCAT) briefly attracted funds, but in essence, it was a "zero-sum game"—early players reaped profits from late players. Lacking real value support, 90% of the Meme tokens went to zero within 3 months.
Even more serious is the market fatigue effect: after being repeatedly "harvested" (Terra crash in 2022, FTX bankruptcy, VC coin collapse in 2024-2025), retail investors gradually distance themselves from the altcoin market, forming a psychological trauma of "once bitten, twice shy".
CEX's "Liquidity Depletion" and Death Spiral
Trading volume of altcoins on leading exchanges like Binance and Coinbase has plummeted by over 70% compared to 2021, while smaller exchanges are facing a wave of closures. Reasons include:
Regulatory pressure: SEC's ongoing lawsuits against Binance and Coinbase
User churn: Users are shifting to compliant products such as BTC ETFs.
Declining project quality: Bad money drives out good.
Insufficient liquidity leads to increased price volatility (a 10% depth order book may contain less than $100,000), further scaring away investors and creating a death spiral of "liquidity depletion → price crash → investor exodus → even greater liquidity depletion".
The dilemma of narrative exhaustion and homogeneous competition
2017 saw ICOs, 2020 saw DeFi, 2021 saw NFTs and the metaverse, 2024 saw AI and RWA... but in 2025, no new narrative can truly ignite the market.
The existing sectors (Layer 1, Layer 2, DeFi, NFT) are highly saturated, with projects being largely homogeneous, making it difficult for users to distinguish between good and bad projects. The end result: funds are unsure where to invest and simply remain "lying flat" in BTC.
III. Institutional Perspective: Grayscale and CoinShares' 2026 Predictions
3.1 Gray-Scale Report: The Dawn of the Institutional Era and the Hierarchical Pattern
In its 2026 Digital Asset Outlook: Dawn of the Institutional Era, Grayscale clearly states that the crypto market is entering a new phase dominated by traditional finance.
BTC: An Irreversible Institutionalization Process
Grayscale anticipates an accelerated structural shift in digital asset investment in 2026, driven by two main themes:
Macroeconomic demand for alternative store-of-value assets: Persistent fiscal imbalances, inflation risks, and global money supply growth are driving demand for BTC and ETH as scarce digital commodities.
Increased regulatory clarity: More countries are expected to approve crypto ETP products, and the US may pass bipartisan market structure legislation to further integrate blockchain finance.
Key catalysts include:
The 20 millionth Bitcoin is about to be mined: The 20 millionth BTC (total supply of 21 million) will be mined in March 2026. This milestone will reinforce the narrative of the fixed supply and scarcity of BTC.
Institutional allocation ratios are increasing: US state pension funds and sovereign wealth funds (such as the Harvard endowment and Mubadala in the UAE have already taken the lead) are gradually increasing their BTC allocation from the current less than 0.5% to a higher level.
Hedging against US dollar depreciation: Amid soaring US Treasury bonds and a global trend of de-dollarization, BTC's hedging properties as "digital gold" are becoming increasingly prominent.
Grayscale predicts that BTC is poised to reach a new all-time high in the first half of 2026, with breaking $150,000 becoming the baseline scenario.
ETH: "Sideways Consolidation" During a Painful Transformation
Grayscale openly stated that ETH is undergoing a "painful transformation," requiring time to adapt to institutional adoption and regulatory standards. The three main directions of this transformation include:
Layer 2 is deeply integrated with the mainnet: through improvements to the economic model (such as the further evolution of EIP-4844), the success of L2 can truly contribute to the value of ETH.
Institutional-grade DeFi/RWA applications: scaling up compliant use cases such as tokenized bonds and on-chain asset management
Massive adoption at the consumer level: On-chain social networking, gaming, and other applications break out of their "niche" circles.
However, these transformations will require 1-2 years to validate. Grayscale predicts that ETH is more likely to be in a "sideways consolidation" phase in 2026, with relatively limited price increases, far from replicating the explosive growth of 2017 or 2021.
Altcoins: A Layered Fate and a Battle for Survival
The report emphasizes that "not all tokens will successfully transition out of the old era," and altcoins will exhibit a clear stratification:
First Tier: Quasi-Institutional Grade Assets
Representative projects: Solana, Avalanche, Polygon
Features: Real users, institutional endorsement, and regulatory oversight.
Expected: It may attract some institutional funding, but its price increase will be far less than that of BTC.
Second Tier: Ecosystem and Utility Tokens
Representative projects: DeFi protocols (Aave, Morpho, Uniswap), AI chains (Bittensor, Near)
Features: Benefiting from real-world use case growth, supported by cash flow.
Expectations: Limited potential, but able to survive in the "era of practicality".
Third Tier: Speculative Tokens
Representative projects: Meme coin, pure narrative projects, and VC coins with high FDV and low circulation.
Characteristics: Lacks practical applications and relies on retail investor FOMO.
Expected outcome: High probability of marginalization or complete elimination.
Grayscale has clearly stated that the era of "universal price increases" for altcoins is over, and the traditional four-year halving cycle is crumbling, replaced by a more stable inflow of institutional capital. In the future, only projects with sustainable revenue, real users, and regulatory backing will survive; the rest will disappear in the process of natural selection.
3.2 CoinShares: From Speculation to Practicality, "Hybrid Finance" Defines the Future
CoinShares' (Outlook 2026: Toward Convergence and Beyond) report offers a more radical view: 2025 will be the last year of a speculative-driven market, and 2026 will shift towards utility, cash flow, and consolidation.
The Rise of "Hybrid Finance"
CoinShares introduces the concept of "Hybrid Finance": a deep integration of public blockchains and traditional financial systems, forming new infrastructure that neither can build alone. The core story for 2026 is "convergence":
1. Traditional institutions building on public blockchains:
BlackRock launches on-chain money market fund (BUIDL)
Franklin Templeton launches tokenized government bonds
Banks such as Citibank and HSBC are issuing bonds on private blockchains.
2. Stablecoins are shifting from crypto tools to global payments:
Regulatory frameworks such as the US GENIUS Act and the EU MiCA provide a green light.
Following Stripe's acquisition of Bridge, businesses can directly integrate stablecoin payments via API.
Stablecoin market capitalization moves from $200 billion to $500 billion.
3. The explosion of tokenization:
Private lending and tokenized government bonds dominate the market.
On-chain products offer faster settlement, lower costs, and global distribution.
The market capitalization of RWA (Real-World Assets) is projected to exceed $50 billion by 2026.
4. The Era of Value Capture:
Applications like Hyperliquid use revenue to buy back/burn tokens.
Tokens have been upgraded from "governance tools" to "equity assets".
Cash flow and fundamentals have become the core valuation indicators.
Institutional dominance and the disappearance of retail FOMO
CoinShares points out that BTC ETFs saw inflows exceeding $90 billion in 2025, demonstrating that institutional mainstreaming is irreversible. Meanwhile, retail investor FOMO sentiment has significantly weakened due to past traumas, a weak narrative, and regulatory uncertainty, with retail funds choosing to remain on the sidelines or limiting themselves to mainstream assets like BTC.
2026 Price Scenario Forecast
CoinShares offers three scenarios based on the macro environment:
Soft landing (baseline scenario): BTC breaks through $150,000, ETH follows with limited gains, and near-institutional altcoins see moderate increases.
Stable growth: BTC remains in the $110,000-$140,000 range, with reduced market volatility.
Stagflation/Recession: Short-term pressure but medium-term recovery, BTC's "digital gold" attributes become more prominent.
Core Prediction:
BTC's market capitalization share has further increased to over 65% (currently 59-60%).
Institutions dominate pricing power, while the influence of retail investors is marginalized.
Liquidity is concentrating on practical projects; only projects with "real users + real revenue + compliant pathways" will succeed.
90% of existing altcoins will be eliminated, and the market will complete a process of "survival of the fittest."
Ultimate assessment: CoinShares believes that 2026 will no longer be about digital assets "challenging" traditional finance, but rather about them becoming part of mainstream finance. Practicality will prevail, hybrid finance will define the future, and the crypto market will transform from a "disruptor" to an "integrator."
IV. Core Question: Has the four-year cycle truly come to an end?
4.1 The essence of the cycle: from "supply-driven" to "demand-driven"
The past four-year cycle was essentially a supply-side driven model:
The classic transmission of the halving effect: BTC halving → Reduced selling pressure from miners → Supply contraction → Price increase → FOMO (Fear of Missing Out) → Retail investor influx → Funds overflow to ETH → Then overflow to altcoins
The cyclical entry of new funds: Each bull market has new sources of funds (in 2017 it was ICO retail investors, in 2021 it was DeFi/NFT players and the pandemic money printing boom), and these funds follow the natural flow path of "BTC→ETH→altcoins".
Structural changes in 2025: Demand restructuring
However, in 2025, the demand side underwent a fundamental change:
Institutional funds have "targeted needs": they only buy BTC and not altcoins, preventing funds from "spilling out."
The "permanent absence" of retail investors' FOMO: After the 2022 crash, retail investors lost confidence in altcoins and dared not chase them even when BTC hit new highs.
The solidification of liquidity stratification: The liquidity pools for BTC, ETH, and altcoins have been completely separated, and funds can no longer flow freely as before.
Conclusion: The four-year cycle of "halving → BTC rise → altcoin rotation" has not ended, but its transmission mechanism has been disrupted by institutional investors. The future cycle may be a "lame bull market" characterized by "BTC rising alone → ETH barely following → altcoins continuing to decline".
4.2 Do altcoins have a future?
The answer is: most altcoins have no future, but a few sectors still have room to survive.
No future for knock-offs
VC coins with high FDV and low circulation: their economic model is inherently flawed, and retail investors will always be the ones left holding the bag.
Meme coins with no practical use: Except for a few "cultural symbols" (such as DOGE and SHIB), most will go to zero.
Homogeneous Layer 1/Layer 2: The market only needs 3-5 mainstream public chains (ETH, Solana, BNB Chain, etc.), the rest are "zombie chains".
The crypto market in 2025 is undergoing a painful but necessary "coming-of-age ceremony"—transforming from a retail-dominated speculative market to an institutional-dominated asset allocation market.
Bitcoin's enduring dominance is not a victory for crypto, but rather a result of traditional finance's "taming" of crypto. When BTC becomes a "shadow of US tech stocks," it gains liquidity and compliance, but loses its original purpose as a "decentralized currency." This is progress, but also a compromise.
The "Twilight of the Gods" for altcoins is not the end, but the eve of rebirth. When the bubble bursts and the bad money is eliminated, truly valuable projects will rise from the ruins. History always rhymes—every bubble bursts sows the seeds of the next era.
The four-year cycle hasn't ended; it's just changed its face. Future bull markets may no longer be a frenzy of "all cryptocurrencies rising together," but rather a brutal competition where "the strong get stronger and the weak are eliminated." In this competition, only those who understand the new rules, embrace institutionalization, and adhere to value investing will ultimately emerge victorious.
The data in this report was compiled and edited by WolfDAO. Please contact us if you have any questions for updates.
Written by: Nikka / WolfDAO (X: @10xWolfdao)
#Altcoin #ETH走势分析 #加密市场观察 #比特币流动性 #迷因币ETF
