The Fall of Cryptocurrencies in 2025: When Year-End Promises Turned into a Collapse

By the end of 2025, the cryptocurrency market faced a dramatic crash that dismantled months of accumulated expectations. What promised to be a spectacular year-end for Bitcoin and altcoins ended up being one of the worst year-ends in the sector’s recent history. Record-high price promises, backed by ETF flows, strategic digital asset treasuries (DATs), and historically favorable seasonal patterns, evaporated within weeks. The crypto market decline revealed an uncomfortable truth: institutionalization did not eliminate fragility, it only disguised it in a new form.

From initial euphoria to collapse: How catalysts failed

Entering Q4 2025, investors were riding unprecedented enthusiasm. Bitcoin was surfing a wave of strong ETF inflows, while analysts dusted off charts showing that the last three months of the year historically offered the most reliable winning streaks. Digital asset treasuries (DATs) — publicly traded companies replicating Michael Saylor’s accumulation strategy — promoted themselves as leveraged bets for the upcoming rally. Adding potentially more flexible monetary policy and a favorable political environment in Washington, many investors were convinced that Bitcoin would reach new all-time highs before the New Year.

However, that did not happen. A cascade of $19 billion in liquidations in October created a devastating liquidity hole, initiating a decline that would spread across all corners of the sector. Bitcoin collapsed from $122,500 to $107,000 in hours, with even steeper percentage drops in other cryptocurrencies. This event marked the start of a persistent decline that would last for the following months.

The downward cycle of the DATs: From structural buyers to forced sellers

The digital asset treasury accumulation strategy promised a price-driving effect. Publicly traded companies, most formed during 2025, tried to replicate Saylor’s model through continuous Bitcoin purchases. After a brief period of enthusiasm in spring, investors quickly lost interest.

When the crypto decline began in October, the dynamic reversed completely. DAT stock prices plummeted, with most falling below their net asset value (NAV) (Net Asset Value), limiting their ability to issue new shares and debt. What initially was a source of constant buying turned into a potential selling pressure mechanism.

The case of KindlyMD (NAKA) illustrates the problem: the stock went from being a high-yielding asset to a penny stock, with its Bitcoin holdings now worth more than twice the company’s total market capitalization. Many other companies face similar trajectories. Instead of converting investor fiat into crypto holdings, DATs began using capital to buy back their own shares. The promise of a multiplier effect turned into a downward spiral that threatens to amplify the market decline if more companies are forced to liquidate.

Altcoin ETFs: Promising entry but limited impact

The debut of spot altcoin ETFs in the US coincided unfortunately with deteriorating market sentiment. Despite this, some vehicles managed to attract significant inflows: Solana ETFs accumulated $900 million since late October, while XRP ETFs surpassed $1 billion in net inflows in just over a month.

However, this demand did not translate into price support. Solana (SOL) has fallen approximately 35% since its ETF debut, while XRP dropped nearly 20%. Smaller altcoin ETFs — Hedera (HBAR) at $0.11, Dogecoin (DOGE) at $0.13, and Litecoin (LTC) at $68.75 — registered insignificant demand as investors abandoned risk assets. The decline demonstrated that institutional ETF demand could not counteract the mass selling pressure from retail.

Broken seasonality: When the historical pattern fails

Analysts had pointed out a convincing historical pattern: since 2013, Q4 averaged a 77% return for Bitcoin, with an average gain of 47%. Of the last twelve years, eight Q4 quarters showed positive returns — the best success rate among all quarters.

2025 is on track to join the atypical years: 2022, 2019, 2018, and 2014, all deep bear markets. Bitcoin has fallen about 23% since early October. If these levels hold, it would be its worst last quarter in seven years. Patterns are not rules — this lesson was learned again at a high cost.

The liquidity vacuum that amplified every negative move

The $19 billion liquidation cascade on October 10 was damaging in multiple ways. It sent Bitcoin crashing from $122,500 to $107,000, with much larger percentage declines in altcoins. Many believed that institutionalization through ETFs would make cryptocurrencies immune to such events, but in reality, it revealed that the market, historically dominated by speculation without fundamentals, had simply adopted a new form.

Two months after the initial crash, market liquidity and depth had not recovered. Bitcoin hit a local low on November 21 at $80,500, later rebounding to $94,500 on December 9. Currently, in January 2026, Bitcoin trades near $90,050, reflecting ongoing volatility post-crash.

A critical indicator revealed the nature of this rebound: open interest continued to decline from $30 billion to $28 billion. This shows that the price recovery was mainly due to the closing of short positions, not genuine demand from new buyers. This dynamic — where rebounds occur without new demand — is characteristic of weakened markets experiencing prolonged declines.

The lack of catalysts for 2026

Bitcoin and the crypto market have underperformed stocks and precious metals since October. The Nasdaq Composite rose 5.6% since October 12, gold increased 6.2%, while Bitcoin fell 21% in the same period. This stark contrast points to two realities: the catalysts of 2025 did not meet expectations, and those of 2026 are simply not present yet.

The narrative of Trump dominated the year: lighter regulations, a Bitcoin strategy for the US, ETF inflows hitting record levels. This enthusiasm slowly faded as the decline gained momentum. Now, one of the few potential bullish catalysts is a Federal Reserve rate cut cycle. However, the Fed cut rates in September, October, and December, allowing Bitcoin to lose 24% of its value since the September meeting. The expected impact did not materialize.

Warning signals and risk scenarios

DATs heavily invested in cryptocurrencies at the peak of the previous cycle, with several treasury NAVs falling below one. CoinShares noted in early December that the DAT bubble had, in many respects, already burst. This could lead to an even larger decline in the crypto market as some companies face forced sales in a liquidity-starved market.

MicroStrategy’s CEO recently hinted that the company might sell BTC if the mNAV drops significantly, though it’s worth noting that the company continues raising billions of dollars to keep buying. That scenario remains unlikely for now, but the threat persists in the background.

From collapse to opportunity: Outlook for 2026

There is an optimistic outlook amid all this debacle. When companies like these start facing extreme difficulties, it has historically been a good time for contrarian investors. A similar pattern was observed in the 2022 bear market after Celsius, Three Arrows Capital, and FTX collapsed. Those who bought during the most extreme capitulation phases later saw significant gains.

The 2025 crypto decline can be seen as a necessary purge, removing unfounded speculation and repositioning the sector. As 2026 progresses, real catalysts — sustainable institutional adoption, clear regulation, practical use cases — could lay the groundwork for a genuine recovery, rather than the narrative-driven rally that dominated 2025.

The decline was severe, but it also revealed the true nature of the market: cryptocurrencies still respond to fundamental dynamics, not just institutional optimism. Recognizing this is the first step toward building a more resilient market.