By ODIG Invest

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Navigating the Storm: A Deep Dive into the 2025 Cryptocurrency Market’s Structural Reset

Since mid-2025, the cryptocurrency market has been characterized by extreme volatility and persistent downward pressure. Major asset prices have undergone continuous corrections, trading volumes have dwindled, and investor confidence remains notably subdued. The overall crypto market capitalization, currently around $3.33 trillion, has contracted by approximately 20-30% from its peak earlier in the year. Bitcoin’s dominance has held steady at about 55%, yet its volatility has soared to 40%, significantly surpassing 2024 levels, underscoring a prevailing cautious market sentiment.

On-chain data from CryptoQuant further illustrates this trend, revealing an approximate 8% decline in Bitcoin reserves on exchanges since early August. The USD value of these reserves plummeted from about $300 billion to $250 billion by November. This significant withdrawal of assets from exchanges—likely shifting to self-custody or safer havens—amplifies the existing sell signals.

After a brief rebound in the first half of 2025, mainstream cryptocurrency prices entered a pronounced adjustment phase in October, extending their descent through November. The top 50 cryptocurrencies have largely reverted to levels last seen after the FTX collapse in 2022, signaling a significant market reset.

The Unvarnished Reality of the 2025 Crypto Market

A comprehensive review of the 2025 cryptocurrency market paints a challenging picture, marked by several critical developments:

• Cycle Disruption: Major cryptocurrencies, including Solana (SOL), Ethereum (ETH), and Bitcoin (BTC), have retreated to their December 2024 price points. This development suggests a fundamental invalidation of the traditional four-year cycle theory, necessitating a significant re-evaluation and adaptation from industry participants.
• Token Proliferation & Funding Strain: The past four years have witnessed an explosion in token issuance, predominantly featuring low circulation and high Fully Diluted Valuation (FDV) models. The recent meme coin frenzy further accelerated this trend, with new projects launching daily. This massive influx of supply, coupled with increasingly cautious capital, struggles to offset the large-scale token unlocks from existing projects, unless a constant wave of new buyers materializes.
• Innovation Fatigue: The market is experiencing a “concept multi-use” phase, indicating a lack of genuine innovation. Many projects introduce non-essential technologies, failing to deliver truly novel solutions.
• Project Implementation Challenges: Numerous projects face significant hurdles in achieving real-world adoption. Their economic models often prove ineffective in incentivizing or regulating behavior, and many struggle to find a crucial product-market fit (PMF).
• Airdrop Apathy: The once-hyped airdrop phenomenon has lost its allure, with recipients frequently converting their newly acquired tokens into stablecoins immediately, signaling a lack of long-term conviction.
• Heightened Trading Difficulty: For assets deemed worthwhile to trade and possessing sufficient liquidity, competition has become exceptionally fierce, making profitable trading significantly more challenging.
• Capital Crunch: Venture Capital (VC) investment has dramatically contracted, with total funding in 2025 representing roughly half of 2024’s figures. This tightening of capital has left many project teams facing severe financial constraints.
• Systemic Vulnerabilities: The industry has been plagued by internal issues, including the “Black Swan” event on October 11th, frequent hacker attacks (resulting in over $2 billion in losses during the first half of the year), and persistent congestion on Layer 1 blockchains.
• Declining DeFi Yields: Decentralized Finance (DeFi) yields have fallen below 5%, a stark contrast to the higher returns observed in 2024, diminishing the attractiveness of certain passive income strategies.

This confluence of factors suggests a profound structural adjustment, reminiscent of 2018 but on an even grander scale. It has created significant difficulties for nearly every market participant, from individual users and traders to meme enthusiasts, entrepreneurs, VCs, and quantitative institutions.

The “Black Friday” event on October 11th was particularly impactful, causing substantial losses for many cryptocurrency traders and quantitative firms. The lingering threat of institutional failures remains, underscoring that both speculators, professional traders, and retail investors alike have faced significant capital erosion.

Traditional financial institutions, meanwhile, have largely confined their involvement to Bitcoin, payments, Real World Assets (RWA), and Decentralized Autonomous Organizations (DAT) strategies, maintaining a relative detachment from the broader altcoin market. While Bitcoin spot ETFs demonstrated robust performance in October, attracting a record-breaking $3.4 billion in net inflows, they experienced substantial outflows in early November. This pattern largely reflects profit-taking behavior as prices reached higher levels.

As the U.S. government shutdown concludes, a return of official liquidity is anticipated. The critical question now is: what performance can we expect from the cryptocurrency market in the final two months of 2025?

An increasingly clear direction points to two dominant themes: Bitcoin and stablecoins.

BTC: Macro Liquidity Cycles Eclipse the Halving Narrative

A significant shift in market consensus is underway: analysts are increasingly recognizing global liquidity cycles, rather than solely Bitcoin’s halving events, as the primary drivers of bull and bear market transitions.

Arthur Hayes’s “Liquidity Cycle” Thesis

Building on Arthur Hayes’s recent assertion that “the four-year cycle is dead, the liquidity cycle is eternal,” he posits that the past three bull-bear cycles have closely correlated with periods of massive balance sheet expansion by the U.S. Dollar and Chinese Yuan, coupled with low-interest rate credit easing. Currently, U.S. national debt is growing exponentially. To dilute this debt, the Standing Repo Facility (SRF) is projected to become the government’s primary tool. An increase in SRF balances inherently signifies a synchronous expansion of global fiat currency supplies. Under this “invisible quantitative easing,” Bitcoin’s upward trend is expected to remain intact.

Raoul Pal’s Debt Refinancing Perspective

Raoul Pal’s cyclical theory similarly suggests that the conclusion of each cryptocurrency cycle stems from monetary tightening policies. Data indicates that global debt has reached approximately $300 trillion, with roughly $10 trillion (primarily U.S. Treasuries and corporate debt) nearing maturity. To avert a surge in yields, a massive injection of liquidity will be required. According to Pal’s model, every $1 trillion increase in liquidity could correlate with a 5-10% gain in risk assets (equities, cryptocurrencies). A refinancing scale of $10 trillion could potentially inject $2-3 trillion of new capital into risk assets, providing a powerful impetus for Bitcoin’s appreciation.

These perspectives converge on the idea that a global central bank liquidity cycle will ultimately dominate, providing a long-term macro environment conducive to the appreciation of scarce assets like Bitcoin.

Stablecoins: Evolving into Core Financial Infrastructure

The other major theme for 2025 revolves around stablecoins, whose value is increasingly derived from “real adoption” rather than purely “speculative narratives.”

Regulatory Tailwinds and Institutional Embrace

Recent policy developments offer significant tailwinds: the U.S. Congress is actively pushing to grant the Commodity Futures Trading Commission (CFTC) greater jurisdiction over the cryptocurrency spot market. The CFTC is anticipated to unveil a policy early next year that could permit stablecoins to be used as tokenized collateral in derivatives markets. This initiative would initially be piloted within U.S. clearinghouses, accompanied by stricter regulatory oversight, effectively opening the door for stablecoins to integrate into the core of traditional finance.

The scale of stablecoin adoption is expanding rapidly, far exceeding previous market expectations. Major U.S. institutions are proactively positioning themselves, dedicated to building entirely new payment networks centered around stablecoins.

Real-World Utility and Foundational Role

Faced with an explosion of real-world application scenarios, the true value of stablecoins lies in their “stable performance” across various use cases, including cross-border transfers, foreign exchange risk control, and corporate settlement and allocation. Over the past year, stablecoins have achieved a delicate balance between speed, cost, and compliance, forming the nascent stages of a compliant, low-cost, and traceable global financial channel. They are progressively becoming a viable financial settlement layer for the real world. As foundational infrastructure, stablecoins are solidifying their position through both regulatory frameworks and practical applications, providing stable “blood” for the entire crypto economy.

This evolution holds a crucial implication for entrepreneurs: startup teams should consider making their business processes “stablecoin-native,” targeting demographics most applicable to stablecoin usage, and subsequently identifying a genuine product-market fit (PMF) within this framework.

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(The above content is an authorized excerpt and reproduction from our partner PANews. Original link | Source: ODIG Invest)