Why did the 2025 crypto market sentiment plummet to a historic low? Structural analysis of Messari's million-word report

Source adapted from: Merkle3s Capital based on Messari’s annual report “The Crypto Theses 2026”

Opening | Eerie Contrast: System Not Collapsing, Emotions Reaching the Limit

If we only look at market sentiment indicators, the crypto market in 2025 can almost be declared “dead.”

The Crypto Fear & Greed Index dropped to 10 in November, entering the “Extreme Fear” zone. Looking back at history, moments when the indicator fell to this level are few and far between:

• March 2020: Global liquidity crisis triggered by the pandemic
• May 2021: Chain liquidations due to high leverage
• May-June 2022: Systemic collapse of Luna and 3AC
• 2018-2019: Industry bear market

These periods share a common point: The entire industry falls into disorder, with extremely uncertain future prospects.

But 2025 is completely different. No exchange misappropriating user assets, no Ponzi projects dominating the narrative, market cap not falling below previous cycle highs, stablecoin scale reaching record highs, regulatory and institutional progress continuously advancing— from a “systemic level,” this is simply not a year of industry collapse.

The paradox lies here: everything is getting better, yet emotions are deteriorating.

Why is it “Emotional Collapse” and not “System Collapse”

Messari made a poignant comparison at the beginning of the report:

If you do crypto assets in a Wall Street office, 2025 might be the best year since you entered the industry. But if you chase Alpha every night on Telegram and Discord, this might be the year you miss the “good old days.”

The same market has given rise to two completely opposite experiences.

This is not just a simple bull-bear rotation, but a deeper structural dislocation:

The market is filtering participants—from “short-term Alpha hunters” to “asset allocators” and “long-term holders.” But most are still operating with their old identities in a new system.

The true root of market sentiment: the failure of the monetary system

From a market structure perspective, the sharp decline in sentiment in 2025 cannot be fully explained. The real issues are not:

• Scarcity of Alpha
• BTC too strong
• Institutional influx

These are just superficial phenomena. The deeper truth revealed by Messari is: The monetary system we are in is continuously plundering savers.

An unignorable chart: Global government debt out of control

Over the past 50 years, the debt-to-GDP ratios of major economies depict a shocking curve:

This is not the result of a single country’s mismanagement but a common outcome across political systems and development stages—whether democracy or autocracy, developed or emerging, debt growth overwhelmingly outpaces economic growth.

What is the result? Savers pay the price for this fiscal game.

When debt grows faster than economic output, the costs ultimately fall into three paths:

1. Inflation
2. Long-term low real interest rates
3. Capital controls and withdrawal restrictions

Whichever path, the sacrifice is made by the same group of people.

Why emotions explode in 2025

Because this year, more and more people truly realize this reality for the first time:

The previous assumptions—“Inflation is temporary,” “Cash is always safe,” “Fiat is stable long-term”—are repeatedly proven wrong. People begin to understand:

• Hard work ≠ wealth preservation
• Savings are constantly devaluing
• Asset allocation complexity has risen to an extreme

The root of emotional collapse is not in Crypto itself, but in the shaken confidence in the entire financial system. Crypto is just the first place to feel this impact.

The essence of Cryptomoney is not “high returns”

This is a point Messari repeatedly emphasizes but is most easily misunderstood.

Cryptomoney exists not to promise higher yields, but to provide:

• Predictable rules
• Non-arbitrariness of monetary policy
• The right to self-custody
• Permissionless cross-border transfers

It is not a “money-making tool,” but a mechanism for individuals to regain agency in a world of high debt and low certainty.

Extreme pessimism in sentiment is essentially a kind of awakening—people are beginning to realize the problems of the old system, but the new system has not yet fully met their expectations.

Why only BTC deserves the title of “real money”

Once the market confirms the root of the problem, the next question arises: if what is needed is “money,” why is it BTC and not others?

Money is a consensus issue, not a technical one

This is the first key to understanding BTC’s advantage.

Money is not a competition of “who is fastest,” “who is cheapest,” or “who has the most functions.” Instead, it is a competition of who can be stably used as a store of value over the long term.

From this perspective, BTC’s victory is not mysterious.

Data speaks: relative performance over three years

From December 2022 to November 2025:

• BTC increase: 429%
• Market cap change: $318 billion → $1.81 trillion
• Entered the top ten of global assets
• Most importantly: BTC.D from 36.6% → 57.3%

In theory, this should be a cycle where altcoins take off, with capital repeatedly flowing into BTC. This is not a coincidence, but a reclassification of assets by the market.

ETF and DAT: institutionalizing consensus

Bitcoin ETF is not just “new buying interest,” but has changed three dimensions:

• Who is buying: from retail to institutions and funds
• Why they buy: from speculation to compliant allocation
• How long they hold: from quick entry/exit to long-term holding

When BTC is held by these long-term players, its attributes have changed—from a “high-volatility, high-risk asset” to a “currency-level asset.” This transformation is hard to reverse.

Why BTC being “boring” makes it more like money

This is the most ironic phenomenon of 2025:

• BTC has no application ecosystem
• No narrative rotations
• Not even “news”

But precisely because of this, it perfectly fits all the characteristics of “money”:

• Does not rely on future promises
• Does not require continuous storytelling
• Does not need teams to keep innovating

It only needs to not make mistakes. In an era of high debt and low certainty, “not making mistakes” itself becomes a scarce asset.

BTC’s victory is not about defeating opponents but about being redefined

BTC does not “win,” but is re-selected by the market.

In the search for “true money,” the market repeatedly confirms that it:

• Is the most inexplicable asset
• Is the least trust-dependent asset
• Requires the least future promises

This role has become relatively solidified.

The dilemma of Layer 1: When money issues are solved, what remains

Once BTC is confirmed as “money,” a new problem arises: what about Layer 1?

Frankly speaking: 81% of the crypto market cap is invested in the “money story”

As of the end of 2025, the global crypto market cap is about $3.26 trillion, distributed as:

• BTC: $1.80 trillion
• Other L1s: about $0.83 trillion
• Remaining assets: less than $0.63 trillion

81% of capital is evaluating “who can become money.” This means the valuation logic of L1s has already changed—no longer “application platform potential,” but “monetary status competitiveness.”

The data is harsh: cash flow of L1s is collapsing, valuation multiples are soaring

Messari’s comparison is embarrassing:

L1 total revenue trend (annual):

• 2021: $12.3 billion
• 2022: $4.9 billion
• 2023: $2.7 billion
• 2024: $3.6 billion
• 2025 (annualized): $1.7 billion

And valuation multiples (adjusted P/S):

• 2021: 40x
• 2022: 212x
• 2023: 137x
• 2024: 205x
• 2025: 536x

Revenue plunges, valuation multiples skyrocket—this is not a gap that “growth prospects” can explain.

L1 is not “undervalued,” but “reclassified”

Many comfort themselves: perhaps the market is undervaluing L1?

The reality is quite the opposite. The market is not undervaluing but has downgraded the “monetary potential” rating of L1.

If an asset:

• Cannot stably store value
• Cannot be held long-term
• Cannot generate clear cash flow

Then it can only be priced as a “high-risk, high-volatility asset.”

Lessons from Solana case

SOL was one of the few L1s to surpass BTC in 2025. But Messari points out a detail:

• SOL ecosystem growth: 20-30x
• SOL price premium over BTC: only 87%

In other words: To achieve “significant excess returns,” L1 needs exponential ecosystem breakthroughs. This is not “not enough effort,” but a reward mechanism rewrite.

When BTC becomes money, the pressure on L1s multiplies

This is a critical structural shift that many have not yet realized.

In the past, when BTC’s role was ambiguous:

• L1 could tell the story of “future money”
• The market was willing to pay a premium for this imagination

Now:

• BTC is anchored
• The market no longer pays the same premium for “second money”

The real dilemma for L1 is not competition but positioning: if not money, then what?

Summary | 2025 is not industry death but industry maturity

Overall, the crypto market sentiment plunge in 2025 has never been a sign of systemic failure but a painful restructuring of market structure.

From “profit-making machine” to “financial infrastructure,” from “everyone can profit” to “capital is orderly divided,” this transformation inevitably involves many participants being pushed out and disappointed.

The extreme lows of sentiment precisely indicate that the old game rules have ended. Those who can adapt to the new rules will survive in the next cycle.