The End of the Old Cycle in 2025
2025 is coming to an end, but the crypto market presents an unprecedented “split” scene: Bitcoin (BTC) continues to hit new highs driven by institutional funds, reaching as high as $125,000; Ethereum (ETH) struggles around $2,800, still significantly below its all-time high; meanwhile, the once “rising tide” of altcoins has plunged into an abyss, with most projects down 80-95% from their 2021 peaks, even amid BTC’s new highs, they have failed to recover.
This sharply deviates from the classic narrative of the past decade. The traditional “four-year cycle” script—“BTC first rises → ETH catches up → Altcoins rotate and surge”—seems to have completely failed in 2025. The familiar “carving a boat to seek a sword” strategy for veteran players has now become a joke of “carving a boat to seek fish.”
Meanwhile, institutional reports from Grayscale, CoinShares, and others projecting into 2026 reinforce a harsh reality: the “class solidification” of the crypto market is accelerating—BTC has become the “digital gold” of institutional asset allocation, while altcoins have fallen into a “Dusk of the Gods” with liquidity drying up.
Is this merely a temporary cycle failure or a permanent market structural change? This article will analyze this ongoing “cryptographic paradigm shift” from four dimensions: phenomena, deep mechanisms, institutional behavior, and liquidity structure.
1. Phenomenon Observation: The “Great Divergence” of BTC and Altcoins
1.1 Data Speaks: Unprecedented Performance Divergence
The crypto market in 2025 can be described as “ice and fire.”
Chart: ETH/BTC exchange rate
1. The “Sunset” of Bitcoin:
- Steady price performance: from about $70,000 at the start of the year to a high of $125,000 (+78%), even after a correction, still maintaining around $86,000–$88,000
- Institutional capital influx: spot ETF net inflows totaling hundreds of billions of dollars, with products like BlackRock’s IBIT leading the market
- Highly concentrated holdings: ETF holdings exceed one million BTC; MicroStrategy holds about 670,000 BTC (3.2% of circulating supply)
- Market dominance strengthening: BTC’s market cap dominance rose from 50% at the start of 2024 to current 59-60%, a recent high
2. Ethereum’s “Midlife Crisis”:
- Significant underperformance: limited gains this year, current around $2,800, far below BTC’s performance
- Relative value collapse: ETH/BTC ratio dropped to its lowest in recent years, halved over 60% from its all-time high
- Institutional interest sparse: spot ETF AUM still far below BTC ETF, with phases of fund outflows
- On-chain activity sluggish: Gas fees significantly decreased, reflecting weak user activity and network demand
3. Altcoins’ “Dusk of the Gods”:
- Seasonal indicator collapse: Altcoin Season Index remained below 20 throughout the year (above 50 indicates altcoin season), marking the longest-ever downturn
- Underperforming the market: most of the top 100 projects by market cap underperformed BTC this year, with many down over 80% from 2021 highs
- New coins breaking immediately after launch: mainstream CEX new coins in 2025 often break at issuance, VC tokens become “poison”
- Liquidity exhaustion: daily trading volume of altcoins plummeted over 70% from 2021; insufficient CEX depth can trigger crashes with any sell pressure
1.2 Historical Comparison: “Really Different” This Time
Looking back at the past three bull markets, the “rotation logic” of “BTC → ETH → Altcoins” was almost an iron law:
2017 Bull Market: Classic Three-Stage Rocket
- BTC surged from $1,000 to $20,000 (+1,900%)
- ETH skyrocketed from $8 to $1,400 (+17,400%)
- ICO bubble exploded, altcoins generally gained 50-500 times
2020-2021 Bull Market: DeFi and NFT Frenzy
- BTC rose from $10,000 to $69,000 (+590%)
- ETH from $200 to $4,800 (+2,300%)
- DeFi summer and NFT craze drove altcoins 10-100x
2024-2025 Bull Market: Breakdown of Transmission
- BTC surged sharply from lows to $125,000 (+78%+)
- ETH’s gains were limited, hovering around $2,800
- Altcoins collectively stagnated or even declined as BTC hit new highs
The core difference is clear: in 2025, BTC’s gains no longer “spill over” into ETH and altcoins; capital seems blocked by an invisible wall within the BTC ecosystem. This wall is called “institutionalization.”
2. Deep Mechanisms: How Do Institutional ETFs “Rewrite the Rules of the Game”
2.1 BTC Becomes the “Shadow of Tech Stocks”
Chart: 30-day correlation coefficient between BTC and Nasdaq/Gold
In January 2024, the SEC approved a spot BTC ETF, marking the entry of the “institutional era” in crypto. However, this milestone has a side effect: BTC gradually departs from the original crypto narrative, becoming a “satellite asset” of traditional finance.
High correlation with Nasdaq
By 2025, BTC’s 30-day correlation with the Nasdaq 100 index has remained stable between 0.75-0.85, setting a record high; its correlation with gold has fallen below 0.2. When tech stocks like Nvidia and Tesla surge, BTC ETF funds flow accelerates; during stock pullbacks, BTC declines in tandem.
This is a fundamental shift: BTC is no longer “digital gold” (a safe haven asset), but “digital tech stock” (a risk asset). Its pricing power has shifted from crypto natives to Wall Street fund managers.
The “one-way siphon” effect of institutional buying
Clients of giants like BlackRock and Fidelity—pension funds, family offices, high-net-worth individuals—only recognize BTC, avoiding altcoins. The reasons are not deep understanding of crypto tech but a combination of “regulatory compliance + liquidity + brand recognition”:
- BTC has SEC-approved spot ETF
- BTC has CME futures and a mature derivatives market
- BTC has a 15-year brand history
In contrast, altcoins are still seen as “unknown assets” by institutions, with overlapping regulatory, liquidity, and project risks, making due diligence via traditional finance impossible.
The structural solidification of capital flows: in 2025, over 95% of the hundreds of billions flowing into BTC ETFs are locked within the BTC ecosystem; less than 5% flows via OTC or DeFi bridges into ETH/altcoins. This sharply contrasts with the past “capital spillover effect.”
MicroStrategy’s “Unlimited Ammo” Model
Michael Saylor’s MicroStrategy has become another dominant force in BTC markets. By issuing convertible bonds and secondary offerings, the company keeps buying BTC, currently holding about 670,000 BTC (cost basis around $30 billion).
More critically, MSTR’s stock price has long traded at a 2-3x premium over the value of its BTC holdings, making it an agent for retail leverage long BTC. This creates a positive feedback loop:
MSTR stock rises → market cap expands → debt capacity increases → more BTC bought → BTC price pushed higher → MSTR stock rises again
This “corporate hoarding” model further siphons funds that could have gone into altcoins, reinforcing BTC’s dominance.
2.2 Why Is ETH “Lagging”? The “Vampire Attack” of Layer 2
Ethereum’s weakness is not only due to institutional disinterest but also internal contradictions within its ecosystem.
Layer 2 liquidity dispersal dilemma
Layer 2 networks like Arbitrum, Optimism, Base, zkSync have total value locked (TVL) exceeding hundreds of billions, approaching 60% of mainnet. But the problem is, their tokens (ARB, OP, etc.) do not sufficiently capture ETH value; instead, they divert users and funds.
Core contradiction: when users transact on L2, they pay Gas fees in L2 tokens or stablecoins, not ETH. The economic model of L2 is structurally decoupled from ETH mainnet—success of L2 reduces ETH demand. This is a classic “vampire attack.”
Staking yields’ “Prisoner’s Dilemma”
Post-PoS, ETH staking yields about 3-4% annually. While liquid staking derivatives (like Lido’s stETH) account for a significant portion of staked ETH, this has not driven ETH prices higher.
The paradox: staked ETH is locked, reducing circulating supply (which should be bullish), but also reducing speculative demand (which suppresses prices). ETH has downgraded from “programmable currency” to “interest-bearing bond,” but its 3-4% yield cannot compete with US Treasuries at 4.5%, nor attract high-return crypto investors.
Lack of killer applications creates narrative vacuum
In 2021, DeFi summer and NFT craze made ETH the “world computer.” But in 2025:
- DeFi TVL halved from peak
- NFT trading volume plunged 90%
- Emerging applications like AI agents and on-chain gaming have not scaled
The narrative contrast is stark: BTC has a clear positioning as “digital gold + institutional allocation,” Solana has “high-performance chain + meme culture,” but ETH’s positioning is fuzzy—neither “hard currency” nor “sexy.”
2.3 Altcoins as “Liquidity Black Holes”
If BTC is the “Sunset Empire,” ETH the “midlife crisis,” then altcoins are experiencing a true “Dusk of the Gods”—former stars falling, new projects dying in the cradle.
VC tokens’ “High FDV, Low Circulation” death trap
In 2024-2025, many VC-backed projects launch at extremely high valuations (FDV often $1-5 billion), but with only 5-10% circulating supply. This model is doomed:
- retail investors buy at high levels
- VC and team unlocks cause selling pressure over 1-3 years
- prices remain in long-term decline, even if the project has value
Typical case: a well-known Layer 1 project launched with FDV of $3 billion, circulating market cap only $300 million. Six months later, price down 80%, FDV still $1 billion—valuation remains inflated, but retail investors are wiped out.
Meme coins’ “Ponzi game” and market fatigue
In 2025, Solana ecosystem meme coins (like BONK, WIF, POPCATT) briefly attracted funds, but essentially a “zero-sum game”—early players harvest latecomers. Lacking real value, 90% of meme coins go to zero within 3 months.
More seriously, market fatigue: after being repeatedly “harvested” (Terra collapse in 2022, FTX bankruptcy, VC coin crashes in 2024-2025), retail investors withdraw from altcoins, forming a “once bitten, twice shy” trauma.
CEX liquidity exhaustion and death spiral
Binance, Coinbase, and other top exchanges’ altcoin trading volumes have fallen over 70% from 2021; smaller exchanges are shutting down en masse. Reasons include:
- regulatory pressure: SEC lawsuits against Binance, Coinbase
- user migration: toward BTC ETFs and compliant products
- project quality decline: bad coins drive out good
Lack of liquidity causes price volatility to worsen (order book depth less than $10,000 on 10% depth), further scaring off investors, creating a “liquidity death spiral”: “liquidity dries up → prices crash → investors flee → liquidity further evaporates.”
Narrative exhaustion and homogenization dilemma
2017 had ICOs, 2020 DeFi, 2021 NFTs and metaverse, 2024 AI and RWA… but in 2025, no new narrative can truly ignite the market.
Existing tracks (Layer 1, Layer 2, DeFi, NFT) are highly saturated; projects are highly homogeneous, users cannot distinguish quality. The final result: capital is unsure where to go, so it “lies flat” in BTC.
3. Institutional Perspective: Grayscale and CoinShares’ 2026 Forecast
3.1 Grayscale Report: Dawn of the Institutional Era and Stratification
Grayscale’s “2026 Digital Asset Outlook: Dawn of the Institutional Era” clearly states that the crypto market is entering a new phase dominated by traditional finance.
BTC: An Irreversible Institutionalization Process
Grayscale predicts that in 2026, the acceleration of structural transformation in digital asset investment will be driven by two main themes:
- Macro-driven demand for alternative stores of value: ongoing fiscal imbalance, inflation risks, and global money supply growth boost demand for BTC and ETH as scarce digital commodities
- Increased regulatory clarity: more countries will approve crypto ETP products; the US may pass bipartisan legislation to further integrate blockchain finance
Key catalysts include:
- The upcoming mining of the 20 millionth Bitcoin: in March 2026, the 20 millionth BTC will be mined (total supply 21 million), reinforcing the narrative of fixed supply and scarcity
- Rising institutional allocation: US state pension funds, sovereign wealth funds (e.g., Harvard endowment, Abu Dhabi Mubadala) will gradually increase BTC holdings from less than 0.5%
- US dollar depreciation hedge: amid soaring US debt and global de-dollarization, BTC’s role as “digital gold” becomes more prominent
Grayscale forecasts BTC could hit a new all-time high in the first half of 2026, surpassing $150,000 as a baseline scenario.
ETH: Painful Transition and “Sideways Accumulation”
Grayscale states ETH is undergoing a “painful transformation,” requiring time to adapt to institutional adoption and regulatory standards. The three main directions are:
- Deep integration of Layer 2 and mainnet: through improvements like EIP-4844, enabling Layer 2 success to truly feed back into ETH value
- Institutional DeFi/RWA applications: scaling tokenized bonds, on-chain asset management, and compliant use cases
- Mass consumer adoption: breakthroughs in on-chain social, gaming, and other applications
But these transitions will take 1-2 years to validate. Grayscale predicts ETH in 2026 will likely be in a “sideways accumulation” phase, with limited price gains, far from the explosive growth of 2017 or 2021.
Altcoins: Stratification and the Great Washout
The report emphasizes that “not all tokens can successfully transition into the new era”—altcoins will show clear stratification:
First Tier: Quasi-Institutional Assets
- Representative projects: Solana, Avalanche, Polygon
- Features: real users, institutional backing, regulatory pathways
- Outlook: may attract some institutional funds, but gains will be far below BTC
Second Tier: Ecosystem and Utility Tokens
- Representative projects: DeFi protocols (Aave, Morpho, Uniswap), AI chains (Bittensor, Near)
- Features: benefit from real use cases, supported by cash flow
- Outlook: limited upside but survival in the “utility era”
Third Tier: Speculative Tokens
- Representative projects: Meme coins, purely narrative projects, VC tokens with high FDV and low circulation
- Features: lack real utility, rely on retail FOMO
- Outlook: likely marginalized or zeroed out
Grayscale states that the “all-rocket” era for altcoins has ended; the traditional four-year halving cycle is breaking down, replaced by more stable institutional capital inflows. Only projects with sustainable revenue, real users, and regulatory compliance will survive; others will be washed out in the “big wash.”
3.2 CoinShares: From Speculation to Utility, “Hybrid Finance” Defines the Future
CoinShares’ “Outlook 2026: Toward Convergence and Beyond” presents a more aggressive view: 2025 is the last year driven by speculation; 2026 will shift toward utility, cash flow, and integration.
The Rise of “Hybrid Finance”
CoinShares introduces “Hybrid Finance”: deep integration of public chains with traditional finance systems, forming new infrastructure that neither can build alone. The core story of 2026 is “convergence”:
1. Traditional institutions building on public chains:
- BlackRock issuing on-chain money market funds (BUIDL)
- Franklin Templeton launching tokenized government bonds
- Citi, HSBC issuing bonds on private chains
2. Stablecoins transforming from crypto tools to global payment rails:
- Regulatory frameworks like US GENIUS Act, EU MiCA providing green lights
- Stripe acquiring Bridge, enabling enterprises to integrate stablecoin payments via API
- Stablecoin market cap growing from $200 billion to $500 billion
3. Tokenization explosion:
- Private credit, tokenized bonds leading the market
- On-chain products offering faster settlement, lower costs, global distribution
- RWA (Real World Assets) market projected to surpass $50 billion in 2026
4. The era of value capture:
- Applications like Hyperliquid using income to buy back/destroy tokens
- Tokens upgrading from “governance tools” to “equity-like assets”
- Cash flow and fundamentals becoming core valuation metrics
Institutional dominance and retail FOMO fading
CoinShares notes that in 2025, BTC ETF inflows exceed $90 billion, indicating irreversible mainstream institutionalization. Meanwhile, retail FOMO, scarred by past crashes, narrative fatigue, and regulatory uncertainty, has significantly diminished; retail funds prefer to stay on the sidelines or only in mainstream assets like BTC.
Price scenarios for 2026
Based on macro conditions, CoinShares offers three scenarios:
- Soft landing (baseline): BTC surpasses $150,000, ETH modestly follows, quasi-institutional altcoins rise gently
- Steady growth: BTC remains in $110,000–$140,000 range, market volatility decreases
- Stagflation/recession: short-term pressure but mid-term recovery, BTC’s “digital gold” role emphasized
Key predictions:
- BTC market cap share further rises above 65% (current 59-60%)
- Institutional-led pricing power, retail influence marginalized
- Liquidity concentrates on practical projects with “real users + real income + compliance”
- 90% of existing altcoins will be eliminated; market completes “natural selection”
The ultimate view: CoinShares believes that in 2026, digital assets will no longer challenge traditional finance but become part of it. Utility wins; hybrid finance defines the future. Crypto will shift from “disruptor” to “integrator.”
4. Core Question: Has the Four-Year Cycle Truly Ended?
4.1 The Essence of Cycles: From “Supply-Driven” to “Demand-Driven”
The past four-year cycle was fundamentally supply-driven:
Halving effect transmission: BTC halving → miner sell pressure decreases → supply tightens → price rises → FOMO triggers → retail influx → capital overflows into ETH → then into altcoins
Periodic new capital inflows: Each bull market had new sources (2017 ICO retail, 2021 DeFi/NFT and pandemic money printing), following the natural “BTC→ETH→Alt” flow.
The structural change in 2025: demand-side restructuring
However, in 2025, demand-side has undergone a fundamental change:
- “Targeted demand” from institutions: only buy BTC, avoid altcoins, blocking spillover
- “Permanent FOMO loss” among retail: after 2022 collapse, retail lost confidence in altcoins; even with BTC hitting new highs, they dare not chase
- Liquidity stratification solidifies: liquidity pools for BTC, ETH, and altcoins are now completely separated; funds cannot flow freely as before
Conclusion: the “halving→BTC rise→altcoin rotation” logic of the four-year cycle is not dead, but its transmission mechanism has been broken by institutionalization. Future cycles may be “BTC alone rises → ETH modestly follows → altcoins continue to decline,” a “limping bull market.”
4.2 Do Altcoins Still Have a Future?
The answer is: most altcoins have no future, but some niches still have room for survival.
Altcoin types with no future:
- VC tokens with high FDV and low circulation: inherently flawed economic models, retail always the bagholders
- Utilityless Meme coins: except a few “cultural symbols” (like DOGE, SHIB), most will zero out
- Homogeneous Layer 1/Layer 2: market only needs 3-5 main chains (ETH, Solana, BNB Chain, etc.), others are “zombie chains”
In 2025, the crypto market is undergoing a painful but necessary “coming of age”—from a retail-led speculative playground to an institutional-led asset allocation market.
Bitcoin’s “sunset” is not a victory of crypto but a “taming” by traditional finance. When BTC becomes the “shadow of tech stocks,” it gains liquidity and compliance but loses its original “decentralized currency” essence. This is progress and compromise.
The “Dusk of the Gods” for altcoins is not an end but the eve of rebirth. When bubbles burst and bad coins are cleared, truly valuable projects will rise from the ruins. History rhymes—every bubble burst seeds the next era.
The four-year cycle has not ended; it has only changed its face. Future bull markets may no longer be a “parade of thousands of coins rising together,” but a brutal competition of “the strong survive, the weak exit.” In this race, those who understand the new rules, embrace institutionalization, and adhere to value investing will be the last to laugh.
This report’s data is compiled and edited by WolfDAO. For questions, contact us for updates.
Written by: Nikka / WolfDAO
