Crypto was supposed to come out with a bang this year.
Heading into the fourth quarter, Bitcoin was riding a wave of massive ETF inflows, digital asset treasuries (DATs) were posing as leveraged bets on the next step higher, and analysts were dusting off charts showing the final three months of the year as crypto’s most reliable winning streak.
Add to that the promise of looser monetary policy and a more favorable political environment in Washington, and many investors became convinced that bitcoin would be headed for new record prices by the end of the year.
Instead, here’s what happened: A $19 billion liquidation cascade in October blew a hole in liquidity, spot altcoin ETFs failed to offset the selling pressure, and the new crop of cash-rich crypto stocks has already begun to transform from structural buyers into potential forced sellers.
Bitcoin is down 23% since the start of October – a dismal performance in itself, but even uglier given the continued rally in stocks and precious metals.
Here’s how each of the big end-of-year “catalysts” went from promised flywheel to headwind.
The DAT’s steering wheel turns into a spin
The frenzy of digital asset treasuries – hastily created publicly traded companies (mostly this year) attempting to replicate Michael Saylor’s (MSTR) strategy – promised a flywheel for crypto prices and constant buying pressure.
After a brief period of buying enthusiasm in the spring, investors quickly lost their enthusiasm. Then, as cryptocurrency prices began to decline through October, DAT sales really accelerated. Their prices plunged, with most companies falling below their net asset value, limiting their ability to issue stock and debt to raise cash. At first, purchases slowed down, then they stopped completely – with a few exceptions. Now, DATs, instead of their initial plans to turn investors’ fiat currency into crypto holdings, are now starting to use dollars to buy back shares. The latest is KindlyMD (NAKA), a former highflyer turned penny stock, whose shares have fallen so low that its bitcoin holdings are worth more than twice the company’s enterprise value.
There are fears that many more will follow and possibly become forced sellers, offloading their assets into an already fragile market, turning the so-called flywheel into free fall and weighing on the market.
Altcoin ETF
As market sentiment deteriorated across the board, the long-awaited launch of spot altcoin ETFs in the US failed to have a chance to make an impact – even though some of them gathered commendable flows.
Solana ETFs have brought in $900 million in assets since the end of October, according to SoSoValue data. XRP vehicles have surpassed $1 billion in net inflows in just over a month.
This strong demand, however, has not translated into the prices of the underlying tokens. SOL has fallen 35% since the ETF’s debut, while XRP is down almost 20%.
Small altcoin ETF – hedera (HBAR), , – at the same time, demand has been negligible while the appetite for risk has disappeared.
Seasonality
Analysts highlighted Bitcoin’s historically strong end to the year, with the fourth quarter producing the asset’s strongest returns. This year is poised to remind investors of an old adage: past performance is no guarantee of future results.
Since 2013, Bitcoin’s average fourth-quarter return was 77%, with a median gain of 47%, according to CoinGlass data. Over the past twelve years, eight of them have posted positive returns – the best success rate of any quarter.
The outliers? 2022, 2019, 2018 and 2014 – deep bear markets.
2025 is about to join them. BTC is down 23% since the beginning of October. If bitcoin stays at current levels, this would be its worst final quarter in seven years.
Liquidity void
The $19 billion liquidation cascade on October 10 – which sent BTC plummeting from $122,500 to $107,000 in a matter of hours, with much larger percentage drops across the rest of crypto – was damaging in more ways than one. Many believed that institutionalization through ETFs would make crypto immune to this type of decline, but in reality it demonstrates that a market historically dominated by speculative madness has not changed, it has simply taken on a new form.
Two months later, not only has liquidity and market depth failed to recover from the selloff, but it has also shaken investor confidence, who are now largely moving away from any type of leverage.
Bitcoin actually reached a local minimum on November 21 at $80,500, since then it has returned to relative safety after hitting a high of $94,500 on December 9. But during this period, open interest continued to decline, from $30 billion to $28 billion, according to Coinalyze.
This shows that recent price appreciation can be attributed to closing short positions rather than true buyer demand, a scenario unthinkable to many and one that has been wrapped up in the narratives of Trump, the ETF and the 2025 DAT.
What are the catalysts for 2026?
Bitcoin and the broader crypto market have underperformed stocks and precious metals since October’s blowout; the Nasdaq Composite is up 5.6% since October 12, gold is up 6.2% while bitcoin is down 21% over the same period.
This radically poor performance signals two things: the 2025 catalysts have not lived up to expectations and the 2026 catalysts simply aren’t there.
At the start of the year, Trump season was in full swing, lighter regulations around crypto and a US Bitcoin strategy were being touted while ETF spot flows continued to break records.
But that enthusiasm has gradually waned to the point where one of the only bullish catalysts is a rate-cutting cycle seen as having a positive impact on risk assets like bitcoin. The Federal Reserve cut rates in September, October, and December, but BTC has lost 24% of its value since the September meeting.
As Bitcoin bulls begin to latch onto potential bullish catalysts, agnostic traders can see the warning signs. DATs have invested heavily in crypto at the top, with several of these treasury company mNAVs now falling below one. CoinShares said in early December that the DAT bubble had already burst in many ways.
This could lead to major fallout in the crypto market as some companies may be forced to liquidate their holdings in a market devoid of any liquidity to deal with waves of selling pressure.
Phong Le, CEO of Even Strategy (MSTR), recently hinted at the possibility of the company selling BTC if mNAV falls below 1.0, although it should be noted that the tech company is still raising billions of dollars to buy BTC, so this remains a worst-case scenario.
There is a bullish twist to all of this, because when these companies begin to go out of business, it is likely a good time to buy, as seen in the 2022 bear market following the collapse of Celsius, Three Arrows Capital, and FTX.
