Crypto Market 2025: Q3 Review and Forecast

Ether outperforms Bitcoin in third quarter

At the start of the third quarter, Bitcoin showed a resurgence of bullish sentiment, driven by expected macroeconomic easing and institutional accumulation. The quarter was nevertheless marked by persistent volatility. The token underperformed against Ether, which surged 70.7% for the quarter, compared to a 6.39% increase for Bitcoin.

A rotation of capital out of Bitcoin led to an altcoin season in September, with gains concentrated in smart contract platforms and financial sector tokens like Avalanche, Binance Coin, Chainlink and Solana.

DeFi growth continued robustly, with total value locked exceeding $164 billion at the end of the quarter, driven by Ethereum Layer 2 scaling solutions and real-world asset lending on platforms like Aave.

Institutional Adoption Increases, Regulatory Activity Resumes

Critical regulatory milestones have brought an additional sense of clarity to the crypto sector, including the passage of the GENIUS Act in the United States, which provided the first comprehensive federal framework for stablecoins.

Additionally, the SEC has advanced its Crypto Project Plan, proposing clear classifications of tokens, and the Commodity Futures Trading Commission (CFTC) has actively engaged in discussions on spot crypto trading rules. Ongoing dialogues and regulatory guidance regarding cryptocurrency trading rules remain the focus, but there is clearly much more to be done.

“Above all, we need to see more clarity on tokenization. What can we tokenize? Who can buy a tokenized product?” Gokhman told INN, also emphasizing the need for greater collaboration.

“The bigger question is: Can we have a global standard of regulation for trading on decentralized exchanges and for trading in tokenized products, so that an institutional investor in Europe can trade with an institutional investor in the United States and Japan, without worrying about each other’s regulations getting in the way?

Internationally, regulatory frameworks for stablecoins have progressed, with legislative advancements in South Korea, the EU, Japan, the UAE, Hong Kong and Singapore.

Stable market competition

The stablecoin sector saw net inflows exceeding $46 billion in the third quarter.

The market recorded a transfer volume of $15.6 trillion, the most active period since 2021, although 71% of these transfers were carried out by high-frequency trading robots.

Inflows were led by Tether’s USDT and Circle Internet Group’s (NYSE: CRCL) USDC, but incentives for revenue sharing between exchanges illustrate growing competition in crypto markets to attract and retain liquidity.

Hyperliquid’s launch of its native stablecoin, USDH, symbolizes this trend. USDH is designed to capture value in the hyperliquid ecosystem, reducing reliance on external stablecoins.

The market has also seen Avalanche gain momentum as a broader DeFi ecosystem, providing strong infrastructure and liquidity for several decentralized applications and stablecoin projects.

The growing role of stablecoins as a yield-generating asset, as well as a transactional tool, has sparked nuanced regulatory discussions. Reflecting on the banking sector’s response, Gokhman stressed that stablecoins offering a similar return to traditional savings accounts should be regulated, but should not be prevented simply because they compete with banks.

Blockchain infrastructure and AI integration are advancing

Blockchain infrastructure also advanced in the third quarter, enabling more efficient diversification of multi-chain wallets and improving institutional capital flows in decentralized finance.

Cross-chain liquidity aggregation protocols have emerged to enable seamless token swaps and liquidity sharing across 30+ layer 1 and 2 blockchains.

Unlike isolated liquidity pools, these protocols simplify asset transfers and improve market efficiency.

Building on an evolving infrastructure landscape, Franklin Templeton is developing its own multi-chain venture capital platform.

“We want to be there as soon as possible to test which L1 channels make the most sense,” Gokhman said. “We’re also building robust, institutional-grade infrastructure, the kind of quality customers expect. At this point, the question becomes who wants to jump in the pool with us first, but we’re already there. We can tell you the water is good.”

When asked about the importance of multi-chain derivatives trading, Gokhman explained that chains differ in transaction speed, gas fees and other parameters. “Some chains are better for certain smart contracts and tokenized assets. We need to be sophisticated enough to understand that,” he told INN.

Just like in traditional markets, where commodity futures trade on the CME and stocks on the NASDAQ, in the tokenized world, Grokhman expects trading to be more granular. As the means of moving assets between chains expand, it will be easier to choose venues based on where the asset has the best liquidity and execution fees.

Elsewhere, blockchain technology and artificial intelligence (AI) are increasingly closely integrated.

A landmark collaboration between Google (NASDAQ: GOOGL) and Coinbase Global (NASDAQ: COIN) demonstrates practical integration of AI with digital currency at scale. The company’s open source Agent Payments Protocol, which enables AI applications to communicate, send and receive payments using stablecoins, has garnered broad industry engagement, evidenced by support from more than 60 technology and financial partners, including the Ethereum Foundation, American Express (NYSE:AXP) and Salesforce (NYSE:CRM).

Crypto Market Forecast for Q4

Looking ahead to the fourth quarter, key catalysts for the cryptocurrency sector include expected finalizations from the SEC and CFTC on token classification and spot trading rules. Cboe Global Markets’ new crypto ETFs and upcoming long-term Bitcoin and Ether futures contracts will expand market access and further improve liquidity.

Macroeconomic factors such as possible interest rate reductions by the US Federal Reserve could boost risk appetite and capital inflows; However, continued geopolitical and macroeconomic uncertainty requires prudent risk management. The U.S. government shutdown adds another level of uncertainty, although markets have largely ignored it thus far.

Tech highlights include Ethereum’s Fusaka hard fork in December, which promises better scalability and efficiency, as well as the growth of L2 solutions and real asset lending in DeFi.

As Gokhman noted, tokenization of previously inaccessible assets will deepen diversification opportunities for large investors, with early adopters paving the way for broader institutional entries.

“I think there’s always that element where once you have the first big clients in your space, start looking at it, and then everyone jumps in,” the expert told INN.

“I think that’s going to be something we see over the next few quarters. We’re going to see some of these bigger players dip their toes, and then everyone else will be more comfortable jumping in the water as well.”