From boom to bust: The cryptocurrency crash that buried the year-end promises

By early 2025, the cryptocurrency market was gearing up for a spectacular close. Analysts spoke of an impossible crypto crash in the fourth quarter, supported by three seemingly unshakable pillars: record ETF flows, a new generation of digital asset treasuries (DATs) acting as structural buyers, and historical patterns suggesting that the last three months of the year were almost a guaranteed bet. But instead of fireworks, what the market saw was an implosion that dismantled each of those narratives.

The expectations fueling optimism

Just a few months ago, the convergence of factors seemed perfect. Bitcoin ETFs were recording historic inflows, with BlackRock leading the institutional charge. Digital asset treasuries — publicly traded companies hurriedly formed to replicate Michael Saylor’s strategy and accumulate bitcoin as a store of value — promised to create a perpetual flying effect: more corporate purchases would mean more demand, driving prices higher, validating these vehicles’ valuations, and allowing them to issue more debt for future buys.

Analysts also dusted off historical charts showing that since 2013, Bitcoin’s Q4 yielded an average return of 77%, with an average gain of 47%. Between 2013 and 2025, eight out of twelve Q4 quarters produced positive gains. The only exceptions: the deep bear markets of 2022, 2019, 2018, and 2014.

Adding to this the promise of a more receptive administration towards cryptocurrencies in Washington and lower interest rates, it’s no surprise that many believed 2025 would end with new all-time highs for Bitcoin.

The virtuous cycle of DATs turns against the market

The crypto crash arrived as investment retrenched. The cascade of liquidations of $19 billion on October 10 opened a hole in the market’s depth that persists to this day. Bitcoin plummeted from $122,500 to $107,000 in hours, with much larger percentage drops in the rest of the ecosystem.

But the most worrying was what happened afterward with the DATs. During their expansion phase in spring, these companies aggressively accumulated assets. Then, when prices started falling in October, the virtuous cycle completely reversed. The prices of DAT stocks collapsed, many below their (NAV), erasing their capacity to issue new debt to finance purchases.

What was a structural buyer became a potential forced seller. The most extreme case is KindlyMD (NAKA), which saw its shares fall so drastically that its Bitcoin holdings are now worth twice the entire company’s enterprise value. Now, instead of converting fiat money into cryptocurrencies, several DATs are using dollars to buy back their own shares.

CoinShares warned in early December that the DAT bubble had already burst in many respects. The central concern is that if more companies like KindlyMD continue to fall, they could face forced sales that unload assets into an already fragile market.

Altcoin ETFs: demand without price transfer

While the death sentence was quietly being written on the DAT model, what was supposed to be another catalyst arrived: spot altcoin ETFs in the United States. Some of these vehicles captured notable flows: Solana ETFs accumulated $900 millions since late October, while XRP ETFs surpassed $1,000 million in just a month.

However, this strong demand did not translate into price gains. SOL has fallen approximately 35% since its ETF debut. XRP has dropped nearly 20%. Other smaller altcoin ETFs — Heder (HBAR), Dogecoin (DOGE), and Litecoin (LTC) — registered virtually insignificant demand as investors retreated from risk.

The pattern was unmistakable: ETFs could attract capital, but in a market where risk appetite was fading, that capital did not translate into genuine purchases of the underlying assets. It was more defensive capital seeking alternatives rather than genuine bullish demand.

The promise of seasonality crumbles

Historical data on Bitcoin in Q4 was so solid that it was easy to fall into the trap of assuming it would perform again. But 2025 is on track to be the worst Q4 for Bitcoin in seven years.

Since the first week of October, BTC has fallen about 23%, a decline that would be historic in any other context. By November 21, Bitcoin hit a local low of $80,500, from where it recovered to reach $94,500 on December 9. However, even during that recovery, signs of strength were weak: open interest continued to decline, from $30 billion to $28 billion, according to Coinalyze.

The price recovery was not driven by new buyers entering the market, but by traders closing short positions. It’s a different kind of recovery — less sustainable — and very different from what bulls had promised.

The liquidity gap: the wound that won’t heal

Two months after the October cascade, market depth has not only failed to recover but has persistently influenced investor confidence. Many now completely avoid any form of leverage, a understandable reaction after witnessing the devastation of cascading liquidations.

Institutionalization through ETFs was promoted as the ultimate solution for cryptocurrencies to be immune to such drops. The reality proved that a market historically dominated by speculative euphoria simply adopted new forms of instability without solving underlying liquidity issues.

Bitcoin is currently trading around $90,000 (with data from January 22, 2026), showing persistent volatility in a context where liquidity remains limited. This is the environment in which the market now operates: more fragile, not less.

The performance gap revealed by reality

The 2025 crypto crash stands out by contrast. While Bitcoin fell about 21% since mid-October, the Nasdaq Composite rose 5.6% in the same period and gold increased 6.2%. Cryptocurrencies was the worst performer among all risk assets categories.

This relative failure underscores two uncomfortable truths: first, the catalysts of 2025 did not deliver as expected; second, markets simply see no clear catalysts for 2026.

The early-year euphoria over lighter regulations and a Bitcoin strategy in Washington evaporated. The Federal Reserve rate cuts (September, October, and December) produced negative returns in Bitcoin. ETF flows, although still positive, lost their previous momentum.

2026: Where are the catalysts?

For the market to recover from the crypto crash that left scars in 2025, it needs new catalysts. Currently, the consensus is that none are clearly present.

However, there is a historical angle to consider. In past bear markets — like the 2022 collapse following Celsius, Three Arrows Capital, and FTX failures — the foundations for future gains are built precisely when these companies begin to close and capitulate completely.

MicroStrategy CEO Phong Le recently hinted that the company might sell Bitcoin if its (mNAV) falls below 1.0, although it’s worth noting that the company is still raising billions to buy BTC, so this remains a worst-case scenario.

From a purely technical perspective, the market has endured enough pain that capitulation may be near. If that scenario materializes, historically, it has represented exactly the kind of moment when buying has been most profitable in the long term. But first, the crypto crash must complete its cycle.