Crypto was expected to conclude this year with a dramatic flourish.
As we approached the fourth quarter, Bitcoin was experiencing strong ETF inflows, while digital asset treasuries (DATs) promoted themselves as leveraged bets on the next increase, with analysts revisiting charts that showed the last quarter traditionally as crypto’s most dependable winning period.
Adding to this optimism were expectations of more lenient monetary policy and a beneficial political climate in Washington, leading many investors to believe Bitcoin would reach new all-time highs by year’s end.
However, the reality unfolded differently: an October liquidation cascade worth $19 billion ruptured liquidity, spot altcoin ETFs fell short in balancing the selling pressure, and the new set of treasury-heavy crypto stocks shifted from being structural buyers to potential forced sellers.
Bitcoin has declined by 23% since the beginning of October—this is troubling by itself, but even more so when compared to ongoing rallies in equities and precious metals.
Here’s how each of the anticipated year-end “catalysts” transitioned from hoped-for accelerators to obstructing forces.
DATs flywheel turns into tailspin
The surge of digital asset treasuries—swiftly formed publicly traded firms (mostly this year) trying to replicate Michael Saylor’s strategy (MSTR)—was projected to provide steady buying pressure and promote crypto prices.
However, after a brief wave of buying enthusiasm in the spring, investor excitement dwindled quickly. As crypto prices began to decline through October, selling in DATs intensified. Their stock prices plummeted, with most companies now trading below their net asset value, restricting their ability to issue shares and debt for fundraising. Initially, purchases decreased sharply, and then they virtually halted—save for a few exceptions. Now, instead of converting investor fiat into crypto holdings, DATs are beginning to use dollars to repurchase shares. The latest example was the once-promising KindlyMD (NAKA), whose shares have dropped to a level where its Bitcoin assets are valued at more than double the company’s enterprise value.
There’s growing concern that more DATs could follow suit and become forced sellers, offloading assets onto a fragile market, turning the expected flywheel into a tailspin, further weighing down the market.
Altcoin ETFs
As market sentiment declined universally, the long-awaited introduction of spot altcoin ETFs in the U.S. couldn’t possibly make a significant impact—despite some of them garnering impressive inflows.
Solana ETFs attracted $900 million in assets since late October, according to SoSoValue data. XRP funds saw net inflows surpassing $1 billion within just over a month.
Nonetheless, this strong demand did not influence the prices of the underlying tokens. SOL has dropped by 35% since the ETF launch, while XRP is down nearly 20%.
ETFs for smaller altcoins—such as hedera (HBAR), , —saw minimal interest as risk appetite waned.
Seasonality
Analysts noted Bitcoin’s historically solid year-end performance, as the fourth quarter yields the asset’s highest returns. This year serves as a stark reminder of the age-old adage: past gains do not guarantee future outcomes.
Since 2013, Bitcoin’s average return in the fourth quarter was 77%, with a median rise of 47%, according to CoinGlass data. Over the last twelve years, eight of those quarters recorded positive returns—the highest success rate among all quarters.
The exceptions? 2022, 2019, 2018, and 2014—all deep bear markets.
2025 is on track to join them. Bitcoin is down 23% since early October. Should it maintain its current levels, it will mark its worst last-quarter performance in seven years.
Liquidity void
The October 10th liquidation cascade of $19 billion—which caused BTC to plummet from $122,500 to $107,000 in mere hours, with significantly larger percentage drops among other cryptocurrencies—proved damaging in multiple ways. Many anticipated that the institutionalization through ETFs would shield crypto from such sell-offs, but it instead revealed that a market traditionally dominated by speculative frenzy had merely transformed into a different form.
Two months later, not only has liquidity and market depth failed to rebound from the sell-off, but it has also shaken investor confidence, leading many to shy away from any level of leverage.
Bitcoin established a local low of $80,500 on November 21, but since then, it has seen a recovery to a relative high of $94,500 on December 9. However, during that time, open interest has consistently dwindled, decreasing from $30 billion to $28 billion, according to Coinalyze.
This indicates that the recent price gains are largely attributed to short positions being closed rather than actual buyer demand—a situation unimaginable to those who became engrossed in the narratives surrounding Trump, ETFs, and DATs for 2025.
What are the 2026 catalysts?
Since the October collapse, Bitcoin and the wider crypto market have lagged behind equities and precious metals; the Nasdaq Composite is up 5.6% since October 12, gold has increased by 6.2%, while Bitcoin has fallen by 21% in the same timeframe.
This drastic underperformance signals two crucial points: the catalysts for 2025 did not meet expectations, and the anticipated catalysts for 2026 are seemingly nonexistent.
At the year’s start, excitement was palpable during the Trump season, with claims of lighter regulations surrounding crypto and a U.S. Bitcoin strategy being promoted while spot ETF flows were hitting record highs.
However, that enthusiasm has gradually subsided to a level where the only remaining bullish catalyst seems to be a perceived rate-cutting cycle that is thought to positively influence risk assets like Bitcoin. Although the Federal Reserve reduced rates in September, October, and December, BTC has still lost 24% of its value since the September meeting.
As Bitcoin advocates cling to hope regarding potential bullish catalysts, neutral traders can see clear warning signs. DATs heavily invested in crypto at the peak, and many of those companies’ market net asset values are now under one. CoinShares reported in early December that the DAT bubble has, in many respects, already burst.
This could lead to significant fallout in the crypto market, as some companies might be forced to liquidate their holdings into a market that is unable to manage surges in selling pressure.
Even Strategy (MSTR) CEO Phong Le recently hinted that the company might sell BTC if its market net asset value drops below 1.0, although it is noteworthy that the technology firm remains in the process of raising billions to purchase BTC, marking it as a worst-case scenario.
There is a potential silver lining, as the winding down of these companies could represent a prime buying opportunity, similar to what was observed during the 2022 bear market after the collapses of Celsius, Three Arrows Capital, and FTX.
