Crypto Current #99
Welcome to crypto current #99, the final edition for 2025, and rather than another week of news and price moves, we're stepping back to look at the year as a whole. It's been a strange one. Bitcoin hit all-time highs above $126,000, yet most tokens finished the year underwater. Clearer regulatory direction finally arrived in the US, but new layer-1s struggled to find a reason to exist. Memecoins faded while the platforms launching them printed money. The narratives that dominated previous cycles, four-year halving rhythms, alt season rotations, retail-driven pumps, didn't play out the way many market participants expected. Something shifted in 2025. The question is whether it's temporary or structural. We think it's the latter, and this note attempts to lay out our framework for why.
2025: The Year of the Split
Bitcoin touched $126,000 in October before settling in the low-$90s. Currently flat on the year in an environment where risk assets such as S&P500 are +17% Year to date and that headline number masks a more telling story.
Roughly 75% of tokens are negative on the year, with half down more than 40%. The winners fell into three categories: ETF-connected assets that benefited from institutional flows, tokens with direct US regulatory tailwinds (XRP, LINK), and select narratives such as privacy. Everything else, including the majority of Layer 1s, DeFi, Real World Assets, NFT’s and infrastructure got crushed.
What worked
Stablecoins crossed the Rubicon. Transaction volumes hit $46 trillion for the year (roughly $9 trillion adjusted), up 106% year-on-year. More importantly, the regulatory fog lifted. The GENIUS Act passed the Senate 51-23, establishing the first federal framework for stablecoin issuers. Circle completed its IPO. Tether posted over $10 billion in year to date profit. The regulatory risk question that haunted institutional allocators for years finally has an answer.
DeFi found its business model. Hyperliquid processed over $1 trillion in perpetual futures volume with an annualized revenue run-rate exceeding $1.2 billion, operated by a team of fewer than 50 people. Aave crossed $200 million in cumulative protocol revenue. Ethena scaled USDe from $5.4 billion to $8.4 billion in supply over two weeks when market conditions aligned.
M&A validated the infrastructure. Q2 2025 was the largest quarter for crypto M&A on record: 78 deals totalling $8.2 billion. Coinbase acquired Deribit for $2.9 billion. Ripple bought Hidden Road for $1.25 billion. Kraken purchased NinjaTrader for $1.5 billion. Stripe closed Bridge for $1.1 billion. These M&A waves give some indication of what styles of businesses will be valuable going forward too).
Clearer regulatory direction. Beyond stablecoins, the CLARITY Act passed the House, establishing clearer SEC/CFTC jurisdictional boundaries. The SEC's "Project Crypto" initiative signalled a shift from enforcement-first to engagement. Paul Atkins replaced Gary Gensler. The executive order reversing Operation Chokepoint 2.0 reopened banking access. Two of the three concerns institutional investors have cited for years, regulatory hostility and stablecoin risk, are now largely resolved.
What didn't
New L1s struggled for relevance. Despite significant launches (Berachain, Monad, Movement), new layer-1s faced an existential question: why do we need another chain? Canton Coin illustrated the problem clearly. A private blockchain built for Wall Street, technically capable, institutionally-backed, but with no retail distribution or social premium. The token declined despite the product potentially succeeding. Technical capability without distribution or narrative is worth very little.
NFT volume remained depressed. Despite attempts at revival and some gaming/utility use cases gaining traction, NFT trading volumes stayed well below 2021-2022 peaks. The collectibles thesis hasn't found its second act.
The long tail bled out. The number of tokens competing for capital has exploded, with over 17,000 assets now trading on major venues (as tracked by Coingeko), yet the capital base remains largely circular. Tokens without clear revenue models, institutional sponsorship, or regulatory tailwinds struggled to find bids. There was no market-wide alt season where everything melted up together. The retail flow that powered previous cycles slowed dramatically, and what did arrive was absorbed by ETFs and Digital Asset Treasuries rather than filtering down to smaller tokens.
What surprised
October 10 didn't break the market. The largest liquidation event in crypto history, $19 billion unwound in a single day, over $1 trillion in market cap erased. Within weeks, prices stabilized and began recovering. The "leverage ratchet" played out, but the floor held. Institutional infrastructure, regulatory clarity, and stablecoin maturity created a different market structure than previous cycles.
Privacy made a comeback. Zcash rallied 1000%. Railgun processed $200 million in monthly flows. The Tornado Cash sanctions were lifted. After years of regulatory pressure pushing privacy to the margins, the market rediscovered demand for confidential transactions.
Prediction markets went mainstream. Polymarket received CFTC approval. Kalshi raised $1 billion at an $11 billion valuation. Coinbase, Robinhood, and Gemini all announced competing products. What started as a crypto-native experiment is becoming financial infrastructure.
Memecoin infrastructure outperformed memecoins. Pump.fun launched over 13 million tokens by September and generated > $900 million in cumulative revenue. The tokens themselves mostly went to zero. The platform printing them became one of the most profitable businesses in crypto.
Where this leaves us: The three phases of tech value creation
To frame where crypto sits in its maturation cycle, it helps to borrow a framework from traditional tech investing. New technologies typically move through three phases:
Phase 1: Theoretical - Blue-sky: Transformative promise, early infrastructure, limited commercial activity, high speculation. Crypto's 2017-2020 era. ICOs, theoretical use cases.
Phase 2: Adoption and user growth: Network effects take hold, infrastructure scales rapidly, market cap concentrates in the base layer. Crypto's 2020-2024 period. DeFi summer, NFT boom, L1 wars, rollup scaling.
Phase 3: Revenue and Cashflow: Base layer generates meaningful cash flows, revenue per user emerges as a key metric. This is 2025. Hyperliquid's billion-dollar run-rate. Circle's profitable IPO. Coinbase's $1.9 billion quarterly revenue. Stablecoins processing more volume than Visa. The pipes are making money.
Phase 3a: (Application Layer Monetization): Category-defining applications emerge, revenue per employee dramatically exceeds infrastructure, value shifts from pipes to products users touch daily. In the internet era, this was Google, Amazon, and Netflix eclipsing Cisco and the telecom backbones by 10x.
The notable difference in crypto: Phase 3a candidates are emerging faster than historical precedent would suggest. Several protocols now rank among the most profitable businesses globally by revenue per employee (see above), achieving in 1-3 years what internet companies took a decade to build:
Perpetual DEXs (Hyperliquid, Jupiter) processing billions in derivatives volume. Hyperliquid's revenue per employee exceeds $100 million annually.
Lending protocols (Aave, Morpho, Kamino) generating sustainable yield through battle-tested frameworks. Aave manages $33 billion+ in TVL across multiple chains.
Synthetic dollars (Ethena) scaling from concept to $15 billion Total Value Locked (TVL) in 18 months, currently TVL $6.7b.
Consumer rails (Pump.fun, Shuffle) capturing transaction flow at the application layer. Pump.fun generated more fee revenue in 2025 than most listed fintech companies.
Looking ahead
The crypto investor base is changing, and that shift may matter more than any technical development.
Early cycle participants traded on four-year halving cycles, altcoin rotations, and the assumption that new retail waves would always arrive to supply exit liquidity. That playbook worked when crypto was a closed ecosystem with a predictable rhythm.
As capital rotates from crypto-native holders to institutions, family offices, and a new wave of retail with different return expectations, the paradigm changes. The next cohort of investors will likely care less about halving cycles and more about underwriting cash flows and revenue visibility. The sectors that attract their attention will most likely follow the M&A wave as institutions scramble to get positioned first.
Bitcoin's risk as measured by volatility and return as measured by Constant Annual Growth Rate (CAGR) continues to compress toward traditional asset class returns, a natural function of its growing market cap. Capital will increasingly seek out revenue-generating protocols. This will likely form the next phase in crytpo markets, one of value creation, that looks more like traditional investing: identify the businesses generating durable revenue, assess their moats, underwrite their growth.
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