This year was expected to be a dramatic one for cryptocurrency.
As we approached the fourth quarter, Bitcoin was benefiting from significant ETF inflows. Digital asset treasuries (DATs) were being marketed as leveraged opportunities for a potential price surge, and analysts were referencing charts that depicted the last three months of the year as Bitcoin’s most consistent winning stretch.
With looser monetary policies and a more favorable political landscape in Washington, many investors felt optimistic about Bitcoin reaching new all-time highs by year-end.
However, reality played out differently: A $19 billion liquidation event in October significantly impacted liquidity. Additionally, spot altcoin ETFs could not mitigate the selling pressure, and newly formed treasury-centric crypto stocks shifted from being structural buyers to likely forced sellers.
Bitcoin has dropped by 23% since October began—a troubling figure, especially given the ongoing gains in equities and precious metals.
DATs’ Promises Turn Sour
The surge in digital asset treasuries—newly established public companies seeking to mirror Michael Saylor’s strategy—was seen as a potential catalyst for crypto prices and consistent buying. However, enthusiasm quickly faded, leading to significant sell-offs as crypto values declined throughout October. Most DAT shares fell below their net asset values, limiting their capacity to raise funds through debt or equity. As purchases dwindled to a halt, some DATs started using cash to buy back shares instead, like KindlyMD (NAKA), whose holdings in Bitcoin were worth more than twice its enterprise value.
Challenges for Altcoin ETFs
While market sentiment worsened, the long-awaited launch of spot altcoin ETFs couldn’t create a noticeable impact, despite some impressive inflow numbers. Solana ETFs attracted $900 million in assets since late October, and XRP-related funds amassed over $1 billion in net inflows within a month. However, this demand did not reflect positively on the underlying tokens, with SOL dropping 35% and XRP declining almost 20% since their ETF introductions.
Changing Seasons
Typically, Bitcoin shows remarkable performance in the fourth quarter, averaging a 77% return since 2013, with eight out of the last twelve years ending positively. Unfortunately, this year seems poised to join the ranks of disappointing years like 2014 and 2018, especially with Bitcoin down 23% since the start of October, signaling its worst fourth quarter in seven years if current trends continue.
Liquidity Issues Persist
The $19 billion liquidation on October 10 sent Bitcoin tumbling from $122,500 to $107,000 within hours, revealing that despite institutionalization via ETFs, the speculative nature of the crypto market remained unchanged. Two months later, neither liquidity nor market depth had improved, dampening investor confidence considerably. Bitcoin recently saw a low of $80,500 and a recovery to $94,500 by December 9. Nevertheless, the open interest in futures contracts decreased from $30 billion to $28 billion, suggesting that price gains were largely due to short-covering rather than real buyer demand.
Looking Ahead to 2026
Since October’s turmoil, Bitcoin and the wider crypto market have dramatically underperformed compared to equities and precious metals, with the Nasdaq gaining 5.6% and gold 6.2%, while Bitcoin fell 21%. This stark underperformance indicates that the catalysts anticipated for 2025 did not materialize, and prospects for 2026 appear bleak. Initial excitement surrounding lighter regulations, a U.S. bitcoin strategy, and record ETF inflows has diminished. Presently, one of the few potential bullish catalysts is the possibility of an interest rate cut, yet Bitcoin still lost 24% following the latest cuts.
