The 2025 Cryptocurrency Market: The Serious Implications of Persistent High Dominance Indicating Asset Hierarchization

If we summarize 2025, it was not merely a bull or bear market, but a year in which the flow of funds, policy frameworks, and market structures within the crypto industry underwent fundamental transformations simultaneously. The most emblematic phenomenon was the continued high level of Bitcoin dominance (the market capitalization ratio of cryptocurrencies as a whole). This dominance is not just a numerical increase but a structural warning signal indicating that institutional capital selectively flows into mainstream assets, with little spillover into long-tail assets (tokens ranked below 100 by market cap).

2025 was a transitional period where the crypto market reoriented itself across multiple axes—political, financial, and technological—and laid the groundwork for a more mature institutional framework heading into 2026. During this process, the traditional assumption of an “overall rising bull market” was completely shattered, and strict differentiation based on asset quality became the new market norm.

Policy Shift and Institutionalization: From Suppression to Permission, a Framework Setting a Floor

In early 2025, President Trump’s inauguration and executive orders related to digital asset strategies dramatically changed market expectations regarding regulation. However, this policy shift did not serve as a direct engine driving market growth as before, but rather as a clear delineation of minimum boundaries—providing a baseline rather than pushing the market forward.

Looking back at past cycles, regulation always had a negative impact—banning or investigations at peaks to curb risk appetite, and focusing on accountability during bear markets to increase uncertainty. What emerged in 2025 was an institutional shift from suppression to permission, from ambiguity to norms. Executive orders led the way, regulatory agencies aligned in their views, and legislative frameworks gradually advanced. The previous regulatory model, focused on individual enforcement, was replaced by a systematic licensing and approval regime.

In this transition, the promotion of ETFs and the enactment of stablecoin legislation served as key “expectation anchors.” The approval of spot ETFs gave Bitcoin and Ethereum access to a compliant, long-term allocation pathway through traditional financial systems for the first time. By the end of 2025, the scale of ETP/ETF products related to Bitcoin and Ethereum reached hundreds of billions of dollars, becoming major institutional vehicles for capital deployment. Simultaneously, legislation such as the officially enacted GENIUS Act in July clarified the hierarchy of crypto assets from an institutional perspective—distinguishing which assets possess “financial infrastructure attributes” and which remain high-risk speculative products. This differentiation broke the previous blanket valuation of “cryptocurrencies” and promoted asset-specific valuation.

Notably, the policy environment of 2025 did not produce the explosive growth driven by policy incentives seen in previous cycles. The more fundamental achievement was providing the market with a relatively clear floor—defining the boundaries of permissible actions and distinguishing assets with long-term survival potential from those likely to be marginalized.

Capital Differentiation: Stablecoins, RWA, ETFs, and DAT Indicating a Preference for Low-Risk Assets

A counterintuitive yet crucial phenomenon in 2025 was that capital did not disappear but did not react to price movements either. The market’s market cap and on-chain transfer volumes of stablecoins remained high, and physical ETF inflows persisted across multiple timeframes. Meanwhile, most altcoins outside the mainstream assets continued to face downward price pressure over the long term.

What does this divergence signify? It indicates that in 2025, capital was systematically flowing into “compliance-friendly, low-volatility, long-term holdable” assets rather than speculative surges. The role of stablecoins fundamentally changed from being a trading intermediary or high-leverage fuel during bull markets to becoming a destination for capital retention and settlement tools. The total market cap of stablecoins increased from about $200 billion at the start of the year to over $300 billion by year-end. The additional $100 billion inflow occurred despite the overall market cap of alt assets not expanding during the same period.

Profit-yielding stablecoins like USDe temporarily exceeded a market cap of $10 billion in 2025, becoming the third-largest stablecoin after USDT and USDC—an emblematic shift. The fact that these tokens, with clear and explainable revenue models, attracted concentrated capital suggests that market valuation is shifting from “story appeal” to “cash flow authenticity.”

The development of RWA (Real-World Assets) further reinforced this trend. Implemented in 2025, RWAs mainly consisted of low-risk assets such as government bonds, money market funds, and short-term debt. Their core significance was not in creating new profit opportunities but in verifying the potential for compliance assets to exist on-chain. As of October 2025, the TVL of RWA protocols reached approximately $18 billion, several times higher than early 2024. While not directly driving prices, this structural impact was clear: RWAs created near-riskless yield anchors for on-chain capital, enabling some funds to “stay on-chain without participating in crypto price volatility.”

Similarly, the rapid rise of Digital Asset Treasury Companies (DATs)—public companies embedding Bitcoin and Ethereum into their balance sheets—became a notable phenomenon. About 200 companies adopted similar strategies, holding over $130 billion in digital assets. Like ETFs, DATs serve to attract mainstream capital, but their mechanism is more “equity-like,” exacerbating the capital hierarchy between mainstream assets and altcoins.

Market Stratification: Why Did Dominance Rise While Altcoins Continued to Decline?

The ultimate price outcome reflects that the 2025 crypto market exhibited a highly counterintuitive but logically consistent state. The market did not collapse, but most projects continued to decline persistently.

According to research by Memento Research, of the 118 tokens issued in 2025, approximately 85% traded below their TGE (Token Generation Event) prices in the secondary market, with median FDV (Fully Diluted Valuation) dropping over 70%. Importantly, this trend was not limited to low-tier projects; even high-rated mid-tier projects significantly underperformed compared to Bitcoin and Ethereum.

The high sustained dominance indicates that the inflow of institutional and long-term capital was selectively concentrated into “high-quality assets,” with little spillover into long-tail assets. Bitcoin’s dominance did not show the rapid decline typical of previous bull markets but remained at high levels—directly indicating that institutionalized capital had not dispersed into long-tail assets.

The fundamental reason is that the roles of capital and narratives in the market have rapidly diverged. Short-term trading remains driven by stories and emotions, but new narratives, while capable of generating short-term price reactions driven by sentiment, have significantly shortened their effective lifespan. Stories that once fueled months of enthusiasm now cool off within weeks.

This fundamental shift means that 2025 is not the end of “story-based pricing” but the beginning of a phase where stories are increasingly filtered by capital structures. Prices still react to narratives and emotions, but only assets capable of attracting long-term capital after fluctuations can truly realize their intrinsic value.

Structural Hierarchies of Mainstream and Alt Assets: Investment Implications

Within this dual structure, 2025 revealed a new market state. At a macro cycle level, allocation logic concentrated on mainstream coins and assets with institutional acceptance. At a shorter cycle level, the market remained driven by stories and emotions, characterized by trading and rapid rotation.

This stratification has serious implications. While stories have not disappeared, their influence has been significantly compressed. Stories serve to capture emotional swings but are no longer suitable for long-term valuation. As a result, the market has formed a clear two-tier structure: the upper layer concentrates institutional capital and long-term allocations, while the lower layer continues to be driven by speculative capital and story-driven rapid rotation.

This hierarchy implies that the traditional “full-alt season” has become more difficult to realize as institutional frameworks solidify. As capital flows become more selective, tokens lacking credible revenue mechanisms or meaningful narratives risk losing even marginal price support.

Tokens with Cash Flows: From Stories to Valuation—The First Areas to Remain

In this environment of high dominance, tokens with genuine revenue mechanisms became the first to remain in the story-driven market. This does not mean they have entered a mature value investment phase but that their environment—where stories are filtered by capital structures and long-term capital seeks efficient deployment—has made them highly realistic.

For example, assets like BNB, SKY, HYPE, PUMP—whose value capture mechanisms are more direct—tended to be prioritized for recovery during market downturns. These tokens generate continuous fee income through their protocols, which supports their value via buybacks, burns, staking yields, and other mechanisms.

The significance of this shift is that, by 2026, the key question will shift from “Does the asset have a story?” to “Can revenue still be generated after scaling?” Fields like DePIN (Decentralized Physical Infrastructure Networks) exemplify this—its true value lies not in fleeting narratives but in transforming highly capital-intensive real-world infrastructure demands into sustainable, decentralized supply networks.

AI×Crypto and Robotics: Productivity Revolution as a Long-term Value Driver

Another major transformation in 2025 was the reevaluation of AI and robotics×crypto sectors, which experienced cooling in their story premiums but gained structural significance.

Compared to 2024, DeAI investment cooled noticeably, and related tokens underperformed mainstream assets, with story premiums rapidly compressing. However, this cooling does not signify the loss of direction but indicates that AI-driven productivity changes have shifted into a more fundamental stage of system engineering.

Between 2024 and 2025, structural changes occurred within the AI industry: inference demand surged relative to training, the importance of post-training and data quality increased sharply, competition among open-source models intensified, and the agent economy transitioned from conceptual to practical applications. These changes all point to a common fact: AI is moving from a “model capability race” to a “system engineering” phase emphasizing compute power, data, cooperation, and payment efficiency.

This transition aligns with areas where blockchain can function long-term—decentralized compute and data markets, composable incentive mechanisms, native value settlement, and permissioned governance. The structural significance of AI×crypto lies not in short-term stories of AI projects issuing tokens but in providing infrastructure and coordination tools that complement the AI industry.

However, in 2025, this sector did not achieve systematic pricing—primarily because the cycle of realizing productivity value is too long. The current market environment, where “stories are compressed and capital prefers more acceptable assets,” keeps AI×crypto outside the mainstream deployment zone. Yet, once this sector enters a pricing zone post-2026, it is likely to unlock significantly higher upper bounds than traditional application stories.

Predictive Markets and Perp DEX: Institutional Reformation of Speculative Demand

Among the few sectors that grew in 2025 are predictive markets and decentralized perpetual contracts (Perp DEX). Their significance is straightforward—they cater to the most primitive and resilient demand in crypto: pricing uncertainty and leverage trading.

Predictive markets are fundamentally about information aggregation. During the US presidential election cycle, prediction markets on election outcomes rapidly gained liquidity and public attention on-chain, with total trading volume exceeding $2.4 billion and open interest around $270 million in 2025. This is not short-term gambling but reflects real capital continuously absorbing event outcome uncertainties.

The rise of Perp DEX signifies a new stage for contract trading, a core product form of crypto markets. Its essence is not about whether on-chain is faster than off-chain but about transforming opaque, counterparty-risky contract markets into verifiable, settlement-ready, trustless environments.

In 2026, prediction markets may expand access to non-crypto audiences, such as real estate forecasts. Global spontaneous betting events like the World Cup could become new flow transfer points. The more critical factors are infrastructure maturity—improved liquidity, market-making mechanisms, capital reuse between events, and better dispute resolution—potentially transforming prediction markets from “event-based gambling” into long-term probability pricing infrastructure for macro, political, financial, and social uncertainties.

2026 Outlook: Deep Market Transformation Indicated by Dominance

The conclusion for 2025 is simple yet profound: the sustained high Bitcoin dominance is a key indicator that the market has shifted from a “full-scale rise” to a “hierarchical allocation” structure.

This shift is multi-layered. With policy frameworks established, the market has entered a “risk-constrained” maturity phase. Capital flow differentiation has reduced the influence of stories, shifting focus toward “cash flow and value capture mechanisms” as the core of asset valuation. High dominance is not just an index issue but a structural warning that the market itself has fundamentally transformed.

Whether 2026 will follow the traditional four-year cycle or extend beyond it through continued institutional inflows and regulatory development remains a critical question. But what is certain is that the era of “overall rising” markets has ended, giving way to a “hierarchically selective” market structure—an essential understanding for interpreting the deep transformation indicated by dominance and navigating the future market landscape.