By Thomas Perfumo, Kraken Global Economist

Crypto markets in 2025 were driven overwhelmingly by Bitcoin, which itself was shaped by macro forces and mainstream adoption. That framing carries forward into 2026. What’s changed is not the importance of Bitcoin, but the channels through which demand, liquidity, and risk are now expressed.

Crypto’s new market structure

As a macro asset, Bitcoin continues to lead market risk sentiment shifts in a period defined by mixed economic growth, persistent inflation, and volatile geopolitical catalysts. This translates into compressed volatility ranges punctuated by sharp, narrative-driven moves. The market feels less euphoric than prior cycles and structurally more complex.

A significant driver of Bitcoin’s price discovery now flows through institutional vehicles. U.S.-listed Bitcoin ETFs (like BlackRock’s IBIT) and digital asset treasury companies (like Strategy) represented massive quantities of net capital flows in 2024 and through 2025.

In 2025 alone, ETFs and Strategy collectively represented nearly $44 billion of net spot demand for bitcoins. Yet price performance disappointed relative to expectations, underscoring how supply dynamics have quietly shifted.

The likeliest source of marketable supply is coming from long-term holders capitalizing on performance through 2025. Bitcoin Coin Days Destroyed – a measurement of how long coins are held before they are moved – reached its highest level on record for a single quarter in 4Q 2025.

This suggests meaningful turnover from legacy HODL’ers at a time when crypto is competing for attention and capital against strong equity markets, AI-driven growth, and record price action in gold and other precious metal commodities.

The result is a market that absorbs enormous inflows without the reflexive upside seen in prior cycles.

Despite these headwinds, the broader market structure remains constructive. Systemic risk indicators are contained, stablecoin liquidity is at all-time highs, and regulatory clarity is improving.

Innovation is accelerating, but so is complexity, and rising complexity tends to obscure fragility – especially in a macro regime where monetary policy support is no longer a given.

What to watch next

Looking ahead, several themes will shape how crypto behaves in 2026:

1. Macroeconomic trends and liquidity conditions

Economic growth is expected to remain modest, with the U.S. outperforming regions like Europe and the UK, but inflation remains sticky. Central banks are still expected to ease interest rate policy with the exception of a few developed economies like Japan and Australia.

However, monetary easing is taking place at a slower pace than in 2025. Markets expect U.S. policy rates to drift toward the low 3% range by year-end 2026 with the added benefit of a pause in quantitative tightening, or balance sheet reductions.

Liquidity remains one of most relevant leading indicators for risk assets, crypto included. While quantitative tightening has effectively ended in the U.S., there is no clear path towards quantitative easing absent a negative growth shock.

With Federal Reserve Chair Jerome Powell’s term expiring in May 2026, markets may soon face a policy transition that introduces uncertainty around liquidity management.

The risk here is asymmetric: easing is more likely to arrive as a reaction to bad news rather than as a proactive tailwind. Persistently elevated inflation remains the key threat to a more constructive macro backdrop.

A true goldilocks outcome has to combine favorable trade relationship developments, reduction in consumer price inflation, sustained confidence in elevated investment in artificial intelligence, and de-escalation of geopolitical conflicts.

2. Momentum in IBIT and MSTR

ETF flows and Strategy’s positioning continue to act as a major gauge of sentiment. However, the nature of that signal is changing. ETF inflows in 2025 were lower than in 2024, and digital asset treasuries like Strategy are unable to issue equity as accretively with compressed premiums to net asset value.

Speculative positioning is also depressed. Options markets tied to vehicles like IBIT and Strategy saw a collapse in net delta exposure during late-2025, even below levels observed during the April 2025 tariff turmoil, which saw risk assets aggressively sold.

Without renewed risk-on sentiment, it’s difficult for these vehicles to catalyze another powerful leg higher in Bitcoin as they have in the past.

3. U.S. market structure and regulatory momentum

Regulatory clarity is no longer a theoretical tailwind — it’s tangible. The passage of stablecoin legislation is already reshaping onchain dollar liquidity, and attention is now turning toward broader market structure reform through the CLARITY Act.

If enacted, this framework would provide long-awaited clarity around the oversight of digital commodities and exchanges, likely accelerating capital formation and furthering the U.S. as the crypto capital of the world.

The global knock-on effects matter as well. Other countries are looking at the outcomes of U.S. policy decisions. The outcome will define where capital, developers, and innovation migrate.

4. Shifts in the volatility regime

Crypto volatility has been unusually low, even during periods of new all-time highs. This is a meaningful departure from historical cycle behavior. New all-time highs were observed while Bitcoin’s 30-day realized volatility hovered in the 20–30% range, levels typically associated with market cycle troughs, not peaks.

Bitcoin market cap dominance reinforces this signal. Throughout 2025, dominance averaged above 60%, with no sustained breakdown toward the sub-50% levels that historically marked speculative late-cycle excess.

Whether this reflects a structurally more mature market — or simply deferred volatility — remains one of the most important open questions heading into 2026.

5. Tokenization of traditional assets

The tokenization of real-world assets is quietly becoming one of the most important structural stories in crypto. Tokenized financial assets grew from roughly $5.6 billion to nearly $19 billion in a single year, expanding well beyond Treasury funds into commodities, private credit, and public equities.

As regulatory posture has shifted from adversarial to collaborative, incumbents are increasingly exploring onchain distribution and settlement. The tokenization of widely held assets such as large-cap U.S. equities could unlock new sources of global demand and onchain liquidity, serving as a catalyst for the next phase of growth much like ICOs or AMMs did in prior eras

6. New tokenomics for DeFi

The evolution of tokenomics may prove a niche but powerful catalyst. Many DeFi governance tokens launched during prior cycles were structured more conservatively to avoid value accrual mechanisms like fee sharing. That era may be ending.

Proposals like Uniswap’s move toward activating protocol fees signal a broader shift toward models that support sustainable cash flows and long-term alignment. If successful, these changes could reprice a subset of DeFi assets away from pure momentum and toward more durable valuation frameworks with improved incentive structures for future growth.

Setting the stage for 2026

As crypto heads into 2026, the market is balancing macro uncertainty with accelerating onchain innovation.

Bitcoin remains the primary lens through which risk sentiment is expressed, but it no longer operates in isolation. Liquidity conditions, institutional positioning, regulatory clarity, and the maturation of asset tokenization and tokenomics are increasingly intertwined.

Sentiment is lower than it was a year ago, and that matters. Expectations are reset, leverage is flushed, and structural progress continues largely out of the spotlight.

While tail risks remain elevated — particularly on the macro side — the underlying foundation looks more resilient than it did in prior cycles.

The industry is no longer early, but it is still evolving. The groundwork laid today may define the contours of crypto’s next expansion, even if the path there remains uneven.

The views and opinions expressed in this article are those of the author and do not necessarily represent the views or opinions of Kraken or its management.