Why has the cryptocurrency market become the laggard amid the global liquidity structural differentiation?

Author: ODIG Invest

Since mid-2025, the overall crypto market has exhibited high volatility and downward pressure, with major asset prices continuously retracing, trading volumes shrinking, and investor confidence waning. As of yesterday, the total global crypto market capitalization was approximately $3.33 trillion, down about 20-30% from the peak at the beginning of the year. BTC dominance remains stable around 55%, with volatility reaching as high as 40%, far exceeding 2024 levels. Market sentiment is cautious.

On-chain data from CryptoQuant shows that exchange BTC reserves have decreased by about 8% since early August, and USD-denominated reserves have fallen from approximately $300 billion to $250 billion in November. This indicates investors are withdrawing funds from exchanges (shifting to self-custody or safe-haven assets), reinforcing sell signals.

Mainstream token prices experienced a brief rebound in the first half of 2025 but entered a correction phase starting in October, with further declines in November. The top 50 tokens’ prices have nearly fallen back to levels seen after the 2022 FTX collapse.

To summarize the current state of the crypto market in 2025, including:

• Major tokens like SOL, ETH, and BTC have returned to December 2024 prices; the four-year cycle theory has failed, requiring industry participants to adjust and adapt.
• Token explosion: Over the past four years, most tokens were issued under low circulation and high FDV models. After the Meme craze, the number of tokens increased rapidly; new projects launch daily, leading to an oversupply in the market. Capital is becoming more cautious, and unless new buyers keep entering, this cannot offset the wave of large-scale unlockings.
• Market entering a concept reuse phase: Innovation is lacking; many technologies are non-essential.
• Project implementation difficulties: Economic models and incentives are ineffective; many projects have yet to find product-market fit (PMF).
• Airdrop fatigue: Airdropped tokens are immediately exchanged for stablecoins.
• Trading difficulty increases significantly: Any asset worth trading with sufficient liquidity faces intense competition.
• Capital chain tightness: VC investments have shrunk, with total funding at about half of 2024, leading to strained project finances.
• Industry issues frequently occur: The 10.11 “Black Swan” event; frequent hacking attacks (losses exceeding $2 billion in the first half of the year); Layer 1 chain congestion incidents, etc.
• DeFi yields decline: Compared to 2024, DeFi yields have fallen below 5%.

This resembles a structural adjustment, similar to 2018 but on a larger scale. Almost every market participant faces difficulties—users, traders, meme creators, entrepreneurs, VCs, quantitative institutions, etc.

Especially after Black Friday on 10.11, many crypto traders and quant firms suffered losses, and concerns about institutional failures persist. This event signifies that speculators, professional traders, and retail investors are all facing capital losses.

Traditional financial institutions mainly participate in BTC, payments, RWA, and DAT strategies, remaining relatively disconnected from the altcoin market. Bitcoin spot ETFs performed strongly in October, with net inflows of $3.4 billion, setting a record, but experienced large-scale outflows in early November, reflecting profit-taking at high prices.

Currently, with the market expectations of the government shutdown ending, official liquidity is expected to return. What will the crypto market look like in the last two months of 2025?

The increasingly clear direction remains: BTC and stablecoins.

BTC: Macroeconomic liquidity cycles replacing halving narratives

As market consensus shifts, analysts believe that the global liquidity cycle, rather than the simple Bitcoin halving event, is the core driver of bull-bear transitions.

Based on Arthur Hayes’ recent core statement “The four-year cycle is dead; liquidity is eternal,” he argues that the past three bull-bear cycles closely aligned with large-scale US dollar / RMB balance sheet expansion and periods of low interest rate credit easing. Currently, US debt is growing exponentially, and to dilute debt, the Standing Repo Facility (SRF) will become a primary tool for the government; increasing SRF balances indicate global fiat currency expansion. Under “hidden quantitative easing,” Bitcoin’s upward trend remains unaffected.

He believes SRF will become a key government tool amid ongoing monetary conditions, with US debt piling up exponentially. As SRF balances grow, global fiat currency expands, reigniting Bitcoin’s bull market.

Raoul Pal’s cycle theory also indicates that each crypto cycle ends with monetary tightening. Data shows global debt totals about $300 trillion, with roughly $10 trillion maturing soon (mainly US Treasuries and corporate bonds). To prevent yields from soaring, large-scale liquidity injections are needed. His model estimates that every $1 trillion added in liquidity could yield 5-10% returns in risk assets (stocks, crypto). The refinancing of $10 trillion could inject $2-3 trillion into risk assets, strongly boosting BTC prices.

All these ideas are underpinned by the dominance of global central bank liquidity cycles, providing a long-term macro environment for the rise of scarce assets like BTC.

Stablecoins: Moving towards financial infrastructure

Another major theme in 2025 is stablecoins, whose value is driven not by “speculative narratives” but by “real adoption.”

Recent policy developments are favorable: the US Congress is pushing to grant the CFTC (Commodity Futures Trading Commission) greater jurisdiction over the spot crypto market. The CFTC is expected to introduce a policy early next year that may allow stablecoins to serve as tokenized collateral in derivatives markets. This will initially be piloted at US clearinghouses and accompanied by stricter regulation, opening the door for stablecoins to enter the traditional financial core.

Stablecoins are rapidly expanding in scale, surpassing market expectations. Major US institutions are actively building a new payment network centered around stablecoins.

As real-world applications explode, stablecoins are proving their value in cross-border transfers, exchange rate risk management, corporate settlements, and allocations.

Over the past year, they have balanced speed, cost, and compliance, forming a compliant, low-cost, traceable global funds channel—gradually becoming a practical financial settlement layer for the real economy. As infrastructure, stablecoins are being solidified through regulation and actual use cases, providing stable liquidity for the entire crypto economy.

This also offers insights for entrepreneurs: teams should consider “native stablecoin” business models, target “stablecoin user groups,” and find products that truly fit the market (PMF).