Interpreting Messari's 100,000-word Annual Report (Part 1): Why Will Market Sentiment Collapse Completely in 2025?

Author: Merkle3s Capital

This article is based on the annual report The Crypto Theses 2026 released by Messari in December 2025. The full report contains over 100,000 words, with an official reading time of 401 minutes.

This content is supported by Block Analytics Ltd X Merkle 3s Capital. The information in this article is for reference only and does not constitute any investment advice or invitation. We do not take responsibility for the accuracy of the content, nor do we assume any consequences arising from it.

Introduction | This is the worst year for emotions, but not the weakest year for the system.

If we only look at sentiment indicators, the crypto market in 2025 could almost be sentenced to “death.”

In November 2025, the Crypto Fear & Greed Index fell to 10, entering the “Extreme Fear” range.

Historically, there have been very few moments when emotions have dropped to this level:

In March 2020, the liquidity crunch triggered by the global pandemic.

In May 2021, leveraged cascading liquidation

In May-June 2022, the systemic collapse of Luna and 3AC.

2018–2019 industry-wide bear market

These periods have a common feature: the industry itself is failing, and the future is highly uncertain.

But the year 2025 does not fit this characteristic.

There is no head exchange misappropriating user assets, no Ponzi projects with a market value of hundreds of billions of dollars dominating the narrative, the total market value has not fallen below the peak of the last cycle, the scale of stablecoins has instead reached a new historical high, and the regulatory and institutionalization processes continue to advance.

On the “factual level”, this is not a year in which an industry is collapsing.

However, on the “emotional level”, it may be the most painful year for many practitioners, investors, and long-time users.

Why do emotions collapse?

Messari opens the report with a striking comparison:

If you are involved in crypto asset allocation in a Wall Street office, 2025 could be the best year since you entered this industry. But if you are staying up late on Telegram and Discord, watching the markets and searching for Alpha, this might be the year you miss the “old days” the most.

The same market, two almost completely opposite experiences.

This is not a random emotional fluctuation, nor is it a simple switch between bull and bear markets,

but rather a deeper structural dislocation:

The market is changing participants, but most people are still using old identities to participate in the new system.

This is not a market review.

This article does not intend to discuss short-term price trends, nor does it attempt to answer the question “Will it rise next?”.

It is more like a structural description:

Why, while the system, funding, and infrastructure are constantly being strengthened,

Is the market sentiment sliding towards a historic low?

Why do many people feel that “they chose the wrong track,” but the system itself has not failed?

In this hundred-thousand-word report, Messari chooses to start over from a very fundamental question:

If cryptocurrency assets ultimately qualify as “money”, then who deserves to be treated as money?

Understanding this is a prerequisite for comprehending the complete collapse of market sentiment in 2025.

Chapter 1 | Why Are Emotions So Low That They Are Abnormal?

If you only look at the results, the emotional collapse in 2025 is almost “incomprehensible.”

In the absence of exchange crashes, systemic credit collapses, and the bankruptcy of core narratives, the market has nonetheless provided an emotional response close to historical lows.

Messari's assessment is very straightforward: this is an extreme case of “a serious disconnect between sentiment and reality.”

1. The sentiment indicator has entered the “historical anomaly zone”.

The Crypto Fear & Greed Index has dropped to 10, which is not a normal pullback signal.

In the past decade or so, this figure has only appeared on very few occasions, and each time it has appeared, it has been accompanied by a real and profound industry-level crisis:

Breakdown of the financial system

The credit chain has collapsed.

The market is skeptical about whether the “future exists”.

But these problems did not occur in 2025.

There were no core infrastructure failures, no mainstream assets were liquidated to zero, and there were no systemic events significant enough to undermine the legitimacy of the industry.

Statistically speaking, this sentiment reading does not match any known historical template.

2. The market has not failed; what has failed is the “personal experience”.

The collapse of emotions does not come from the market itself, but from the subjective experiences of the participants.

Messari repeatedly emphasizes a neglected fact in the report:

The year 2025 will be one where institutional experiences far surpass those of retail investors.

For institutions, this is an extremely clear and even comfortable environment:

ETFs provide a low-friction, low-risk allocation channel.

DAT (Digital Asset Treasury) becomes a stable and predictable long-term buyer.

The regulatory framework is becoming clearer, and the compliance boundaries are gradually becoming visible.

But for a large number of participants under the old structure, this year has been exceptionally cruel:

Alpha significantly reduced

Narrative wheel failure

Most assets underperform BTC in the long run.

The relationship between “effort” and “results” has been completely broken.

The market does not reject people, it has just changed its reward mechanism.

3. “Did not make any money” is misinterpreted as “the industry is failing”

The real trigger point of emotions is not the price drop, but the cognitive dissonance.

In multiple cycles in the past, the implicit assumption of crypto is:

As long as you are diligent enough, start early enough, and are aggressive enough, you can achieve excess returns.

But in 2025, this assumption was systematically broken for the first time.

Most assets no longer gain a premium because of “storytelling”.

The ecosystem growth of L1 no longer automatically translates into token rewards.

High volatility no longer means high returns.

The result is that a large number of participants began to have an illusion:

If I didn't make money, then it must be an issue with the entire industry.

However, Messari's conclusion is exactly the opposite:

The industry is becoming more like a mature financial system, rather than a machine continuously generating speculative dividends.

4. The essence of emotional collapse is identity misalignment.

Considering all the phenomena, the only implied answer given by Messari is:

The emotional collapse in 2025 is essentially a misalignment of identity.

The market is leaning towards “asset allocators”, “long-term holders”, and “institutional participants”.

But a large number of participants still exist as “short-term Alpha seekers”.

When the reward logic of the system changes, and the participation method does not adjust accordingly, emotions are bound to collapse first.

This is not a matter of personal ability, but rather the friction costs of switching roles in the era.

Summary | Emotions do not tell you the truth

The market sentiment in 2025 truly reflects the pain of the participants, but it does not accurately reflect the state of the system.

Emotional breakdown ≠ industry failure

Pain intensifies ≠ Value disappears

It just hints at one thing:

The old ways of participation are quickly becoming obsolete.

Understanding this is the prerequisite for entering the next chapter.

Chapter 2 | The Real Root of Emotional Collapse: The Currency System is Failing

If we only stay at the market structure level, the emotional collapse in 2025 is still not fully explained.

The real question is:

Alpha has decreased.

BTC is too strong

Institutions have entered.

These are just surface phenomena.

The deeper judgment provided by Messari in the report is:

The collapse of market sentiment essentially stems from a long-ignored fact—the monetary system we are in is continuously putting pressure on savers.

A picture that must be faced: Global government debt is out of control.

This image is not a macro background decoration, but rather the logical starting point of the entire Cryptomoney argument.

Over the past 50 years, the ratio of government debt to GDP in major global economies has shown a highly consistent and almost irreversible upward trend:

🇺🇸 United States: 120.8%

🇯🇵 Japan: 236.7%

🇫🇷 France: 113.1%

🇬🇧 United Kingdom: 101.3%

🇨🇳 China: 88.3%

🇮🇳 India: 81.3%

🇩🇪 Germany: 63.9%

This is not the result of governance failure in a particular country, but rather a common outcome that spans systems, political structures, and stages of development.

Whether in democratic countries, authoritarian states, developed economies, or emerging markets, government debt has consistently outpaced economic growth over the long term.

What this chart truly indicates is not “high debt,” but rather “savings being systematically sacrificed.”

When government debt grows much faster than economic output over the long term, the system can only maintain stability through three methods:

Inflation

Long-term low real interest rates

Financial repression (capital controls, withdrawal restrictions, regulatory intervention)

Regardless of the path taken, the final cost will be borne by the same group of people:

Saver.

Messari used a remarkably restrained yet impactful statement in the report:

When debt grows faster than economic output, the costs fall most heavily on savers.

It translates to:

When debt outpaces growth, savings are destined to be the sacrificed party.

Why will emotions collapse in 2025?

Because 2025 is the year when more and more participants will clearly realize this for the first time.

Before this:

“Inflation is only temporary”

Cash is always safe.

“In the long run, fiat currency is stable.”

And reality is constantly denying these assumptions.

When people discover:

Working hard ≠ wealth preservation

The act of saving itself is continuously shrinking.

The difficulty of asset allocation has significantly increased.

The collapse of emotions does not come from Crypto, but from the erosion of confidence in the entire financial system.

Crypto is just the first place where this shock is perceived.

The significance of cryptocurrency is not in “higher returns.”

This is also a point that Messari repeatedly emphasizes, but it is easily misinterpreted.

Cryptomoney does not exist to promise higher returns.

Its core value lies in:

Rules are predictable

Monetary policy should not be arbitrarily changed by a single institution.

Assets can be self-custodied

Value can be transferred across borders without permission.

In other words, what it offers is not a “money-making tool,” but rather:

In a world of high debt and low certainty, restore monetary choice to individuals.

Emotional breakdown is actually a form of “awakening”.

When you put this debt chart together with the market sentiment for 2025, you will find an counterintuitive conclusion:

Extreme pessimism does not mean the failure of the industry, but rather that more and more people are beginning to realize that the problems of the old system are real.

The issue with crypto has never been “useless.”

The real issue is: it no longer creates easy excess returns for everyone.

Summary | From emotions, to structures, and then to the currency itself

This chapter addresses a fundamental issue:

Why has market sentiment plunged to historic lows without a systemic collapse?

The answer is not in the K-line, but in the currency structure.

Emotional breakdown is just a facade.

Paradigm rupture is a process.

The imbalance of the monetary system is the root cause.

And this is precisely the reason why Messari chose to start the entire report from “money” rather than from “applications.”

Chapter 3 | Why Only BTC is Considered “Real Money”

If you have read to this point, it is easy to have a question:

If the problem lies in the monetary system, then why is the answer BTC and not something else?

Messari's judgment given in the report is exceptionally clear:

BTC is no longer on the same competitive dimension as other Crypto assets.

1. Money is not a technical issue, but a consensus issue.

This is the first key to understanding BTC.

Messari repeatedly emphasizes a fact in the original text that is easily overlooked by engineers:

Money is a social consensus, not a technical optimization problem.

In other words:

Money is not about “who is faster”

It's not about 'who is cheaper'.

It's not about “who has more features”

And who is regarded as a long-term, stable store of value.

From this perspective, Bitcoin's victory is not mysterious.

2. Three years of data have already written the answer on the face.

From December 1, 2022 to November 2025:

BTC increased by 429%

Market cap from 318 billion dollars → 1.81 trillion dollars

Global asset ranking enters the top ten

And more importantly, relative performance:

BTC.D from 36.6% → 57.3%

During a period that “theoretically should be a copycat frenzy”, funds have instead continued to flow back into BTC.

This is not a random outcome of a market cycle; it is the market reclassifying assets.

3. ETF and DAT are essentially about “institutionalized consensus”

Messari's assessment of ETFs is very restrained, but the conclusion is extremely heavy.

The Bitcoin ETF is not as simple as “new buying pressure”; what it truly changes is:

Who is buying + Why buy + How long can it be held

ETFs turn BTC into compliant assets

DAT turns BTC into a part of the company's balance sheet.

The national reserve has elevated BTC to the level of a “strategic asset”.

When BTC is held by these entities, it is no longer:

“High volatility risk assets that can be discarded at any time”

but rather:

Currency assets that must be held for the long term and should not be easily mismanaged.

Money, once treated like this, is hard to get back.

4. Why BTC becomes more “boring”, the more it resembles money

This might be the most counterintuitive point of 2025.

BTC has no applications

No narrative rotation

No ecological story

Not even a “new thing”

But precisely because of this, it meets all the characteristics of “money”:

Not relying on future promises

No need for growth narrative

No need for the team to deliver continuously

It just needs to work without errors.

In a world of high debt and low certainty, “not making mistakes” is itself a scarce asset.

5. BTC is strong, and it is not a failure of the market.

Many people's suffering comes from an illusion:

“BTC is strong, indicating that something is off in the market.”

Messari's judgment is exactly the opposite:

The strength of BTC indicates that the market is becoming more rational.

When the system starts rewarding:

Stability

predictability

Long-term credibility

All strategies that rely on “high volatility for high returns” will become increasingly painful.

This is not a problem with BTC, it is a problem with the way of participation.

Summary | BTC did not win, it was chosen.

BTC did not “defeat” other assets.

It has been repeatedly validated by the market in an era where a currency system is constantly failing:

The asset that needs the least explanation

The least trust-dependent asset

Assets that require the least commitment to the future

This is not the result of a market cycle,

but rather a role confirmation.

Chapter 4 | When the market only needs one kind of “money”, the story of L1 begins to fail

After confirming that BTC has been chosen by the market as the “main Cryptomoney”, one unavoidable question arises:

If money already has the answer, then what is left for Layer 1?

Messari does not provide a direct conclusion, but after reading through this section, one trend becomes very clear:

The valuation of L1 is being forced to shift from “future narratives” back to “real constraints.”

1. A cruel but true fact: 81% of the market value is in the narrative of “money”.

By the end of 2025, the total market capitalization of the cryptocurrency market is approximately $3.26T:

BTC: $1.80T

Other L1: about $0.83T

Remaining assets: less than $0.63T

In total:

Approximately 81% of the market value of crypto assets is priced by the market as “money” or “potential money.”

What does this mean?

means that the valuation of L1 is no longer based on the pricing logic of an “application platform.”

but rather the pricing logic of “Does it qualify as money”.

2. The problem is that most L1s do not match.

The data provided by Messari is very straightforward and very cold.

After excluding exceptional cases with abnormally high revenue such as TRON and Hyperliquid:

The overall revenue of L1 continues to decline.

But the valuation multiples are continuously rising.

The adjusted P/S ratio is as follows:

2021: 40x

2022: 212x

2023: 137x

2024: 205x

2025: 536x

And the total revenue of L1 during the same period:

2021：$12.3B

2022：$4.9B

2023：$2.7B

2024：$3.6B

2025 (annualized): $1.7B

This is a gap that cannot be reasonably explained by “future growth.”

3. L1 is not “undervalued”, but rather “reclassified”.

The suffering of many people comes from a misunderstanding:

“Isn't L1 being unfairly punished by the market?”

Messari's judgment is exactly the opposite:

The market did not wrongfully kill L1, but is instead reducing their 'monetary imagination space'.

If an asset:

Cannot stabilize value

Cannot be held for a long time

and cannot provide a definite cash flow

Then it ultimately only has one pricing method left:

High beta risky assets.

4. The example of Solana has actually explained everything.

SOL is one of the few L1s that will outperform BTC in 2025.

But Messari pointed out a devastating fact:

SOL ecosystem data growth 20–30 times

The price has outperformed BTC by 87%.

In other words:

To achieve “significant excess returns” in front of BTC, L1 needs an order-of-magnitude-level ecological explosion.

This is not a matter of “not trying hard enough,” but rather that the reward function has been rewritten.

5. When BTC becomes “money”, the burden on L1 is actually heavier.

This is a structural change that many people are not aware of.

Before BTC has a clear monetary status:

L1 can tell the story of “becoming money in the future”.

The market is willing to pay in advance for this possibility.

And now:

BTC has already been solidified

The market is no longer willing to pay the same premium for the “second money”.

Thus, L1 faces a more difficult problem:

If it's not money, then what exactly are you?

Summary | The issue with L1 is not competition, but positioning.

L1 did not “lose to BTC”.

They lost:

In the dimension of currency

The market doesn't need more answers.

Once the protection of the “currency narrative” is lost, all valuations must re-accept the constraints of reality.

This is the direct source of the emotional collapse of a large number of participants in 2025.