Original author: Grayscale

Original translation: TechFlow

• In the third quarter of 2025, all six major crypto market sectors experienced positive price returns, but fundamental dynamics varied. Crypto Sectors is a proprietary framework developed in partnership with index provider FTSE/Russell to organize digital asset markets and measure returns.
• Bitcoin underperformed other crypto market sectors, and its return pattern can be considered an "alt season", but it is different from previous "alt seasons".
• The top 20 tokens in Q3, based on volatility-adjusted price returns, demonstrate the importance of stablecoin legislation and adoption, rising trading volumes on centralized exchanges, and trends in digital asset treasuries (DATs).

Each cryptoasset is related to blockchain technology and shares a basic market structure, but the similarities end there. The cryptoasset class encompasses a wide range of software technologies with applications in consumer finance, artificial intelligence (AI), media and entertainment, and more. To organize the data, Grayscale Research uses a proprietary taxonomy and index series developed in partnership with FTSE/Russell, known as the Crypto Sectors . The Crypto Sectors framework covers six distinct market segments (Exhibit 1). Together, they encompass 261 tokens with a combined market capitalization of $3.5 trillion. [1]

Figure 1: The Crypto Sectors framework helps organize the digital asset market

Measuring blockchain fundamentals

While blockchains are not businesses, their economic activity and financial health can be measured in similar ways. Three key indicators of on-chain activity are users, transaction volume, and transaction fees. Because blockchains are anonymous, analysts often use "active addresses" (blockchain addresses with at least one transaction) as an imperfect indicator of user numbers.

Fundamental indicators of blockchain health showed mixed results in the third quarter (Exhibit 2). On the negative side, the cryptocurrency sector, both for currencies and smart contract platforms, saw a quarter-over-quarter decline in user numbers, transaction volume, and fees. Overall, speculative activity related to Memecoin has declined since the first quarter of 2025, contributing to a decline in transaction volume and trading activity.

Encouragingly, blockchain-based application fees increased by 28% month-over-month. This growth was primarily driven by fee revenue from a handful of leading applications: (i) Jupiter, a Solana-based decentralized exchange; (ii) Aave, a leading lending protocol in the cryptocurrency space; and (iii) Hyperliquid, a leading perpetual futures exchange. On an annualized basis, application-layer fee revenue now exceeds $10 billion. Blockchain is both a network for digital transactions and a platform for applications. Therefore, higher application fees can be seen as a sign of increasing adoption of blockchain technology applications.

Chart 2: Different fundamentals across the cryptocurrency industry in Q3 2025

Track price performance

Cryptoasset returns were positive across all six crypto sectors in the second quarter of 2025 (Exhibit 3). Bitcoin lagged behind other segments, a pattern of returns that can be considered a crypto “alt season”—although unlike other periods of declining Bitcoin dominance in the past. [2] The financial crypto sector led gains, driven by rising trading volumes on centralized exchanges (CEXs), while the smart contract platform crypto sector likely benefited from stablecoin legislation and adoption (smart contract platforms are networks where users use stablecoins for peer-to-peer payments). While all crypto sectors achieved positive returns, the AI crypto sector lagged behind other segments, reflecting a period of subdued returns for AI stocks. The currency crypto sector also underperformed, reflecting the relatively modest gains in Bitcoin’s price.

Chart 3: Bitcoin underperforms the rest of the cryptocurrency market

The diversity of the cryptoasset class means that dominant themes and market leadership frequently shift. Exhibit 3 shows the top 20 index-eligible tokens based on volatility-adjusted price returns in the third quarter of 2025 [3] . The list includes several large-cap tokens with market capitalizations exceeding $10 billion, including ETH, BNB, SOL, LINK, and AVAX, as well as several tokens with market capitalizations below $500 million. The financial crypto sector (seven assets) and the smart contract platform crypto sector (five assets) accounted for the largest share of the top 20 list this quarter.

Chart 4: Top performing assets in the cryptocurrency space by risk-adjusted returns

We believe there are three key themes that have stood out in recent market performance:

(1) Digital Asset Treasurys (DATs): The last quarter has seen a surge in the number of DATs: publicly traded companies holding cryptocurrencies on their balance sheets and as investment vehicles for equity investors. Several of the top 20 tokens are likely to benefit from the creation of new DATs, including ETH, SOL, BNB, ENA, and CRO.

(2) Stablecoin adoption: Another significant theme last quarter was the legislation and adoption of stablecoins. On July 18, President Trump signed the GENIUS Act, a new bill that provides a comprehensive regulatory framework for stablecoins in the United States (see our report “Stablecoins and the Future of Payments ”). Following the passage of the Act, stablecoin adoption accelerated, with the circulating supply increasing by 16% to over $290 billion (Exhibit 4). [4] The primary beneficiaries were smart contract platforms that host stablecoins, including ETH, TRX, and AVAX—with AVAX experiencing significant growth in stablecoin trading volume. Stablecoin issuer Ethena (ENA) also experienced strong price returns, despite the fact that its USDe stablecoin did not meet the requirements of the GENIUS Act (USDe is widely used in decentralized finance, and Ethena has launched a new stablecoin that does). [5]

Chart 5: Stablecoin supply growth this quarter, led by Ethereum

(3) Rising exchange trading volume: Exchanges were another major theme, with August trading volume on centralized exchanges reaching its highest level since January (Chart 5). [6] The increase in trading volume appears to have benefited several assets associated with centralized exchanges, including BNB, CRO, OKB, and KCS, all of which are in the top 20 (in some cases, these assets are also linked to smart contract platforms). [7]

Meanwhile, decentralized perpetual swaps continue to maintain strong momentum (for background information, see “DEX Appeal: The Rise of Decentralized Exchanges ”). Leading perpetual swap exchange Hyperliquid has seen rapid growth, ranking in the top three in fee revenue this quarter. [8] Smaller competitor DRIFT has broken into the top 20 cryptocurrencies after a significant increase in trading volume. [9] Another decentralized perpetual swap protocol, ASTER, launched in mid-September and grew from a $145 million market cap to $3.4 billion in just one week. [10]

Chart 6: CEX perpetual contract trading volume reached its highest level of the year in August

In the fourth quarter, returns in the cryptocurrency sector were likely driven by a number of different themes. First, following the bipartisan passage of the bill by the House of Representatives in July, the relevant U.S. Senate committees have begun work on legislation for the cryptocurrency market structure. This represents comprehensive financial services legislation for the cryptocurrency industry and could serve as a catalyst for its deeper integration with the traditional financial services industry. Second, the U.S. Securities and Exchange Commission (SEC) has approved universal listing standards for commodity-based exchange-traded products (ETPs). [11] This could lead to an increase in the number of crypto assets available to U.S. investors through ETP structures.

Finally, the macroeconomic environment is likely to continue evolving. Last week, the Federal Reserve approved a 25 basis point interest rate cut and hinted at two more cuts later this year. All else being equal, crypto assets are expected to benefit from Fed rate cuts (as they reduce the opportunity cost of holding non-interest-bearing currencies and support investor risk appetite). Meanwhile, a weakening US labor market, elevated stock market valuations, and geopolitical uncertainty could all be seen as sources of downside risks in the fourth quarter.

Index meaning:

• FTSE/Grayscale Crypto Sectors Total Market Index: This index measures the price returns of digital assets listed on major global exchanges, providing a reference for overall crypto market trends.
• FTSE Grayscale Smart Contract Platforms CryptoSector Index: This index is designed to assess the performance of crypto assets that support the development and deployment of smart contracts, which serve as the underlying platforms for self-executing contracts.
• FTSE Grayscale Utilities and Services CryptoSector Index: This index focuses on measuring the performance of crypto assets designed to provide real-world applications and enterprise-grade functionality.
• FTSE Grayscale Consumer and Culture CryptoSector Index: This index assesses the performance of cryptoassets that support consumption-centric activities across a wide range of goods and services.
• FTSE Grayscale Currencies CryptoSector Index: This index measures the performance of crypto assets that have one of three core functions: store of value, medium of exchange, and unit of account.
• FTSE Grayscale Financials CryptoSector Index: This index specifically evaluates the performance of crypto assets that aim to provide financial transactions and services.

[1] Source: Artemis, Grayscale Investments. Data as of September 23, 2025.

[2] Altcoins are crypto assets with a market capitalization lower than Bitcoin.

[3] To be included in the cryptocurrency space, a token must be listed on a minimum number of eligible exchanges and meet minimum market capitalization and liquidity thresholds.

[4] DeFiLlama, data as of September 22, 2025.

[5] Grayscale Investments

[6] The Block, data as of September 22, 2025.

[7] Certain exchange tokens also benefited from unique factors. For example, OKX announced a token buyback and burn program, with $26 billion worth of tokens destroyed. Source: The Block .

[8] Artemis, data as of September 22, 2025.

[9] The Defiant

[10] CoinMarketCap, data as of September 23, 2025. ASTER was launched too late to be included in the cryptocurrency industry index.

[11] Source: U.S. Securities and Exchange Commission .