2025 Crypto Market In-Depth Report: Institutions, Stablecoins, and Regulation; 2025 Crypto Market Review and 2026 Outlook

I. Institutions become marginal buyers: volatility declines, interest rate sensitivity increases.

In the early stages of the crypto market's development, price behavior and market rhythm were almost entirely dominated by retail traders, short-term speculative capital, and community sentiment. The market exhibited extremely high sensitivity to social media buzz, narrative shifts, and on-chain activity metrics. This pricing mechanism, driven primarily by sentiment and narrative, is often summarized as "community beta." Within this framework, asset price increases often stemmed not from fundamental improvements or long-term capital allocation, but from the rapid accumulation of FOMO (Fear of Missing Out). Conversely, once expectations reversed, panic selling was rapidly amplified in the absence of long-term capital support. This structure resulted in core assets like Bitcoin and Ethereum exhibiting highly non-linear price volatility for a considerable period: steep upward phases and violent pullbacks, with market cycles dominated by sentiment rather than constrained by capital. Retail investors were both major participants and key conduits for amplified volatility, their trading behavior favoring short-term price changes rather than risk-adjusted returns, thus keeping the crypto market in a state of high volatility, high correlation, and low stability for an extended period.

However, from 2024 to 2025, this long-standing market structure underwent a fundamental shift, as illustrated in the ETF AUM data. With the successive approvals and successful operation of US spot Bitcoin ETFs, crypto assets gained a compliant channel for systematic allocation by large-scale institutional capital for the first time. Unlike the previous "suboptimal paths" such as trusts, futures, or on-chain custody, ETFs, with their standardized, transparent, and compliant structure, significantly reduced the operational and compliance costs for institutions entering the crypto market. Entering 2025, institutional funds were no longer merely periodically "testing the waters" with crypto assets, but were continuously accumulating positions through ETFs, regulated custody solutions, and asset management products, gradually evolving into marginal buyers in the market. The key to this change lies not in the size of the funds themselves, but in the shift in the nature of the funds: the source of new market demand shifted from sentiment-driven retail investors to institutional investors with asset allocation and risk budgeting as their core logic. As the marginal buyers changed, the market's pricing mechanism was also reshaped. The primary characteristics of institutional funds are lower trading frequency and longer holding periods. Unlike retail investors who frequently enter and exit the market based on short-term price fluctuations and media signals, pension funds, sovereign wealth funds, family offices, and large hedge funds typically base their decisions on medium- to long-term portfolio performance. Their allocation processes involve investment committee discussions, risk control reviews, and compliance assessments. This decision-making mechanism naturally discourages impulsive trading and makes position adjustments more of a gradual rebalancing rather than emotional chasing of highs and lows. With the increasing proportion of institutional funds, the weight of high-frequency short-term trading in the market's trading structure has decreased, and price movements are beginning to reflect capital allocation trends more than immediate sentiment changes. This change is directly reflected in the volatility structure: although prices still adjust with macroeconomic or systemic events, the extreme amplitudes caused by short-term sentiment have significantly converged, especially in the most liquid core assets such as Bitcoin and Ethereum. The market as a whole exhibits a "static order" closer to traditional assets; price movements no longer rely entirely on narrative jumps but gradually return to capital constraints.

Meanwhile, a second significant characteristic of institutional funds is their high sensitivity to macroeconomic variables. The core objective of institutional investment is not maximizing absolute returns, but rather optimizing risk-adjusted returns. This dictates that their asset allocation behavior is inevitably profoundly influenced by the macroeconomic environment. In the traditional financial system, interest rate levels, liquidity conditions, changes in risk appetite, and cross-asset arbitrage opportunities constitute the core input variables for institutions adjusting their positions. When this logic is introduced into the crypto market, the price behavior of crypto assets begins to correlate more strongly with macroeconomic signals. Market practice in 2025 clearly demonstrates that changes in interest rate expectations have a significantly enhanced impact on Bitcoin and crypto assets as a whole. When major central banks, especially the Federal Reserve, adjust their policy interest rate paths, institutional allocation decisions in crypto assets will also be reassessed. The underlying logic is not a change in confidence in the crypto narrative, but a recalculation of opportunity costs and portfolio risks.

In summary, the emergence of institutions as marginal buyers in the crypto market in 2025 marks a shift in crypto assets from a "narrative-driven, sentiment-based pricing" phase to a "liquidity-driven, macro-based pricing" phase. The decline in volatility does not signify the disappearance of risk, but rather a shift in the source of risk: from internal emotional shocks to a high sensitivity to macroeconomic interest rates, liquidity, and risk appetite. This change has methodological implications for research in 2026. The analytical framework needs to move from simply focusing on on-chain indicators and narrative changes to a systematic study of capital structures, institutional behavioral constraints, and macroeconomic transmission paths. The crypto market is being integrated into the global asset allocation system; its prices no longer merely answer "what story the market is telling," but increasingly reflect "how capital is allocating risk." This transformation is one of the most far-reaching structural changes in 2025.

II. Mature On-Chain Dollar System: Stablecoins Become Infrastructure, RWA Brings Yield Curves On-Chain

If the large-scale influx of institutional funds in 2025 answered the question of "who is buying crypto assets," then the maturity of stablecoins and Real Asset Tokenization (RWA) further answered the more fundamental questions of "what to buy, what to use for settlement, and where the returns come from." It is at this level that the crypto market completed a crucial leap in 2025 from a "crypto-native financial experiment" to an "on-chain dollar financial system." Stablecoins are no longer just a medium of exchange or a hedging tool, but have evolved into the clearing and pricing basis for the entire on-chain economic system. Simultaneously, RWAs, represented by on-chain US Treasury bonds, began to be implemented on a large scale, providing on-chain, for the first time, a sustainable, auditable, low-risk return anchor, fundamentally changing the return structure and risk pricing logic of DeFi.

From a functional perspective, stablecoins have undeniably become the core infrastructure of on-chain finance by 2025. Their role has long surpassed that of "price-stable trading tokens," comprehensively undertaking multiple functions such as cross-border settlement, trading pair pricing, DeFi liquidity hub, and institutional fund inflow and outflow channels. Whether in centralized exchanges, decentralized trading protocols, or in RWA, derivatives, and payment scenarios, stablecoins constitute the underlying track for fund flows. On-chain transaction volume data clearly shows that stablecoins have become an important extension of the global dollar system, with annualized on-chain transaction volume reaching tens of trillions of dollars, far exceeding the payment systems of most single countries. This fact means that in 2025, blockchain truly assumed the role of a "functional dollar network" for the first time, rather than merely being an appendage system for high-risk asset trading. More importantly, the widespread adoption of stablecoins has changed the risk structure of on-chain finance. With stablecoins becoming the default unit of account, market participants can trade, lend, and allocate assets without directly exposing themselves to the price fluctuations of crypto assets, thus significantly lowering the barrier to entry. This is particularly crucial for institutional funds. Institutions do not inherently pursue the high volatility returns of crypto assets, but rather value predictable cash flow and manageable risk sources of income. The maturity of stablecoins allows institutions to gain on-chain "USD-denominated" exposure without bearing the traditional crypto price risk, laying the foundation for the subsequent expansion of RWA and yield-generating products.

Against this backdrop, the large-scale implementation of RWA, especially on-chain US Treasury bonds, became one of the most structurally significant developments of 2025. Unlike earlier attempts focused on "synthetic assets" or "yield mapping," the RWA project in 2025 began to introduce low-risk real-world assets directly onto the blockchain in a manner closer to traditional financial asset issuance. On-chain US Treasury bonds are no longer just a conceptual narrative, but exist in an auditable, traceable, and composable form, with clear cash flow sources, a defined maturity structure, and direct linkage to the risk-free interest rate curve in the traditional financial system.

However, the rapid expansion of stablecoins and RWA in 2025 also exposed another side of the on-chain dollar system: its potential systemic vulnerability. Particularly in the yield-generating and algorithmic stablecoin sectors, multiple de-pegging and collapse events sounded alarm bells for the market. These failures were not isolated incidents, but rather reflected the same type of structural problems: implicit leverage from recursive re-staking, opaque collateral structures, and a high concentration of risk in a few protocols and strategies. When stablecoins no longer rely solely on short-term government bonds or cash equivalents as reserves, but instead pursue higher yields through complex DeFi strategies, their stability no longer stems from the asset itself, but from the implicit assumption of continued market prosperity. Once this assumption is broken, de-pegging is no longer a technical fluctuation, but could evolve into a systemic shock. The numerous events of 2025 demonstrate that the risk of stablecoins lies not in "whether they are stable," but in "whether the source of their stability can be clearly identified and audited." While yield-generating stablecoins can indeed offer returns significantly higher than the risk-free rate in the short term, these returns are often built on leverage and liquidity mismatches, and their risks are not fully priced in. When market participants treat these products as "cash-like" equivalents, the risks are systematically amplified. This phenomenon forces the market to re-examine the role of stablecoins: are stablecoins payment and settlement tools, or financial products embedded with high-risk strategies? This question was first raised in 2025 in terms of real costs.

Therefore, looking ahead to 2026, the research focus is no longer on whether stablecoins and RWAs will continue to grow. From a trend perspective, the expansion of the on-chain dollar system is almost irreversible. The real key issue lies in "quality stratification." Differences among different stablecoins in terms of collateral transparency, maturity structure, risk isolation, and regulatory compliance will directly reflect their capital costs and use cases. Similarly, differences among different RWA products in terms of legal structure, liquidation mechanisms, and yield stability will determine whether they can become part of institutional-level asset allocation. It is foreseeable that the on-chain dollar system will no longer be a homogeneous market, but will form a clear hierarchical structure: products with high transparency, low risk, and strong compliance will obtain lower funding costs and wider adoption; while products relying on complex strategies and implicit leverage may be marginalized or even gradually eliminated. From a more macro perspective, the maturity of stablecoins and RWAs has enabled the crypto market to be truly embedded in the global dollar financial system for the first time. On-chain is no longer just an experimental field for value transfer, but an extension of dollar liquidity, yield curves, and asset allocation logic. This shift, coupled with the entry of institutional funds and the normalization of the regulatory environment, is driving the crypto industry from cyclical speculation to infrastructure development.

III. Normalization of Regulation: Compliance Becomes a Moat, Reshaping Valuation and Industry Organization

In 2025, global crypto regulation entered a phase of normalization. This change is not reflected in a single law or regulatory event, but rather in a fundamental shift in the industry's overall "survival assumptions." For many years prior, the crypto market operated in a highly uncertain institutional environment. The core issue was not growth or efficiency, but rather "whether the industry was allowed to exist." Regulatory uncertainty was considered part of the systemic risk, and capital often had to reserve an additional risk premium for potential compliance shocks, enforcement risks, and policy reversals before entering the market. Entering 2025, this long-standing problem was addressed for the first time. As major jurisdictions in Europe, the US, and the Asia-Pacific region gradually established relatively clear and enforceable regulatory frameworks, market focus shifted from "whether it can exist" to "how to expand its scale while remaining compliant." This shift has profoundly impacted capital behavior, business models, and asset pricing logic.

The clarification of regulations has significantly lowered the institutional barriers for institutions entering the crypto market. For institutional capital, uncertainty itself is a cost, and regulatory ambiguity often implies unquantifiable tail risks. In 2025, as key aspects such as stablecoins, ETFs, custody, and trading platforms were gradually brought under clear regulatory oversight, institutions were finally able to assess the risks and returns of crypto assets within existing compliance and risk control frameworks. This change does not mean that regulation has become lax, but rather predictable. Predictability itself is a prerequisite for large-scale capital entry. Once regulatory boundaries are clear, institutions can absorb these constraints through internal processes, legal structures, and risk models, rather than treating them as "uncontrollable variables." As a result, more long-term capital began to enter the market systematically, with both depth of participation and scale of allocation increasing simultaneously, and crypto assets gradually being incorporated into a broader asset allocation system. More importantly, the normalization of regulation has changed the competitive logic at the enterprise and protocol levels.

The profound impact of normalized regulation lies in its reshaping of industry organization. As compliance requirements are gradually implemented in issuance, trading, custody, and settlement, the crypto industry is showing a stronger trend towards centralization and platformization. More products are choosing to complete their issuance and distribution on regulated platforms, and trading activities are concentrating on venues with licenses and compliance infrastructure. This trend does not mean the disappearance of the decentralized concept, but rather that the "entry point" for capital formation and flow is being reorganized. Token issuance is gradually evolving from disordered peer-to-peer sales to more procedural and standardized operations closer to traditional capital markets, forming a new form of "Internet capital marketization." In this system, issuance, disclosure, lock-up periods, distribution, and secondary market liquidity are more closely integrated, and market participants' expectations of risk and return are becoming more stable. This change in industry organization is directly reflected in the adjustment of asset valuation methods. In previous cycles, crypto asset valuations relied heavily on narrative strength, user growth, and TVL (Total Value Limit), while consideration of institutional and legal factors was relatively limited. After 2026, with regulation becoming a quantifiable constraint, valuation models began to introduce new dimensions. Regulatory capital requirements, compliance costs, legal structure stability, reserve transparency, and accessibility of compliant distribution channels are gradually becoming important variables affecting asset prices. In other words, the market is beginning to impose a "regulatory premium" or "regulatory discount" on different projects and platforms. Entities that can operate efficiently within a compliant framework and internalize regulatory requirements as operational advantages are often able to obtain funding at lower capital costs; while models that rely on regulatory arbitrage or regulatory ambiguity face the risk of valuation compression or even marginalization.

IV. Conclusion

The turning point for the crypto market in 2025 was essentially due to three simultaneous events: the migration of funds from retail to institutional investors, the formation of an on-chain dollar system (stablecoins + RWA) from narrative to reality, and the implementation of normalized regulations from a gray area. These three factors collectively propelled crypto from a "high-volatility speculative asset" to a "modelable financial infrastructure." Looking ahead to 2026, research and investment should focus on three core variables: the strength of the transmission of macroeconomic interest rates and liquidity to crypto, the quality stratification of on-chain dollars and the sustainability of real returns, and the institutional moat formed by compliance costs and distribution capabilities. In this new paradigm, the winners will not be the projects with the best storytelling, but rather the infrastructure and assets that can continuously expand under the constraints of capital, returns, and regulations.