Huobi Growth Academy | 2025 Cryptocurrency Market In-Depth Report: Institutions, Stablecoins, and Regulation, 2025 Cryptocurrency Market Review and 2026 Outlook

1. Institutions Become Marginal Buyers: Downward Volatility, Upward Interest Rate Sensitivity

In the early stages of the cryptocurrency market, price behavior and market rhythm were almost entirely dominated by retail traders, short-term speculative capital, and community sentiment. The market exhibited a high sensitivity to social media trends, narrative shifts, and on-chain activity indicators, which is often summarized as "community beta." Within this framework, asset price increases were often not driven by fundamental improvements or long-term capital allocation, but rather propelled by the rapid accumulation of FOMO sentiment; conversely, once expectations reversed, panic selling could be quickly amplified in the absence of long-term capital support. This structure caused core assets like Bitcoin and Ethereum to exhibit highly nonlinear price volatility characteristics for a considerable period: steep during uptrends and severe during pullbacks, with market cycles dominated by emotion rather than capital constraints. Retail investors were both the primary participants and key transmitters of volatility, with trading behavior more focused on short-term price changes rather than risk-adjusted returns, keeping the cryptocurrency market in a state of high volatility, high correlation, and low stability over the long term.

However, from 2024 to 2025, this long-standing market structure underwent a fundamental shift, as indicated by specific ETF AUM data. With the successive approval and successful operation of spot Bitcoin ETFs in the U.S., cryptocurrency assets gained a compliant channel for systematic allocation by large institutional capital for the first time. Unlike previous "suboptimal paths" through 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 cryptocurrency market. As 2025 approached, institutional funds were no longer just "testing the waters" with cryptocurrency assets periodically, 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 was not the scale of funds themselves, but the transformation of their attributes: the source of new market demand shifted from emotion-driven retail investors to institutional investors focused on asset allocation and risk budgeting. When marginal buyers change, the market's pricing mechanism is reshaped accordingly. The primary characteristic of institutional funds is lower trading frequency and longer holding periods. Unlike retail investors who frequently enter and exit based on short-term price fluctuations and public sentiment signals, decisions made by pension funds, sovereign wealth funds, family offices, and large hedge funds are typically based on medium to long-term portfolio performance, requiring discussions in investment committees, risk control reviews, and compliance assessments. This decision-making mechanism inherently suppresses impulsive trading and makes position adjustments more reflective of gradual rebalancing rather than emotional chasing of prices. Against the backdrop of an increasing proportion of institutional funds, the weight of high-frequency short-term trading in market transaction structures has decreased, and price movements began to reflect capital allocation directions more than immediate emotional changes. This change is directly reflected in the volatility structure: although prices still adjust with macro or systemic events, extreme fluctuations triggered by emotions in the short term have significantly converged, especially evident in the most liquid core assets like Bitcoin and Ethereum. The market overall presents a "static order" that is closer to traditional assets, with price movements no longer entirely reliant on narrative jumps but gradually returning to capital constraints.

At the same time, the second notable characteristic of institutional funds is their high sensitivity to macro variables. The core objective of institutional investment is not absolute return maximization, but the optimization of risk-adjusted returns, which determines that their asset allocation behavior is profoundly influenced by the macroeconomic environment. In the traditional financial system, interest rates, liquidity tightness, changes in risk appetite, and cross-asset arbitrage conditions constitute the core input variables for institutions adjusting their positions. When this logic is introduced into the cryptocurrency market, the price behavior of crypto assets begins to exhibit stronger linkage with macro signals. Market practices in 2025 have clearly shown that changes in interest rate expectations significantly enhance their impact on Bitcoin and the overall cryptocurrency assets. When major central banks, especially the Federal Reserve, adjust their policy interest rate paths, institutions will also reassess their allocation decisions in cryptocurrency assets, driven not by changes in confidence in the crypto narrative, but by recalculating opportunity costs and portfolio risks.

In summary, the process of institutions becoming marginal buyers in the cryptocurrency market in 2025 marks a transition of crypto assets from a phase of "narrative-driven, emotion-based pricing" to a new phase of "liquidity-driven, macro-based pricing." The downward volatility does not mean the disappearance of risk, but rather a shift in the source of risk: from internal emotional shocks to high sensitivity to macro interest rates, liquidity, and risk appetite. For research in 2026, this change has methodological significance. The analytical framework needs to shift from purely focusing on on-chain indicators and narrative changes to a systematic study of funding structures, institutional behavioral constraints, and macro transmission paths. The cryptocurrency market is being integrated into the global asset allocation system, and its prices are no longer just answering "what story the market is telling," but increasingly reflecting "how capital is allocating risk." This transformation is one of the most profound structural changes of 2025.

2. Maturity of the On-Chain Dollar System: Stablecoins Become Infrastructure, RWA Brings Yield Curves On-Chain

If the large-scale entry of institutional funds in 2025 answers the question of "who is buying cryptocurrency assets," then the maturity of stablecoins and the tokenization of real-world assets (RWA) further addresses the more fundamental questions of "what to buy, how to settle, and where the yields come from." It is at this level that the cryptocurrency market completed a critical leap from "crypto-native financial experiments" to "on-chain dollar financial systems" in 2025. Stablecoins are no longer just trading mediums or hedging tools but have evolved into the clearing and pricing foundation of the entire on-chain economic system; meanwhile, RWAs, represented by on-chain U.S. Treasury bonds, began to scale, providing the on-chain market with a sustainable, auditable low-risk yield anchor, fundamentally changing the yield structure and risk pricing logic of DeFi.

From a functional perspective, stablecoins have indisputably become the core infrastructure of on-chain finance in 2025. Their role has transcended "price-stable trading tokens" to fully undertake multiple functions such as cross-border settlement, trading pair pricing, DeFi liquidity hubs, and institutional capital entry and exit channels. Whether in centralized exchanges, decentralized trading protocols, or in RWA, derivatives, and payment scenarios, stablecoins constitute the underlying track for capital flow. On-chain trading volume data clearly indicates that stablecoins have become an important extension of the global dollar system, with annual on-chain trading volumes reaching hundreds of trillions of dollars, far exceeding the payment systems of most individual countries. This fact means that blockchain has truly taken on the role of a "functional dollar network" for the first time in 2025, rather than merely being an ancillary system for high-risk asset trading. More importantly, the widespread adoption of stablecoins has changed the risk structure of on-chain finance. Once stablecoins became the default pricing unit, market participants could trade, lend, and allocate assets without directly exposing themselves to the price volatility of crypto assets, significantly lowering the participation threshold. This is particularly crucial for institutional funds. Institutions do not inherently pursue the high volatility returns of crypto assets but place greater emphasis on predictable cash flows and controllable sources of returns. The maturity of stablecoins allows institutions to gain exposure to "dollar-denominated" assets on-chain without bearing traditional crypto price risks, laying the foundation for the subsequent expansion of RWAs and yield-bearing products.

In this context, the large-scale implementation of RWAs, especially on-chain U.S. Treasury bonds, became one of the most structurally significant developments of 2025. Unlike early attempts focused on "synthetic assets" or "yield mapping," RWA projects in 2025 began to introduce real-world low-risk assets directly on-chain in a manner closer to traditional financial asset issuance. On-chain U.S. Treasury bonds are no longer merely conceptual narratives but exist in an auditable, traceable, and composable form, with clear cash flow sources, defined term structures, and directly linked to the risk-free interest rate curve in the traditional financial system.

However, alongside the rapid expansion of stablecoins and RWAs, 2025 also concentratedly exposed another side of the on-chain dollar system: its potential systemic vulnerabilities. Particularly in the yield-bearing and algorithmic stablecoin sectors, multiple de-pegging and collapse events sounded alarms for the market. These failure cases are not isolated incidents but reflect a common structural issue: the implicit leverage brought by recursive re-staking, the opacity of collateral structures, and the high concentration of risks in a few protocols and strategies. When stablecoins no longer merely use short-term government bonds or cash equivalents as reserves but pursue higher yields through complex DeFi strategies, their stability no longer derives from the assets themselves but from implicit assumptions of sustained market prosperity. Once this assumption is broken, de-pegging can evolve from a technical fluctuation into a systemic shock. Events in 2025 have shown that the risk of stablecoins does not lie in "whether they are stable," but in "whether the source of stability can be clearly identified and audited." Yield-bearing stablecoins can indeed provide returns significantly above the risk-free rate in the short term, but these returns are often built on layered leverage and liquidity mismatches, with their risks not being adequately priced. When market participants view these products as "cash-like" equivalents, the risks become 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 posed in 2025 in a way that reflects 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 truly critical issue is "quality stratification." Differences between stablecoins in collateral asset transparency, term structures, risk isolation, and regulatory compliance will directly reflect in their capital costs and usage scenarios. Similarly, differences among various RWA products in legal structures, clearing 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 homogenized market but will form a clear hierarchical structure: high transparency, low risk, and strong compliance products will obtain lower capital 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 allowed the cryptocurrency market to be genuinely embedded into the global dollar financial system for the first time. The on-chain space is no longer merely an experimental ground for value transfer but has become an extension of dollar liquidity, yield curves, and asset allocation logic. This transformation, reinforced by the entry of institutional funds and the normalization of the regulatory environment, collectively drives the cryptocurrency industry from cyclical speculation towards infrastructural development.

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

In 2025, global cryptocurrency regulation entered a phase of normalization, a change that is not reflected in any single law or regulatory event but in the fundamental shift of the industry's overall "survival hypothesis." For many years prior, the cryptocurrency market operated under a highly uncertain institutional environment, where the core issue was not growth or efficiency, but "whether this industry is allowed to exist." Regulatory uncertainty was seen as part of systemic risk, and capital often needed to reserve additional risk premiums for potential compliance shocks, enforcement risks, and policy reversals upon entry. As 2025 began, this long-standing unresolved issue was first addressed in stages. With major jurisdictions in Europe, the U.S., and Asia-Pacific gradually forming relatively clear and enforceable regulatory frameworks, market focus shifted from "whether it can exist" to "how to scale under compliance," a transformation that had profound impacts on capital behavior, business models, and asset pricing logic.

The clarification of regulations significantly lowered the institutional barriers to entry into the cryptocurrency market. For institutional capital, uncertainty itself is a cost, and regulatory ambiguity often implies unquantifiable tail risks. In 2025, as stablecoins, ETFs, custody, and trading platforms gradually fell under clear regulatory oversight, institutions were finally able to assess the risks and returns of cryptocurrency assets within existing compliance and risk control frameworks. This change does not mean that regulation has become lenient, but rather that it has become predictable. Predictability itself is a prerequisite for the large-scale entry of capital. Once regulatory boundaries are clarified, institutions can absorb these constraints through internal processes, legal structures, and risk models without viewing them as "uncontrollable variables." The result is that more long-term capital begins to enter the market systematically, with participation depth and allocation scale increasing, and cryptocurrency assets gradually being integrated 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 regulatory normalization lies in its reshaping of industry organizational forms. As compliance requirements gradually take root in issuance, trading, custody, and settlement processes, the cryptocurrency industry begins to exhibit stronger trends of centralization and platformization. More product choices are completed on regulated platforms for issuance and distribution, and trading activities are concentrated in venues with licensing and compliance infrastructure. This trend does not imply the disappearance of decentralization ideals but means that the "entrances" for capital formation and flow are being reorganized. Token issuance is gradually evolving from chaotic 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 tightly integrated, and market participants' expectations of risks and returns become more stable. This change in industry organization is directly reflected in adjustments to asset valuation methods. In previous cycles, cryptocurrency asset valuations heavily relied on narrative strength, user growth, and TVL metrics, with relatively limited consideration of institutional and legal factors. Entering 2026, as regulation becomes a quantifiable constraint, valuation models begin to incorporate new dimensions. Regulatory capital requirements, compliance costs, legal structure stability, reserve transparency, and the accessibility of compliant distribution channels gradually become important variables influencing asset prices. In other words, the market begins to impose "institutional premiums" or "institutional discounts" on different projects and platforms. Those that can operate efficiently within a compliance framework and internalize regulatory requirements as operational advantages often obtain funding support at lower capital costs; while models relying on regulatory arbitrage or institutional ambiguity face the risk of valuation compression or even marginalization.

4. Conclusion

The turning point of the cryptocurrency market in 2025 essentially involves three simultaneous occurrences: the migration of funds from retail to institutions, the formation of assets from narrative to the on-chain dollar system (stablecoins + RWAs), and the transition of rules from gray areas to normalized regulation. Together, these three factors push cryptocurrency from being a "high-volatility speculative asset" to a "modelable financial infrastructure." Looking ahead to 2026, research and investment should focus on three core variables: the transmission strength of macro interest rates and liquidity to cryptocurrency, the quality stratification of on-chain dollars and the sustainability of real yields, and the institutional moat formed by compliance costs and distribution capabilities. In this new paradigm, the winners will not be the projects that tell the best stories, but rather the infrastructures and assets that can continue to expand under the constraints of capital, yields, and regulations.