Author: Stacy Muur
Compiled by: TechFlow TechFlow
summary:
Institutions are becoming marginal buyers of crypto assets.
Real assets (RWAs) have evolved from a narrative concept into an asset class.
Stablecoins have become both a "killer app" and a systemic vulnerability.
The second-layer network (L2) integrates into a "winner-takes-all" structure.
Prediction markets have evolved from toy applications into financial infrastructure.
Artificial intelligence and encryption (AI × Crypto) have moved from hype narratives to actual infrastructure.
Launchpads have become industrialized and are now part of the internet capital market.
Tokens with high fully diluted valuation (FDV) and low circulating supply have proven to be structurally uninvestable.
Information finance (InfoFi) experienced a boom, expansion, and then collapsed.
Consumer-grade encryption is making a comeback, but through new types of digital banks (Neobanks) rather than Web3 applications.
Globally, regulations are gradually becoming normalized.
In my view, 2025 marks a turning point for the crypto space: it transitions from a speculative cycle to a fundamental, institutional-scale structure.
We have witnessed a repositioning of capital flows, a restructuring of infrastructure, and the maturation or collapse of emerging sectors. Headlines surrounding ETF inflows or token prices are merely the surface. My analysis reveals the deep structural trends underpinning the new paradigm of 2026.
Below, I will analyze the 11 pillars of this transformation one by one, each supported by specific data and events in 2025.
1. Institutions become the dominant force in the flow of crypto funds.
I believe 2025 will witness institutions gain complete control over liquidity in the crypto market. After years of observation, institutional capital has finally surpassed retail investors to become the dominant force in the market.
In 2025, institutional capital didn't just "enter" the crypto market; it crossed a significant threshold. For the first time, marginal buyers of crypto assets shifted from retail investors to asset allocators. In the fourth quarter alone, weekly inflows into US spot Bitcoin ETFs exceeded $3.5 billion, led by products like BlackRock's IBIT.
These capital flows are not random, but rather a structured redistribution of venture capital. Bitcoin is no longer seen as a curiosity-driven asset, but rather as a macroeconomic tool with portfolio utility: digital gold, a convex inflation hedge, or simply an exposure to uncorrelated assets.
However, this shift also has a dual impact.
Institutional fund flows are less responsive but more sensitive to interest rates. They compress market volatility while simultaneously binding the crypto market to macroeconomic cycles. As one chief investment officer put it, "Bitcoin is now a liquidity sponge in a compliance shell." As a globally recognized store of value, its narrative risk is significantly reduced; however, interest rate risk still exists.
This shift in capital flows has far-reaching implications: from exchange fee reductions to a reshaping of the demand curve for yield-generating stablecoins and real-asset tokenization (RWAs).
The next question is no longer whether institutions will enter the market, but how protocols, tokens, and products can adapt to capital needs that are driven by the Sharpe Ratio rather than market speculation.
2. Real Assets (RWAs) have evolved from a concept to a real asset class.
By 2025, tokenized real assets (RWAs) will have transformed from a concept into the infrastructure of capital markets.
We are now witnessing substantial supply: as of October 2025, the total market capitalization of RWA tokens exceeded $23 billion, a nearly fourfold increase year-over-year. About half of this is in tokenized U.S. Treasury bonds and money market strategies. With institutions like BlackRock issuing BUIDL with $500 million in Treasury bonds, this is no longer a marketing gimmick, but a vault secured by on-chain insured debt, rather than unsecured code.
At the same time, stablecoin issuers have begun to back reserves with short-term notes, and protocols such as Sky (formerly Maker DAO) are also integrating on-chain commercial paper into their collateral pools.
Stablecoins backed by government bonds are no longer marginalized, but rather the foundation of the crypto ecosystem. The assets under management (AUM) of tokenized funds nearly quadrupled in 12 months, growing from approximately $2 billion in August 2024 to over $7 billion in August 2025. Meanwhile, the Real Asset Tokenization (RWA) infrastructure of institutions like JPMorgan and Goldman Sachs officially transitioned from testnets to production environments.
In other words, the boundary between on-chain liquidity and off-chain asset classes is gradually collapsing. Traditional financial asset allocators no longer need to purchase tokens associated with physical assets; they now directly hold assets issued in their native on-chain form. This shift from synthetic asset representation to the tokenization of real assets is one of the most impactful structural advancements of 2025.
3. Stablecoins: Both a "killer app" and a systemic weakness.
Stablecoins have delivered on their core promise: a massively programmable dollar. Over the past 12 months, on-chain stablecoin transaction volume reached $46 trillion, a year-on-year increase of 106%, averaging nearly $4 trillion per month.
From cross-border settlements to ETF infrastructure and DeFi liquidity, these tokens have become the central hub of funding in the crypto space, enabling blockchain to truly become a functional dollar network. However, the success of stablecoins has also been accompanied by the emergence of systemic vulnerabilities.
2025 exposed the vulnerabilities of yield-generating and algorithmic stablecoins, especially those that relied on intrinsic leverage. Stream Finance's XUSD crashed to $0.18, wiping out $93 million in user funds and leaving behind $285 million in protocol-level debt.
Elixir's deUSD collapsed due to a large loan default. USDx on AVAX fell due to allegations of manipulation. These cases invariably reveal how opaque collateral, rehypothecation, and concentrated risk can cause stablecoins to de-peg.
The profit-driven frenzy of 2025 further amplified this vulnerability. Capital poured into yield-type stablecoins, some offering annualized yields of 20% to 60% through sophisticated vault strategies. Platforms like @ethena_labs , @sparkdotfi , and @pendle_fi absorbed billions of dollars as traders chased structured yields based on synthetic dollars. However, with the collapses of deUSD, XUSD, and others, DeFi proved to be far from mature, instead exhibiting a tendency towards centralization. Nearly half of the total value locked (TVL) on Ethereum was concentrated in @aave and @LidoFinance, while the remainder was clustered in a few strategies related to yield-type stablecoins (YBS). This resulted in a fragile ecosystem based on excessive leverage, recursive capital flows, and shallow diversification.
Therefore, while stablecoins power the system, they also exacerbate its stress. We are not saying stablecoins are “bankrupt”; they are essential to the industry. However, 2025 proved that the design of stablecoins is just as important as their functionality. As we move into 2026, the integrity of dollar-denominated assets has become a primary concern, not only for DeFi protocols but also for all participants allocating capital or building on-chain financial infrastructure.
4. L2 Integration and Chained Heap Disillusionment
In 2025, Ethereum's "Rollup-centric" roadmap clashed with market realities. L2Beat, once home to dozens of L2 projects, has evolved into a "winner-takes-all" scenario: @arbitrum, @base, and @Optimism attracted the majority of new TVL and liquidity, while smaller Rollup projects saw their revenue and activity drop by 70% to 90% after incentives ended. Liquidity, MEV bots, and arbitrageurs chasing depth and tight spreads amplified this flywheel effect, drying up order flow on edge chains.
Meanwhile, cross-chain bridge transaction volume surged, reaching $56.1 billion in July 2025 alone, clearly demonstrating that "everything is a rollup" still effectively means "everything is fragmented." Users still need to deal with isolated balances, L2 native assets, and duplicate liquidity.
To be clear, this is not a failure, but rather a process of consolidation. Fusaka achieved 5–8 times the throughput of Blob, zk application chains like @Lighter_xyz reached 24,000 TPS, and some emerging specialized solutions (such as Aztec/Ten for privacy features and MegaETH for ultra-high performance) all indicate that a select few execution environments are emerging.
Other projects have entered a "dormant mode" until they can prove that their moats are deep enough that the leaders cannot simply replicate their advantages by forking.
5. Predicting the Rise of Markets: From Edge Tools to Financial Infrastructure
Another big surprise in 2025 is the formal legalization of prediction markets.
Once considered a marginal and peculiar entity, prediction markets are now gradually being integrated into financial infrastructure. Longtime industry leader @Polymarket has returned to the US market in a regulated capacity: its US division has received approval from the Commodity Futures Trading Commission (CFTC) to become a Designated Contract Market. Furthermore, the Intercontinental Exchange (ICE) has reportedly invested billions of dollars, valuing the company at nearly ten billion dollars. Capital inflows are following.
The prediction market has jumped from a “fun niche market” to a weekly trading volume of billions of dollars, with the @Kalshi platform alone handling event contracts worth tens of billions in 2025.
I believe this marks the transformation of the blockchain-based market from a "toy" into a true financial infrastructure.
Mainstream sports betting platforms, hedge funds, and DeFi-native managers now view Polymarket and Kalshi as prediction tools, not entertainment products. Crypto projects and DAOs are also beginning to use these order books as a source of real-time governance and risk signals.
However, this "weaponization" of DeFi also has two sides. Regulatory scrutiny will be more stringent, liquidity will remain highly concentrated in specific events, and the correlation between "prediction markets as signals" and real-world outcomes has not yet been validated under stress scenarios.
Looking ahead to 2026, one thing is clear: event markets, along with options and perpetual contracts, are now on the radar of institutional investors. Portfolios will need to develop a clear view on whether—and how—to allocate exposure to these types of markets.
6. The Convergence of AI and Encryption: From Hot Topic to Practical Infrastructure
By 2025, the combination of AI and encryption will move from noisy narratives to structured practical applications.
I believe three themes defined the year's developments:
First, the agentic economy has transformed from a speculative concept into an operational reality. Protocols like x402 enable AI agents to trade autonomously with stablecoins. Circle's USDC integration, along with the rise of orchestration frameworks, reputation layers, and verifiable systems such as EigenAI and Virtuals, highlights that useful AI agents require collaboration, not just reasoning ability.
Secondly, decentralized AI infrastructure has become a core pillar of the field. Bittensor's dynamic TAO upgrade and December halving event redefined it as "the Bitcoin of AI"; NEAR's Chain Abstraction brought actual intent transaction volume; and @rendernetwork, ICP, and @SentientAGI validated the feasibility of decentralized computing, model profiling, and hybrid AI networks. Clearly, infrastructure has gained a premium, while the value of "AI packaging" is gradually diminishing.
Third, the vertical integration of practical applications is accelerating.
@almanak 's AI community has deployed quantitative-level DeFi strategies, @virtuals_io has generated $2.6 million in fee revenue on Base, and bots, prediction markets, and geospatial networks have become trusted proxy environments.
The shift from "AI packaging" to verifiable agent and bot integration indicates a maturing product-market fit. However, trust infrastructure remains a critical missing link, and the risk of hallucination continues to hang like a dark cloud over autonomous transactions.
Overall, market sentiment at the end of 2025 was optimistic about infrastructure, cautious about the utility of proxies, and generally believed that 2026 could be a year of verifiable and economically valuable breakthroughs in on-chain AI.
7. The Return of Launch Platforms: A New Era for Retail Capital
We believe that the launch platform boom of 2025 is not a "return to ICOs," but rather the industrialization of ICOs. The so-called "ICO 2.0" in the market is actually the maturation of the crypto capital formation stack, gradually evolving into Internet Capital Markets (ICM): a programmable, regulated, 24/7 underwriting track, rather than just a "lottery-style" token sale.
The repeal of SAB 121 accelerated regulatory clarity, transforming tokens into financial instruments with vesting periods, disclosure, and recourse, rather than simply token issuances. Platforms like Alignerz embed fairness into their mechanisms: hash-based auctions, refund windows, and token vesting schedules based on lock-up periods rather than internal channels. "No VC dumping, no insider profits" is no longer just a slogan, but an architectural choice.
At the same time, we've noticed that launch platforms are consolidating into exchanges, a sign of a structural shift: Coinbase, Binance, OKX, and Kraken-related platforms offer KYC/AML (Know Your Customer/Anti-Money Laundering) compliance, liquidity guarantees, and well-crafted launch channels accessible to institutions. Meanwhile, independent launch platforms are being forced to focus on vertical sectors such as gaming, memes, and early-stage infrastructure.
From a narrative perspective, AI, RWA (Real-World Assets), and DePIN (Decentralized Internet of Things) dominate the main issuance channels, with launch platforms acting more as narrative routers than hype machines. The real story lies in the fact that the crypto space is quietly building an ICM layer that supports institutional-grade issuance and long-term alignment of interests, rather than repeating the nostalgia of 2017.
8. The uninvestability of high FDV projects is structural.
For much of 2025, we witnessed the repeated validation of a simple rule: projects with high FDV (Fully Diluted Valuation) and low liquidity are structurally uninvestable.
Many projects—especially new L1 (layer 1 blockchains), sidechains, and “real yield” tokens—have entered the market with FDVs exceeding one billion dollars and circulating supplies in the single digits.
As one research firm put it, "High FDV and low liquidity is a liquidity time bomb"; any large-scale sell-off by early buyers can directly destroy the order book.
The outcome was predictable. These tokens saw their prices surge upon launch, but plummeted as the vesting period ended and insiders exited. Cobie's famous quote— "Refuse to buy overvalued FDV (Fully Diluted Value) tokens"—became a framework for risk assessment, evolving from an online meme. Market makers widened bid-ask spreads, retail investors simply stopped participating, and the market for many of these tokens showed virtually no improvement over the following year.
In contrast, tokens with practical uses, deflationary mechanisms, or cash flow linkages structurally outperform their counterparts whose only selling point is "high FDV".
I believe that 2025 has permanently reshaped buyers' tolerance for "dramatic token economics." FDV and circulating supply are now seen as hard constraints, not irrelevant byproducts. Looking ahead to 2026, if a project's token supply cannot be absorbed through exchange order books without disrupting price action, then that project is practically uninvestable.
9. InfoFi: Rise, Frenzy, and Collapse
I believe that the boom and bust of InfoFi in 2025 will be the clearest cyclical stress test of “tokenized attention”.
InfoFi platforms such as @KaitoAI , @cookiedotfun , and @stayloudio promised to pay analysts, creators, and community administrators for their "knowledge work" through credits and tokens. Within a short window, this concept became a hot venture capital topic, with firms like Sequoia Capital, Pantera, and Spartan Capital investing heavily.
The information overload in the crypto industry and the popular trend of combining AI with DeFi make the curation of on-chain content seem like an obviously missing basic module.
However, this design choice to use attention as the unit of measurement is a double-edged sword: when attention becomes the core metric, content quality collapses. Platforms like Loud and their ilk are overwhelmed by AI-generated low-quality content, bot farms, and interactive alliances; a few accounts reap the lion's share of the rewards, while long-tail users realize the rules of the game are against them.
The prices of several tokens have experienced 80–90% retracements, and some have even completely collapsed (for example, WAGMI Hub suffered a major vulnerability attack after raising nine figures), further damaging the credibility of the space.
The final conclusion is that the first-generation attempt at InfoFi was structurally unstable. While the core idea—monetizing valuable crypto signals—remains attractive, the incentive mechanism needs to be redesigned to base pricing on verified contributions, rather than simply relying on clicks.
I believe that by 2026, the next generation of projects will have learned from these lessons and made improvements.
10. The Return of Consumer Encryption: A New Paradigm Led by New Types of Banks
By 2025, the return of consumer encryption is increasingly seen as a structural shift driven by new banks, rather than a result of native Web2 applications.
I believe this shift reflects a deeper understanding: adoption accelerates when users get started with financial primitives they are already familiar with, such as deposits and yields, while the underlying settlement, yield, and liquidity tracks quietly migrate on-chain.
The result is a hybrid banking stack that shields users from the complexities of gas fees, custody, and cross-chain bridges, while providing direct access to stablecoin yields, tokenized government bonds, and global payment tracks. The outcome is a consumer funnel that can attract millions of users to "go deeper on-chain" without requiring them to grapple with the complex technical details of seasoned users.
The prevailing view across the industry is that Neobanks are gradually becoming the de facto standard interface for mainstream crypto needs.
Platforms such as @ether_fi , @Plasma , @UR_global , @SolidYield , @raincards , and Metamask Card are typical examples of this shift: they offer instant deposit channels, 3–4% cashback cards, 5–16% annualized yields (APY) through tokenized government bonds, and self-custodied smart accounts, all packaged in a compliant and KYC-enabled environment.
These applications benefited from the regulatory reset in 2025, including the repeal of SAB 121, the establishment of a stablecoin framework, and clearer guidance for tokenized funds. These changes reduced operational friction and expanded their potential market size in emerging economies, particularly in regions where real pain points such as yield, foreign exchange savings, and remittances are prominent.
11. The normalization of global crypto regulation
I believe that 2025 will be the year when crypto regulation finally becomes normalized.
Conflicting regulatory directives have gradually led to three identifiable regulatory patterns:
The European framework , including the Markets Crypto Assets Act (MiCA) and the Digital Operations Resilience Act (DORA), has resulted in the issuance of over 50 MiCA licenses, and stablecoin issuers are considered electronic money institutions.
The American framework includes stablecoin laws similar to the GENIUS Act, SEC/CFTC guidance, and the launch of spot Bitcoin ETFs.
The patchwork model in the Asia-Pacific region includes Hong Kong’s full-reserve stablecoin ordinance, Singapore’s licensing optimization, and the adoption of the broader FATF (Financial Action Task Force) travel rules.
This is not just superficial; it completely reshapes the risk model.
Stablecoins have transitioned from "shadow banking" to regulated cash equivalents; banks like Citi and Bank of America can now operate tokenized cash pilots under clear rules; platforms like Polymarket can be relaunched under the supervision of the Commodity Futures Trading Commission (CFTC); and the U.S. spot Bitcoin ETF has attracted over $35 billion in stable inflows without any existential risk.
Compliance has transformed from a hindrance into a moat: institutions with robust Regtech architectures, clear cap tables, and auditable reserves are suddenly able to enjoy lower capital costs and faster institutional onboarding.
In 2025, crypto assets went from being a product of curiosity in the gray area to becoming a regulated object. Looking ahead to 2026, the focus of the debate has shifted from "whether this industry should be allowed to exist" to "how to implement specific structures, disclosures, and risk controls."
