Why did the cryptocurrency market crash in 2025? Truth behind the emotions

Introduction: Two Worlds, One Market

In 2025, the cryptocurrency market lives in a paradox. For portfolio managers on Wall Street, this is a golden year — simple instruments (ETF), steady capital inflows, clear regulatory frameworks. For traditional chart watchers on Telegram and Discord? It’s the worst year since the 2018 crash.

Why do two investors looking at the same market see completely different realities?

The answer is simpler than you think: the market is changing not only because of the players but also because of the rules of reward. And most people are still playing by the old rules.

The Unspoken Problem: The Breakage of the Global Monetary System

Before understanding why sentiment plummeted to historic lows (Crypto Fear & Greed Index = 10 in November 2025), you need to look broader. The problem isn’t in Crypto — it’s in the entire global financial system.

A Chart That Changes Perspective

Over the past 50 years, the national debt of major economies does one thing: grows faster than the economy itself.

• USA: 120.8% of GDP
• Japan: 236.7% of GDP
• France: 113.1% of GDP
• UK: 101.3% of GDP
• Germany: 63.9% of GDP

This is no coincidence of one country or political system. Whether the economy is developed or emerging, democratic or authoritarian — the same trend is everywhere.

What does this mean for savers?

When debt grows faster than production, governments have only three options:

1. Inflation
2. Low real interest rates
3. Financial repression (capital controls, withdrawal restrictions)

Regardless of the choice — the costs are borne by the same group: savers.

This is not theory. It’s mathematics.

Why Did Sentiment Collapse Now?

For years, market participants were driven by ignorance:

• “Inflation is a temporary problem”
• “Cash is always safe”
• “Traditional currencies are stable”

In 2025, this illusion burst. More and more people realized: hard work ≠ wealth protection. Saving alone = loss of value.

Cryptocurrencies became the place where this shock is felt first.

Why BTC Wins Everything

If the problem lies in the monetary system, the logical question arises: why is the answer Bitcoin, and not something else?

Money is not technology, it’s social consensus

Engineers think: “Speed, efficiency, features — that wins.” The market thinks: “Who preserves value forever?”

Bitcoin wins precisely because it is the most boring. No apps, no new narratives, no promises of the future. Just a pure store of value.

Data Speaks Clearly

From December 2022 to November 2025:

BTC:

• Growth: +429%
• Market cap: $318 milliards → $1.81 trillion
• Position in global assets: top 10

Where does the capital flow?

• BTC.D (Bitcoin dominance): 36.6% → 57.3%

In a cycle where theoretically altcoins should “go crazy,” capital returned to Bitcoin. It’s not luck — it’s the market reclassifying assets.

ETF Changed Everything

Bitcoin ETF is not just “new demand.” It’s a fundamental shift:

• Makes BTC an asset compliant with regulations
• Puts BTC on corporate balance sheets
• Elevates BTC to the status of “strategic asset”

When Bitcoin is held by funds, corporations, and state reserves — it ceases to be a “speculative asset to abandon,” and becomes a monetary asset to hold long-term.

It’s hard to degrade it anymore.

What Does This Mean for the Rest of the Cryptocurrency Market?

Once BTC established itself as “money,” the market changed the rules for all others.

Numbers Say It All

By the end of 2025, total crypto market cap: ~$3.26 trillion

• BTC: $1.80T
• Other L1s and assets: $1.46T

81% of the entire market is now valued through the lens of “could this be money.”

What does this change? Everything.

The Layer 1 Problem (Layer 1)

Before 2025, Layer 1 blockchains could spin a narrative: “Maybe someday we’ll be an alternative to Bitcoin.” The market paid a premium for that possibility.

Now? Bitcoin has already won. And Layer 1s face a ruthless question: “If you’re not money, then what are you?”

Data shows a painful trend:

Price-to-Sales (P/S) ratio for L1:

• 2021: 40x
• 2022: 212x
• 2023: 137x
• 2024: 205x
• 2025: 536x

Meanwhile, Layer 1 revenues:

• 2021: $12.3 billion
• 2025 (per year): $1.7 billion

Valuations are rising, but the actual business is falling. This is not “undervaluation” — it’s reclassification. L1s are now perceived as high-risk assets, not as alternative platforms.

( Solana as an Example of Change

SOL in 2025 is one of the few L1s that outperformed Bitcoin. But look at the details:

• Solana’s ecosystem grew 20–30x
• Price of SOL vs BTC: +87%

In other words: to achieve a “significantly higher return” than Bitcoin, Layer 1 must experience an explosion of an order of magnitude. It’s not “lack of team engagement” — it’s a change in the return function.

Why Sentiment Is Extreme Despite a Living Market

Here comes the ultimate paradox of 2025.

System data:

• No major stock market crash
• No trust collapse in infrastructure
• Stablecoin market cap hit a record high
• Regulations are clarifying, institutions are growing

But sentiment dropped to

• Crypto Fear & Greed Index: 10 )extreme fear###
• Only comparable to: 2020 crash, 2021 liquidations, 2022 Luna collapse

Messari states directly: this is an extreme disconnection of sentiment from reality.

But is it “unfair”? Not entirely.

The Real Reason for the Collapse: The Changing Role of the Era

It’s not about investor skill.

Old paradigm (2017-2021):

• Be fast, aggressive, risky → get above-average returns
• Every token can be “money” → speculative premiums for all
• High volatility = high profits

New paradigm (2025+):

• The market rewards stability, long-term value, predictability
• Only one “money” has consensus: Bitcoin
• High volatility = risk signal, not opportunity

When the system changes its reward rules, and the way of participation doesn’t change — sentiment must break down. It’s not a sign of system failure. It’s a sign that the market is maturing.

Summary: What We Learned in 2025

1. Sentiment collapse ≠ industry collapse. It’s a signal that participants are changing faster than the strategy.

2. BTC didn’t win — it was chosen. The market repeatedly confirmed that Bitcoin is the best response to an unstable monetary system.

3. Ethereum and Layer 1s have been reclassified. From “future money” to “high-beta assets.” Painful but logical.

4. Cryptocurrency does not promise higher profits for everyone. It promises something bigger: the right to choose your money and control your wealth in a world where the traditional system is breaking down.

Sentiment in 2025 does not tell you that the industry has failed. It tells you that more and more people are starting to see the reality of the old financial system.

And for the first time, they have an alternative that is not just speculation.