According to a new Grayscale report, crypto market momentum cooled in the fourth quarter of 2025 as investors digested earlier gains and positioned for the year ahead.
What Happened: In its latest Crypto Sector Quarterly report, Grayscale points out that all major crypto sectors posted negative returns in Q4 as investor caution increased amid regulatory uncertainty and evolving technology risks.
Defensive positioning emerged during the quarter, with the currencies sector outperforming others, driven largely by privacy-focused tokens.
Application-layer assets underperformed, while the AI crypto sector recorded the weakest performance, reflecting higher risk sensitivity and the early-stage nature of many projects.
Despite the overall slowdown, some underlying metrics remained constructive.
Transaction volumes within the currencies sector rose modestly, supported by increased Bitcoin (CRYPTO: BTC) activity since early 2025.
While application-layer fees declined quarter over quarter, total fee revenue in Q4 2025 was more than double Q3 2024 levels, underscoring longer-term growth compared with prior years.
Shifting Market Leadership
Market leadership changed sharply from Q3 to Q4.
While large-cap assets such as Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL) and BNB (CRYPTO: BNB) led gains earlier in the year, Q4’s limited positive risk-adjusted returns were concentrated primarily in privacy-focused tokens, including Zcash, Monero, Dash, Decred, BAT and Beldex.
These assets benefited from strong narrative momentum and rising network usage. A small number of AI-related tokens also appeared among top performers, though they were exceptions rather than a broader trend.
Also Read: Why Michael Saylor Won’t Go Bankrupt Even If Bitcoin Falls To $74,000
What’s Next: Grayscale expects investor focus in early 2026 to center on two key themes: U.S. crypto market structure legislation and concerns around the potential impact of quantum computing on cryptography.
The firm anticipates bipartisan crypto legislation could pass in 2026, potentially providing clearer regulatory frameworks and enabling broader participation by regulated financial institutions.
Such developments, Grayscale said, could materially reshape crypto market structure and long-term adoption.
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