Crypto Market Review Q3 2025: Q4 Outlook and Repricing Challenges

Crypto Market Review Q3 2025: Q4 Outlook and Repricing Challenges

The third quarter of 2025 shaped up as a pivotal period for the crypto market, bridging the gains from the risk asset rebound since July with the confirmation of a macro turning point following the September rate cut. However, the fourth quarter saw a sharp reversal due to macroeconomic uncertainties and crypto-market-specific structural risks.

Key Takeaways:

• Inflation Easing and Fed Policy Ambiguity: Slower inflation decline and the prolonged government shutdown led to uncertainty about the Fed's policy path, causing market volatility.
• Government Shutdown Impact: The shutdown hampered GDP growth and disrupted key economic data releases, increasing decision-making difficulty.
• AI Valuation Concerns: Discussions on the overvaluation of AI stocks limited risk appetite, impacting crypto performance.
• Binance Liquidation Fallout: Large-scale liquidation on Binance caused a significant shock, reducing liquidity and increasing price volatility.
• Slowdown in ETF Flows: A slowdown in spot ETF and DAT fund flows exacerbated the selling pressure from the liquidation.
• DAT Strategy Adjustment: The current environment has depreciated the value of digital asset treasury valuations, leading to adjustments in investment strategies.
• Emerging Sectors: Stablecoins, Perp contracts, and prediction markets showed growth, indicating a shift in capital allocations.
• Rate Cut Expectations and Repricing: Rate cut expectations boosted risk appetite in Q3, but policy uncertainties led to repricing in Q4.
• Rise of Digital Asset Treasury Structures: DAT strategies, involving corporate allocation to crypto assets, became more prevalent, especially for Ethereum.
• Prediction Markets as Indicators: Prediction markets like Polymarket and Kalshi emerged as significant indicators of market sentiment and risk assessment.

Macroeconomic Uncertainty and Structural Risks

The slow pace of inflation decline and the longest government shutdown in history increased macroeconomic uncertainty. The latest FOMC meeting minutes clearly signaled caution against prematurely cutting rates, leading to significant shifts in market assessment of the policy path. This resulted in repricing of potential risks such as higher interest rates for longer and increased fiscal uncertainty.

The government shutdown exacerbated macroeconomic pressures, impacting GDP growth and financial liquidity. The Congressional Budget Office estimates the shutdown will reduce annualized real GDP growth in Q4 2025 by 1.0% to 2.0%. Additionally, the suspension of key economic data such as non-farm payrolls, CPI, and PPI figures created a data blind spot, further complicating economic decision-making.

In November, discussions within the U.S. stock market about whether AI stocks were temporarily overvalued intensified. This led to increased volatility in high-valuation tech stocks and impacted overall risk appetite.

Crypto Market-Specific Shocks

Concurrent with macroeconomic uncertainties, the crypto market faced its own structural shocks. Between July and August, Bitcoin and Ethereum surpassed their historical highs, but a large-scale liquidation on Binance on October 11 served as a significant systemic shock. By November 20, both Bitcoin and Ethereum had significantly retraced from their highs, weakening market depth and increasing divisions between bulls and bears.

The liquidity crunch triggered by the liquidation reduced overall market confidence. This, coupled with liquidation spillover effects, increased price volatility and counterparty risks. Moreover, capital inflows into spot ETFs and DAT funds significantly slowed in Q4, exacerbating selling pressure.

Digital Asset Treasury (DAT) Strategy Developments

In Q3, Digital Asset Treasuries (DAT) rose from a fringe concept to a mainstream theme. However, with tighter liquidity conditions and falling prices in Q4, the persistence of DAT-related buying began to weaken. Innovative valuations related to DAT, such as mNAV, came under downward pressure, reflecting investor concerns about liquidity, yield stability, and valuation sustainability.

Within the competitive arena, several sectors demonstrated continued growth momentum. The market capitalization of the stablecoin sector continued to expand, reinforcing its role in anchoring capital in uncertain macroeconomic environments. The Perp sector, led by HYPE and ASTER, saw significant activity improvement. Prediction markets also experienced a resurgence, with trading volumes on Polymarket and Kalshi setting records.

Rate Cut Expectations and Repricing

The rate cut itself was not the critical variable in the global macroeconomy during the third quarter of 2025, but rather the creation, trading, and consumption of these expectations. The pricing of a liquidity turning point began in July, and the actual policy action became a node for verifying the existing consensus. After two months of volatility, the Fed lowered the target range for the federal funds rate by 25 basis points to 4.00%–4.25% at the FOMC meeting in September, and then lowered it slightly again at the October meeting. However, because the market had already bet heavily on a rate cut, the policy action itself had limited marginal impact on risky assets.

The Rise of Digital Asset Treasury Structures

In the third quarter of 2025, Digital Asset Treasuries (DATs) rose from a fringe concept in the crypto industry to a rapidly spreading new theme in global capital markets. This quarter saw public market funds enter crypto assets on a large scale and mechanistic at the same time. Through traditional financing instruments such as PIPE, ATM, and convertible bonds, billions of dollars of fiat currency liquidity entered the crypto market directly, creating a structured trend of linking currencies and stocks.

MicroStrategy pioneered this trend, incorporating Bitcoin into its balance sheet. This has led to traditional stocks acting as a secondary carrier for crypto assets. With systematic differences in valuation logic between stock markets and on-chain assets, MicroStrategy's stock price has consistently been higher than its Bitcoin net asset value.

Prediction Markets: A Meter for Macro Narratives

In the third quarter of 2025, prediction markets jumped from a niche to a new market infrastructure at the intersection of on-chain and compliant finance. With frequent changes in macroeconomic policy and sharp volatility in inflation and interest rate expectations, prediction markets have become important places to capture market sentiment, hedge policy risks, and discover the prices of narratives.

In Conclusion

Q3 2025 saw a significant recalibration in the crypto market. Macroeconomic uncertainties and structural risks increased volatility and challenged investment strategies. While some sectors like stablecoins and prediction markets demonstrated resilience, the overall market is undergoing a repricing and investors should exercise caution.