Annual capitulation: how the cryptocurrency market in 2025 experienced a turning point before recovery

Investment firm Pantera Capital has called 2025 the phase of massive capitulation in the cryptocurrency market, when most assets not related to Bitcoin experienced an unprecedented decline. Capitulation in the crypto market manifested not only in price drops but also in the compression of leverage to historically low levels, as investors panicked and liquidated their positions.

Based on its quarterly report, Pantera Capital expects that with stabilization of fundamental indicators and renewed interest in a broader range of assets, conditions in 2026 could significantly improve.

Extreme Dispersion: How the Decline in Value Was Distributed Among Assets

2025 demonstrated not just a bearish market for most tokens, but a explosive differentiation between individual assets. According to Pantera Capital, the total market capitalization of cryptocurrencies excluding Bitcoin, Ethereum, and stablecoins fell approximately 44% from the peak at the end of 2024.

However, the numerical expression of this decline only partially reflects the true scale of what happened:

• Bitcoin showed the best capital protection, decreasing about 13% over the year (at the current price of $88.03K), essentially remaining the only asset that maintained relative balance.
• Ethereum fell by 4.73% (current price $2.93K), also demonstrating greater resilience compared to the rest of the market.
• Solana retreated by 45.87% (current price $122.94), exposing the vulnerability of high-yield market segments to volatility.
• The vast majority of alternative tokens, excluding the top 3 assets, declined nearly 60%, with the median token losing about 79% of its value.

Pantera noted that 2025 became an extremely narrow market, where only a handful of assets generated positive returns. This dispersion indicated not a correction, but a true bear market for most participants.

Behind the Scenes of the Decline: Why Did Investor Capitulation Occur?

Pantera Capital’s panel contained a detailed analysis of the driving forces behind this massive capitulation. The study showed that prices were largely determined not by fundamentals but by macroeconomic shocks, trader positioning, and capital flows.

Throughout 2025, the market experienced a series of sharp mood swings caused by political decisions, threats of tariffs, and changes in investor risk appetite. The culmination was the October cascade liquidation, which wiped out positions worth over $20 billion — a scale surpassing losses even during the Terra/Luna and FTX crashes.

Alongside macro shocks, Pantera highlighted fundamental structural issues related to the value accrual model of governance tokens. Many such tokens do not provide clear legal rights to cash flows or residual value, creating an attractiveness for traditional securities of digital assets versus speculative tokens.

In the second half of the year, fundamental indicators also weakened: blockchain network fees decreased, revenues from decentralized applications fell, and the number of active addresses declined, although the supply of stablecoins continued to grow.

Conditions for Recovery in 2026: What Pantera Capital Expects

Despite the severity of the decline in 2025, Pantera noted that the duration of this downturn now aligns with the characteristics of previous bear cycles in the history of the crypto market. This observation is significant: if the cycle is approaching a historical norm, then there are potential prerequisites for a turnaround toward recovery.

Pantera views 2026 not as a year of specific price targets but as a period of reevaluation of capital allocation strategies. In the firm’s opinion, if interest in risk recovers and fundamental indicators stabilize, the following will gain an advantage:

• Bitcoin infrastructure (as the most stable asset with the strongest institutional support)
• Stablecoins (as a store of value and settlement medium)
• Crypto assets linked to traditional securities and the tokenization of real assets

Against this backdrop, Pantera expects that the main drivers of growth in 2026 will be institutional adoption of cryptocurrencies, expansion of real asset tokenization, development of AI security in blockchain, consolidation of prediction markets, and a wave of crypto IPOs, rather than a return to broad speculative rallies of individual tokens.

Thus, despite its drama, 2025 ended with the market transitioning from a phase of capitulation to a state potentially conducive to moving to a new stage of development in the cryptocurrency industry.