By Brett Munster
It has been another volatile and consequential year for crypto and since January this newsletter has tracked far more than price action. We began the year by documenting how Coinbase’s Freedom of Information Act requests exposed a paper trail of pause letters from U.S. banking regulators—evidence of a coordinated effort by the FDIC, Federal Reserve, and OCC to quietly discourage banks from servicing crypto firms, a campaign widely referred to as “Operation Chokepoint 2.0.” As the year progressed, Coinbase’s inclusion in the S&P 500 marked a symbolic turning point in institutional acceptance, while Wall Street finally embraced the debasement trade we have been writing about for years, reframing bitcoin less as a speculative asset and more as a hedge against fiscal and monetary excess. Perhaps most tellingly, institutions that once dismissed crypto outright not only reversed course but began to actively integrate it into their core financial frameworks (here and here). Fannie Mae and Freddie Mac moved to recognize crypto assets in mortgage risk assessments and even the Bank for International Settlements acknowledged that crypto is increasingly used as a practical financial tool, particularly in economies facing inflation, capital controls, or fragile banking systems.
Alongside these market and policy developments, we repeatedly stepped back to make broader arguments about where crypto fits within the macroeconomic and historical landscape. We traced the evolution of the global monetary system from Bretton Woods to the present to explain why the current moment looks less like a cyclical fluctuation and more like a structural transition. We challenged conventional assumptions about risk-free returns by arguing that the true hurdle rate for capital is closer to 6 percent, and we highlighted the growing limits of discretionary monetary policy to make the case for rules-based alternatives. We examined why the traditional four-year crypto cycle may be breaking down and showed how bitcoin has become a financial lifeline for democracy activists operating under authoritarian regimes. At the same time, we returned repeatedly to the deteriorating U.S. fiscal outlook—analyzing the debt spiral, the downgrade of U.S. Treasuries, and the potential consequences of changes to the supplementary leverage ratio—and explored how bitcoin is beginning to influence sovereign bond markets, including the emergence of “Bitbonds” as a potential reinvention of government debt issuance. Despite fundamentals continuing to improve and global liquidity rising, prices were flat to down this year producing what we described as the paradox of 2025.
All that mattered, and all of it helped shape the year we have just lived through. Yet when we step back and ask which developments truly defined crypto in 2025—which stories reshaped the industry’s trajectory and compelled even skeptics to pay attention—none of the above fully captures the answer. For that, we need to focus on the three stories that mattered most.
Complete Regulatory Reversal
Just twelve months ago, the crypto industry faced an exceptionally hostile regulatory environment in the United States. Under SEC Chair Gary Gensler’s “regulation-by-enforcement” approach, nearly every major exchange, lender, and infrastructure had a lawsuit issued to them. Even companies that attempted to engage constructively with regulators saw their disclosures turned against them, novel and untested legal theories were applied without clear precedent and cases such as Debt Box showed the agency was willing to go so far as fabricate evidence to pursue their objective. At the same time, SAB 121 made digital-asset custody economically impractical for banks, the DOJ pursued criminal cases against DeFi developers, while the Treasury Department sanctioned open-source privacy software. The FDIC shuttered the nation’s two most crypto-friendly banks, triggering widespread debanking across the sector. In Congress, Senator Sherrod Brown blocked key reform bills, Senator Elizabeth Warren rallied what she called an “anti-crypto army,” and a sweeping broker dealer rule threatened the viability of decentralized finance. The Biden administration proposed a punitive 30% tax on crypto mining, labeled the industry a systemic financial risk, and largely treated the sector as something to be contained rather than cultivated. For many investors, this legal and regulatory uncertainty proved too great a barrier throughout 2023 and 2024.
Against that backdrop, the assurances offered by the incoming administration during the 2024 campaign sparked cautious optimism across the industry. Still, few anticipated the speed, scope, or decisiveness of the regulatory reversal that would unfold in 2025.
In his first week, President Trump signed an executive order guaranteeing Americans the right to use open blockchains, transact peer-to-peer, mine, and self-custody digital assets without government interference. The order prioritized dollar-backed stablecoins to preserve U.S. dollar dominance, ensured fair banking access for crypto businesses, clarified regulatory boundaries, blocked the creation of a U.S. central bank digital currency, and established a Digital Assets Council chaired by David Sacks to coordinate stablecoin oversight and explore a national crypto reserve.
Momentum accelerated with a second executive order on March 6 establishing a Strategic Bitcoin Reserve and broader Digital Asset Stockpile. Roughly 198,000 bitcoin held by the federal government were reclassified as a permanent strategic reserve while Treasury and Commerce were authorized to acquire additional bitcoin through budget-neutral strategies. For the first time, bitcoin was recognized as a strategic monetary asset, comparable to gold.
Subsequent White House actions reinforced this tone. A policy report released later in the spring declared the arrival of a “golden age of crypto,” framing blockchain innovation as a core engine of future productivity growth and national competitiveness. Additional executive orders prohibited banks from denying services to crypto companies solely on the basis of industry participation and directed the Department of Labor to permit cryptoassets in 401(k) retirement plans, further integrating digital assets into mainstream finance.
States followed suit. Lawmakers in at least 24 states introduced legislation this year to authorize bitcoin as a treasury asset, with three states ultimately passing such measures into law. New Hampshire moved first. On May 6, Governor Kelly Ayotte signed House Bill 302, creating the nation’s first state-level bitcoin reserve fund and authorizing the state treasurer to allocate up to 5% of public funds to bitcoin and other digital assets. Arizona followed by establishing a digital asset reserve funded through unclaimed property, legal seizures, staking rewards, and airdrops. The most consequential move, however, came from Texas. On June 21, Governor Greg Abbott signed Senate Bill 21 into law, granting the state comptroller broad authority to buy, sell, hold, and manage digital assets on behalf of the state. In November, Texas executed its first $10 million bitcoin purchase. With an economy that would rank among the world’s top ten if it were an independent nation, Texas possesses the fiscal scale to make globally meaningful digital asset allocations—transforming state-level experimentation into a signal of institutional-grade adoption.
Congress complemented this shift with decisive legal action. The 2024 election brought in a legislature in which over 60% of members publicly support crypto. Early in 2025, Congress overturned an IRS broker-dealer rule that threatened DeFi, reasserting its authority over regulators. In July, the GENIUS Act established the first standalone federal framework for stablecoins, providing issuers with clear rules on reserves, disclosures, redemptions, and oversight—moving stablecoins from a legal gray zone into a federally sanctioned market and unlocking institutional participation.
Momentum has continued with the CLARITY Act, which passed the House in mid-July and currently awaits Senate approval. The bill clarifies the legal distinctions between securities, commodities, and other digital assets, and formally assigns jurisdiction between the SEC and CFTC, providing the statutory certainty the crypto market has long lacked. Meanwhile, Senator Cynthia Lummis and Congressman Nick Begich reintroduced the BITCOIN Act to codify the Strategic Bitcoin Reserve into permanent law, authorizing Treasury to acquire up to one million bitcoins using existing federal assets.
At the agency level, the SEC pivoted dramatically. Gensler’s era of enforcement ended with the appointment of Paul Atkins and the departure of anti-crypto commissioners, leaving Mark Uyeda and Hester Peirce to champion clear, workable rules. The SEC launched “Project Crypto” to modernize securities regulation, rescinded SAB 121 to reopen bank custody, and created a dedicated crypto task force for ongoing industry coordination. In response, BNY Mellon, State Street, and Citi—the three largest traditional custody banks—announced plans to roll out large-scale crypto custody platforms. The SEC also retreated from aggressive legal battles, dropping cases against Binance, OpenSea, and Coinbase entirely—without fines or restrictions—sending an unmistakable signal: the enforcement-first era is over. Most recently, the SEC authorized DTCC to offer tokenized stocks beginning in 2026 with chairman Paul Atkins predicting the entire US financial system may shift to tokenization within a “couple of years.”
Regulatory harmonization has followed. The CFTC approved spot crypto products on regulated futures exchanges, and the SEC and CFTC issued a joint statement clarifying permissible spot trading, signaling a new commitment to coordination. Leadership changes at the OCC and FDIC brought innovation-friendly policies. Banks can now custody digital assets, hold stablecoin reserves, and participate in blockchain-based payment networks without prior supervisory approval. The OCC also recently granted conditional approval for national trust bank charters to five cryptocurrency firms. FASB updated its accounting rules to allow companies to recognize gains on cryptoassets held on their balance sheets; the Federal Reserve withdrew its restrictive 2023 policy that limited banks’ engagement with the crypto sector; and the DOJ dropped its cases against Tornado Cash and Samurai Wallet—marking a major victory for privacy and open-source development.
Taken together, these developments represent a complete regulatory reversal in just one year. In 2023 and 2024, crypto was treated as a threat to suppress. Now it is being positioned as a strategic industry to cultivate. Legal risk has receded, stablecoins operate under a clear federal framework, bank custody is restored, spot markets are integrated into regulated exchanges, and digital assets are now part of long-term U.S. monetary and strategic planning. The administration set the tone, Congress provided legal clarity, the SEC abandoned its adversarial posture, and the broader regulatory ecosystem realigned around innovation rather than exclusion. Importantly, there is good reason to believe these changes are long-lasting. The combination of codified law, mass voter adoption, and growing political influence means the U.S. crypto policy framework is now structurally durable. In less than twelve months, the United States has moved from regulatory hostility to regulatory leadership—a historic reversal for an industry long denied basic legal recognition.
Institutions Bought, Whales Sold
For nearly a decade, the crypto industry repeated a familiar refrain: “The institutions are coming.” The phrase became both a rallying cry and a punchline — a symbol of hope that major allocators would allocate to the asset class, and a reminder of the skepticism born from years of false starts. Until recently, institutional participation remained limited to a narrow band of hedge funds, a handful of endowments, and a few macro traders. The largest pools of capital stayed on the sidelines, citing a shifting list of obstacles: insufficient infrastructure, limited access, and, most recently, regulatory uncertainty.
That calculus began to change in 2024 with the approval of spot bitcoin ETFs, finally giving institutions a familiar, regulated entry point. But the true inflection came in 2025, when the story shifted from experimentation to full-scale deployment. This was the year institutions arrived in force even as an extraordinary wave of selling from long-dormant bitcoin holders created a countervailing sell pressure, tempering price acceleration throughout the year.
Institutional flows into bitcoin ETFs became the defining capital trend of 2025. The products attracted tens of billions in net inflows, placing them alongside long-established giants like SPY and QQQ — an extraordinary feat for vehicles only two years old. Equally notable was the evolving composition of those flows. While retail demand remains substantial, the institutional share of ETF ownership climbed sharply, signaling a shift from tactical speculation to strategic allocation.
That shift was visible across the institutional landscape. Pension plans, endowments, and sovereign wealth funds disclosed meaningful ETF positions throughout the year. Early in 2025, Harvard reported a six-figure allocation to BlackRock’s Bitcoin ETF (IBIT), later expanding the position until bitcoin became its largest publicly reported holding. Brown University added bitcoin ETF exposure in its first-quarter filing, a sign that even historically conservative endowments now assess crypto alongside private equity, venture capital, and traditional alternatives. State pension systems in Wisconsin and Michigan likewise increased their exposure, emphasizing long-term diversification benefits.
Hedge funds deepened their participation as well. Brevan Howard increased its IBIT position by about $2.3 billion making it one of the largest bitcoin ETF holdings on record. Millennium Management maintained multiple ETF positions frequently exceeding $1 billion, reflecting the degree to which large, sophisticated trading firms now treat bitcoin as a core macro asset rather than a fringe curiosity.
The trend extended far beyond the United States. The UAE’s sovereign wealth entities collectively boosted their bitcoin exposure by more than 200 percent since mid-year. Other sovereign organizations — including the Abu Dhabi Investment Council, Mubadala Investment Co., the Czech central bank, the Luxembourg Wealth Fund, and the government of El Salvador — also expanded their positions, reflecting the global normalization of sovereign digital-asset ownership.
Parallel to this institutional surge was the emergence of Digital Asset Treasuries (DATs), a trend reshaping how corporations think about balance-sheet strategy. What began as a controversial experiment by Strategy (formerly MicroStrategy) in 2020 has evolved into a full-fledged corporate finance model adopted by hundreds of public companies. Strategy’s early, aggressively financed accumulation of bitcoin proved extraordinarily accretive relative to traditional treasury approaches and set a playbook that others are now following.
By late 2025, more than 140 DAT firms had collectively deployed over $130 billion into digital assets. BitMine Immersion Technologies (NYSE: BMNR) became the world’s largest corporate holder of Ethereum and the second-largest digital-asset treasury overall, amassing several million ETH and billions of dollars in combined crypto and cash reserves. Even as some smaller DATs experienced pressure during recent drawdowns, the largest players, including Strategy, continued aggressive accumulation — Strategy alone added over $2 billion worth of bitcoin in December.
DATs have created a new structural demand channel: corporate buyers with multi-year time horizons, capital-markets access, and explicit mandates to expand digital-asset reserves across market cycles. This form of recurring, programmatic demand simply did not exist a few years ago.
Traditional banks joined the shift as well. JPMorgan began offering bitcoin- and Ethereum-backed loans, partnered with Coinbase to allow customers to link accounts directly to crypto wallets, and launched their own tokenized money market fund. On December 2, Vanguard ended its long-standing prohibition on crypto ETFs, allowing more than 50 million clients with over $11 trillion in assets to buy and sell regulated crypto ETFs for the first time. Bank of America followed by formalizing a major policy shift: its wealth-management arms — Merrill, Bank of America Private Bank, and Merrill Edge — will now recommend a 1–4% allocation to digital assets beginning January 5, 2026, eliminating a network-wide ban on formal crypto recommendations. Charles Schwab is planning to offer spot trading for bitcoin and Ethereum in the first half of 2026, enabling clients to buy and hold crypto directly rather than only through ETFs.
Given these unprecedented inflows, its reasonable to wonder why bitcoin’s price didn’t rise more. The answer lies on the supply side — in the behavior of the earliest holders.
Once bitcoin crossed $100,000, many early adopters holding coins acquired below $1,000 cost basis began realizing profits. With an estimated 15.75 million BTC mined or acquired at those early price levels, it should not be surprising that long-term holders seized the opportunity to monetize life-changing gains, diversify portfolios, or address estate-planning needs. On-chain data indicates that coins held for five or more years were used to sell over $52 billion worth of bitcoin in 2025 alone.
The most dramatic example came when a cluster of Satoshi-era wallets moved approximately 80,000 BTC, more than $9 billion, for the first time in more than a decade. Remarkably, the market absorbed the volume with barely a dip, signaling deepening liquidity and the growing ability of institutional capital to cushion even extraordinary supply events.
This wave of long-term profit-taking is not a bearish signal but a hallmark of market maturation. As analyst Jordi Visser has observed, bitcoin is experiencing its “IPO moment,” in which early, risk-bearing investors transfer ownership to institutions with longer time horizons and formalized mandates. Deep, regulated markets—particularly via ETFs—now enable large holders to sell without the market impact that would have been unavoidable in earlier cycles. For many of these holders, this represents the first genuine opportunity to realize profits. The process broadens the investor base, stabilizes liquidity, and shifts price discovery toward allocators who view bitcoin as a strategic asset rather than a speculative trade.
A key driver of this transition is the stark divergence in cost bases between cohorts. On average, institutional buyers have entered in the $80,000–$100,000 range, anchoring their allocations to a mature, macro-driven price regime. Early adopters, by contrast, were sitting on over 100x profits. This asymmetry naturally incentivizes legacy holders to take profits while institutional holders, many still near breakeven, are less inclined to sell. The result functions as a structural floor: legacy supply is steadily migrating to institutions that accumulate for allocation purposes, not short-term liquidity.
2025 will be remembered as the year institutional adoption materialized at scale — not as a promise, but as a measurable portfolio reality across pensions, endowments, sovereign wealth funds, hedge funds, and public companies. At the same time, early bitcoin holders began distributing supply into a market finally capable of absorbing it. Far from marking a market peak, this transition represents crypto’s passage into a new phase: one defined not by speculative waves, but by the steady, system-level integration of digital assets into the global financial architecture.
Tariff Fears Stall Momentum
The crypto markets entered 2025 with considerable optimism. A strong rally in the fourth quarter of the prior year carried into January, institutional participation was expanding, and leverage across derivatives markets had risen as investors positioned for what many expected to be a continuation of the previous year’s momentum. Instead, two unexpected tariff announcements by the U.S. administration—one in February and another in October—triggered sharp risk-off reactions that repeatedly reset market positioning. These shocks ultimately stalled the sustained price appreciation that many participants, ourselves included, had anticipated for the year.
The first disruption arrived in February. Early in the month, President Trump announced sweeping new tariffs on imports from Canada and Mexico, alongside additional tariffs on Chinese goods. These measures were later escalated to include a 25% tariff on European imports after negotiations failed to gain traction. Although the policies were aimed squarely at traditional trade relationships, their impact rippled rapidly through global markets. Crypto, which trades continuously and features prominently in risk-oriented portfolios, reacted faster than most asset classes. As macroeconomic uncertainty rose, hedge funds and systematic strategies reduced exposure, and the unwind of leveraged positions accelerated the sell-off. By the end of the quarter, the broader crypto market had suffered a drawdown of roughly 35%.
As we argued at the time, nothing in this decline reflected a deterioration in crypto’s underlying fundamentals. Network activity remained stable, institutional infrastructure continued to mature, and adoption trends showed no meaningful reversal. The sell-off was driven instead by a familiar dynamic: sudden macro uncertainty undermined risk appetite, leverage amplified downside moves, and forced liquidations created a self-reinforcing feedback loop. Crypto’s sensitivity to such episodes is, paradoxically, a function of its liquidity and constant trading. Because the market operates 24/7, it often becomes the first outlet for global investors seeking to express risk-off views, even when the catalyst has little direct relevance to the asset class itself.
There is a deeper irony embedded in the February episode. Unlike global exporters or multinational corporations, bitcoin and other decentralized networks are structurally immune to tariffs. Digital assets do not cross borders through ports of entry, cannot be taxed at customs, and do not rely on centralized intermediaries that can be easily sanctioned or blocked. Peer-to-peer transactions and decentralized finance protocols operate independently of trade policy. In an increasingly protectionist world, this is not a curiosity but a structural advantage. As trade relationships fragment and national currencies are used more aggressively as geopolitical tools, neutral settlement systems become more valuable. For countries seeking to reduce dependence on the U.S. dollar, or for individuals hedging against unpredictable domestic policy, bitcoin’s appeal increasingly extends beyond speculation toward something closer to global financial infrastructure.
That view was validated in the months that followed. As markets absorbed the new trade regime and macro volatility subsided, crypto prices recovered steadily. By late summer and early fall, the sector had not only retraced its losses but pushed to fresh all-time highs. Momentum returned, leverage rebuilt, and expectations grew for a seasonally strong fourth quarter that would cement 2025 as another breakout year.
Those hopes were abruptly dashed again on Friday, October 10. In a second surprise announcement, President Trump unveiled new tariffs targeting Chinese technology imports, alongside restrictions on U.S. exports of “critical software.” The move was framed as retaliation for Beijing’s decision to curb exports of rare-earth materials essential to advanced manufacturing. The timing proved crucial. The announcement came after equity markets had closed for the weekend, leaving investors with no traditional venue to reposition. Once again, crypto—open, liquid, and globally accessible—became the pressure valve for mounting macro anxiety.
The result was the most severe liquidation event the industry has ever recorded. In less than 24 hours, nearly $19 billion in leveraged positions were wiped out through forced liquidations. Total crypto market capitalization fell by roughly $1 trillion, a decline of about 25% in a single day. As in February, the magnitude of the move was driven not by a reassessment of crypto’s intrinsic value, but by the rapid and disorderly unwinding of leverage in response to an unexpected policy shock.
Taken together, these two episodes help explain, at least in part, why 2025 ultimately failed to deliver sustained price appreciation despite otherwise constructive conditions. Each time momentum began to build, an external macro surprise reset positioning and forced the market back into consolidation.
At the same time, on-chain data show that large wallets accumulated assets during these periods of stress, suggesting that longer-term investors viewed the drawdowns as buying opportunities rather than signals of structural weakness. This familiar pattern—retail panic followed by accumulation by “smart money”—has historically laid the groundwork for subsequent advances. Importantly, the violent deleveraging has left the market in a healthier position, with excess leverage largely flushed out. Stablecoin supply continues to grow, indicating that a substantial amount of capital remains on the sidelines, ready to be deployed in 2026. Historically, expansions in stablecoin supply have often coincided with rising cryptocurrency prices, as a larger stablecoin base translates into greater potential buying power.
In this sense, the very policies that disrupted crypto prices in the short term may strengthen the asset class’s long-term case. Tariffs, capital controls, and geopolitical fragmentation underscore the value of neutral, borderless financial networks. In 2025, those forces repeatedly interrupted crypto’s momentum. Over a longer horizon, they may prove to be among its most powerful tailwinds.
In Other News
PNC Bank partners with Coinbase to allow private clients to buy and hold bitcoin in existing accounts.
SEC Chair Atkins signals more action on crypto priorities in the new year.
Solana’s Firedancer client finally goes live.
OCC grants trust charters to five crypto banks.
JPMorgan launches tokenized money-market fund on Ethereum.
Coinbase expands into stocks, prediction markets, Solana DEX trading via Jupiter, and more in ‘everything exchange’ push.
Federal Reserve withdraws restrictive 2023 policy severely limiting ‘novel’ crypto activities.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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