- Bitcoin’s performance was underwhelming in 2025, closing slightly negative at -5%, resulting in a market cap contraction of -$121.4bn. The final quarter was particularly difficult, marked by the largest deleveraging event in digital asset history and the deepest drawdown of the cycle (-36%).
- Despite weak price performance, network fundamentals continue to strengthen, with Bitcoin settling $3.1tn in economically meaningful volume, whilst miners cumulatively computed 3 × 1028 hashes across the year, underscoring continued growth in security and settlement demand.
- Institutional demand was a defining feature of 2025, with US spot ETFs recording $20.9bn in cumulative net inflows. In addition, Digital Asset Treasury companies acquired nearly 500k BTC, showing strong institutional and corporate demand.
Valuation and Performance:
2025 was a volatile year for Bitcoin. The year opened near $93.4K, before the rollout of the U.S. tariff regime triggered a broad-based risk-off move that dragged price down to $74.5K. Momentum later recovered, carrying Bitcoin to a new all-time high of $126K in early October. However, conditions deteriorated sharply in the final quarter, which was characterised by the largest deleveraging event in digital asset history and the deepest drawdown of the cycle. Price retraced aggressively to $80.9K (–36%), effectively erasing the year’s gains. As a result, Bitcoin has effectively round tripped its yearly performance, with price returning to levels near where the year began.
All told, bitcoin's market cap contracted $121.4bn, underscoring the severity of the downturn and the difficult market environment faced across 2025.
There is an important alternative view of what happened in 2025 that is worth discussing. The Realised Cap is a statistical metric that looks at network valuation by pricing each coin at its individual last transaction price rather than marking all supply to the current spot price. As a result, the Realised Cap offers direct insight into the capital flowing into and out of the network over time, as coins are continually revalued higher or lower through investor spending behaviour.
Across the year, approximately $309.4bn of new investor capital flowed into the Bitcoin network, marking the second largest influx on record behind the $382bn committed during 2024-25. These figures underscore the extraordinary scale of sell-side supply that Bitcoin has been required to absorb.
During 2024-25, robust buy-side demand was sufficient to offset this pressure and support sustained price appreciation. However, throughout 2025-26, distribution from mature investors anticipating the end of the four-year cycle has outweighed incoming demand, heavily contributing to the market conditions observed across the year.
Bitcoin’s performance relative to the broader digital asset complex was a tale of two halves. In the first half of the year, Bitcoin materially outpaced the altcoin sector, with Bitcoin Dominance rising from 56.8% to 65.1%, underscoring its position as the preferred asset for capital allocation.
In contrast, the latter half of the year saw this trend reverse, with dominance falling to 58.5% as capital rotated down the risk curve in pursuit of higher-beta exposure, coinciding with Bitcoin’s relative underperformance.
Interestingly, most major altcoins trended downwards too. The segment’s relative outperformance was led by a small handful of coins, specifically ZEC and XMR which benefited from renewed interest in privacy focused assets.
Network Fundamentals
Despite Bitcoin ending the year slightly negative and underperforming the broader risk asset complex, its internal network fundamentals tell a different story. One of Bitcoin’s core value propositions is its capacity to function as a medium of exchange, and 2025 has spotlighted this with substantial network throughput.
Over the year, Bitcoin processed 153.7mn transactions, its second highest total on record, trailing only 2024 which settled 192.2mn. Of these, 79.1mn transactions were monetary in nature, representing 51.5% of activity, while the remaining 74.5mn (48.5%) were non-monetary transactions driven by BRC 20s and Runes.
When filtering for economically meaningful activity by removing change outputs, same entity spends and exchange reshuffling, Bitcoin settled an extraordinary $3.1tn in 2025, the highest annual figure on record. This marks a significant shift in network behaviour, as the volume flowing across the chain has grown far more rapidly than the number of transactions themselves.
In effect, Bitcoin is increasingly being used as a global settlement layer for large-value transfers, with substantial clips of capital moving across the network in a permissionless and jurisdictionless manner. This reinforces the asset’s evolving role as a high-value settlement rail, underscoring the scale, maturity and real-economic usage of the network despite the broader market headwinds of 2025.
Miners are a critical component of Bitcoin’s security model. They supply the computational work that secures the network, producing blocks that embed transactions into the ledger.
In 2025, Bitcoin’s security continued to strengthen as the global hash rate reached unprecedented levels. Integrating the average network hash rate over the year suggests that miners collectively computed on the order of 3 × 1028 hashes, representing an extraordinary amount of computational work securing the network.
For scale, 3 × 1028 hashes corresponds to roughly 30,000,000,000,000,000,000,000,000,000 individual hashing attempts over the course of the year.
This is the largest annual total on record. This immense amount of proof-of-work reflects both the growing scale of the mining industry and the extraordinary computational cost required to attack or reorganize the blockchain.
As an economic reward for securing the network, miners earned a total of $17bn across the year. Of this amount, $16.9bn was paid through the block subsidy, while only $173mn was derived from transaction fees. Breaking this down further, $152mn (89.2%), originated from monetary transactions, while $21mn (10.8%), came from non-monetary activity.
This represents a notable departure from historical precedent, where transaction fees tended to dominate miner revenue during bull market conditions. One plausible explanation is the migration of retail activity toward US spot ETF products and Bitcoin treasury companies, which has reduced native on chain transactional demand and concentrated network usage among larger, less fee sensitive participants.
Institutional Demand:
US Spot ETF products have become a meaningful part of Bitcoin’s market structure by providing professional investors with regulated, easily accessible Bitcoin exposure for the first time in history. In their inaugural year, the US. spot Bitcoin ETF complex attracted $33.1bn in cumulative flows, an extraordinary figure for a first-year product launch. Remarkably, this momentum continued into the following year, which saw an additional $20.9bn of cumulative flows.
Although inflows were lower than in the initial launch year, this remains an exceptional outcome given the challenging market conditions. This year’s flow profile suggests two structural features of the investor base:
- A large share of ETF demand is “sticky”, most likely originating from pension funds, RIAs, and other long-horizon allocators.
- Many investors maintain strong long-term conviction in Bitcoin as an asset class, remaining undeterred by near-term price weakness.
Digital Asset Treasury Companies were a major focal point throughout 2025. While Strategy remains the premier DAT, its presence catalysed the formation of many new treasury-based investment vehicles. These firms acquired an aggregate 498k BTC, a significant new vector of institutional demand. We do not expect this pace to continue in 2026.
Additionally, it is important to recognise that a portion of this activity reflects the consolidation of existing privately held Bitcoin into corporate structures, rather than entirely organic buy-side demand.
Bottom Line:
- 2025 was a testing year for Bitcoin, marked by emotional extremes as new all-time highs gave way to the most severe drawdown of the cycle. Ultimately, the year closed modestly lower, with price largely round-tripping its performance.
- Yet beneath the surface, Bitcoin’s structural foundations continued to strengthen, with network usage and security remaining robust despite the price weakness. Most notably, institutional participation became a defining theme, providing a persistent source of demand that helped anchor the market through a turbulent period. Together, these dynamics frame a market that ended the year in distress, but fundamentally resilient, and increasingly shaped by long-term, conviction-driven capital.
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