When Will Cryptocurrency Crash Further? 2025's Market Collapse and What Comes Next

The crypto market entered 2026 nursing deep wounds. Bitcoin sits at $89.91K as of late January, having surrendered 23% since the start of October 2025—a devastating drop that raises the question: will cryptocurrency crash even harder? Three major structural failures have left the market vulnerable to further deterioration, and without genuine buying pressure emerging, the risk of continued cryptocurrency decline remains acute.

2025 was supposed to be crypto’s triumphant finale. Heading into the fourth quarter, the narrative seemed airtight: BlackRock’s spot Bitcoin ETF inflows were breaking records, digital asset treasuries (DATs)—publicly-traded companies holding Bitcoin as treasuries—promised a new era of structural buying, and historical data suggested Q4 typically delivers crypto’s strongest returns. Add loose monetary policy expectations and a favorable political backdrop in Washington, and the case for a year-end rally looked compelling. Instead, the market delivered a masterclass in how narratives collapse when fundamentals weaken.

When Digital Asset Treasuries Became Forced Sellers Instead of Buyers

The DAT story exemplifies how cryptocurrency’s structural supports can evaporate overnight. Companies like Strategy (MSTR) and others convinced investors they’d engineered a perpetual buying machine—converting fiat currency into Bitcoin holdings via equity issuance. The theory was elegant: rising Bitcoin prices would lift DAT share prices, enabling more capital raises, which would then fund more Bitcoin purchases. A virtuous cycle, or so the narrative went.

By mid-2025, enthusiasm had already begun cooling. But the real damage emerged in October when crypto prices started collapsing. DAT share prices plummeted, with most companies sinking below their net asset value (NAV)—the value of their Bitcoin holdings divided by shares outstanding. This created a vicious trap: underwater valuations made it impossible to issue new equity or debt at reasonable prices. Purchases didn’t just slow; they stopped almost entirely.

Worse still, some DATs have already begun doing the unthinkable: liquidating Bitcoin to repurchase their own equity. KindlyMD (NAKA) has become the cautionary tale, with its shares trading so depressed that the company’s Bitcoin holdings are worth double its market capitalization. If this pattern spreads—and CoinShares warned in December that “the DAT bubble has, in many ways, already burst”—we could witness a forced-selling cascade that will further pressure cryptocurrency prices into 2026. This represents the exact opposite of the promised flywheel.

Spot Altcoin ETFs: Inflows That Couldn’t Move Prices

The debut of spot altcoin ETFs in the U.S. was supposed to democratize access to tokens beyond Bitcoin, creating a new buyer constituency. Initially, the inflows looked impressive: Solana ETFs accumulated $900 million in assets by late October, while XRP vehicles surpassed $1 billion in net inflows in barely a month. The data suggested genuine institutional interest in alternative cryptocurrencies.

None of it mattered. SOL crashed 35% since the ETF launch despite those inflows, while XRP fell nearly 20%. Smaller altcoin ETFs tracking HBAR, DOGE, and LTC saw virtually no demand as risk appetite evaporated. The lesson was brutal: passive inflows from ETF products cannot support prices when sentiment has turned decisively negative. Products designed for the bull market became irrelevant when the bear arrived. This divergence—massive inflows producing massive price declines—revealed that cryptocurrency’s retail-driven psychology hasn’t fundamentally shifted, regardless of institutional wrapper.

Why Historical Seasonality Failed Cryptocurrency This Time

Financial analysts regularly point to historical patterns showing that Bitcoin’s Q4 returns dwarf other periods. Since 2013, Bitcoin has averaged 77% returns in the fourth quarter, with a median gain of 47%. Eight of the past twelve years saw positive Q4 returns. By this logic, 2025 should have been another winner.

Instead, 2025 joins 2022, 2019, 2018, and 2014 as Q4 disasters—all deep bear market years. Bitcoin is on pace to post one of its worst final quarters in seven years if prices remain at current levels. The pattern reveals an uncomfortable truth: historical seasonality works only when underlying conditions support it. When liquidation cascades hollow out market depth and sentiment collapses, patterns mean nothing. Investors betting on “Q4 always works” learned an expensive lesson about the limits of historical analysis in volatile, sentiment-driven markets.

The Liquidity Crisis That Changed Everything

On October 10, Bitcoin cratered from $122,500 to $107,000 in mere hours, dragging altcoins down even harder. The trigger was a $19 billion liquidation cascade that exposed a critical vulnerability: despite all the talk of “institutionalization” through ETFs, the cryptocurrency market remains structurally fragile. Market depth—the ability to absorb large orders without severe price dislocations—had been hollowed out long before the cascade began.

Two months later, that liquidity never returned. Instead of recovering, market depth remained depleted, and investors responded by abandoning leverage entirely. Bitcoin made a local low of $80,500 on November 21, then rallied to $94,500 by December 9. On the surface, the recovery looked healthy. But beneath it lay a troubling truth: open interest collapsed from $30 billion to $28 billion during that bounce, according to on-chain data trackers. This means the price appreciation came from short-position closures, not fresh demand from new buyers. The market has been marked by capitulation, not confidence.

This pattern matters profoundly because it suggests any near-term bounce lacks genuine support. The market is vulnerable to any fresh selling pressure, which raises the question: will cryptocurrency crash again when short-covering runs its course and repositioning accelerates?

The Absence of 2026 Catalysts—And Why That’s Dangerous

Bitcoin and broad crypto assets have dramatically underperformed both equities and precious metals since October. The Nasdaq Composite gained 5.6%, gold rose 6.2%, while Bitcoin fell 21% over that same period. This relative weakness signals that the 2025 narratives have exhausted themselves.

The Trump political tailwind that energized early 2025 has faded. Rate cuts by the Federal Reserve—three of them across September, October, and December—have done nothing to lift Bitcoin, which shed 24% from the September cut alone. The promise of lighter regulatory treatment remains just that: a promise, with no concrete policy yet implemented.

Look at what remains in the bullish arsenal: DATs are under pressure and potentially forced sellers. Altcoin ETFs have proven powerless to move prices during downturns. Seasonal patterns have been broken. Liquidity is scarred. Rate cuts have disappointed. What genuine catalysts exist to drive prices higher into 2026? The honest answer is: none that are visible on the horizon. That vacuum creates risk—but also opportunity.

The Dark Side of Forced Liquidations

The past 24 hours have seen over $625 million in leveraged cryptocurrency positions liquidated, with losses split roughly evenly between longs and shorts. Hyperliquid alone saw a $40.22 million ETH-USD position liquidate, with the platform absorbing roughly $220.8 million in total liquidations—predominantly from short positions caught by intraday rallies driven by macro uncertainty around U.S. trade policy and Treasury volatility.

These liquidations underscore a persistent risk: aggressive leverage amplifies every market swing. In choppy, direction-unclear markets like the one ahead, leverage is a liability. Yet leverage will likely remain present as traders search for returns in a low-conviction environment.

Is Capitulation the Opportunity?

The bearish case seems overwhelming. DATs bought heavily at the top and now risk forced liquidations. Altcoin ETFs have been neutralized as a catalyst. Seasonality has failed. Liquidity is structurally impaired. Rate cuts haven’t helped. 2026 catalysts don’t yet exist.

But history shows something interesting: the moments when most investors lose confidence are often the moments when bold buyers emerge. After FTX collapsed in November 2022, Three Arrows Capital imploded, and Celsius filed bankruptcy, 2023 became the year of recovery. Forced sellers eventually clear the market, prices fall to levels where new capital enters, and new cycles begin.

Whether cryptocurrency crashes further depends on how much more forced selling emerges from the DAT space and how aggressively overleveraged traders de-risk. But whenever that pain ends—and it will end—the foundation will have been reset. That’s when cryptocurrency’s next chapter truly begins.

For now, the question remains open: will cryptocurrency crash further in early 2026? The structural vulnerabilities suggest yes, absent a major positive surprise. But capitulation, when it arrives, typically creates the foundation for the next bull market.