State of the Blockchain 2025: Market Review & Outlook

2025 has been a year of divergence between structural progress and market performance. While regulatory clarity and institutional validation have reached new milestones, price performance has stagnated. L1 tokens are a primary example, broadly underperforming despite a backdrop of accelerating political approvals and expanding institutional products.

Performance among leading ecosystem tokens has been weak, with almost every asset – excluding one or two outliers – posting negative yearly returns.

This underperformance contrasts with network fundamentals: seven of the eight selected ecosystems recorded Total Value Locked (TVL) growth in native token terms and four of the eight experienced a rise in daily activity.

However, this growth was not reflected in the base layers. Chain Fees were down for all eight ecosystems, confirming a clear disconnect in value accrual to the chains themselves.

Instead, value flowed to the application layer: six ecosystems saw app revenue growth, with ecosystems like Near posting a +190% increase. Despite L1s capturing 90% of the market share (in terms of market cap), they now only collect 12% of fees (down from 60% in 2025). This trend highlights the market’s maturing selectivity, where value capture is increasingly isolated to successful apps rather than automatically accruing to the underlying Layer 1 token.

The macro backdrop for 2026 is structurally supportive, driven by expected rate cuts that should lead to reduced borrowing costs and theoretically, boost risk on assets liquidity.

The divergence between declining chain fees and growing app revenue in 2025 suggests that market structure could be heading toward an inversion in value capture. As L1 security and throughput become commoditized, capital will increasingly flow to the application layer to find returns, confirming that selective, application-level narratives will remain the primary sources of performance.

Bitcoin entered 2025 on a wave of optimism, buoyed by expectations of a more favorable regulatory stance under President Donald Trump. That enthusiasm, however, was short-lived, as renewed trade tensions – particularly tariffs on China and other major partners – reintroduced macroeconomic uncertainty and market volatility.

After surging to a record high of $126.2k – a rally propelled by unprecedented adoption, particularly among corporate treasuries – Bitcoin has since staged a sharp retreat as risk appetite wanes and investors reassess the shifting economic landscape. The asset is currently trading near $90.3k, down 3.45% year-to-date. Despite this price drawdown, Bitcoin’s market dominance has actually strengthened, climbing from 58.1% to 59.4%, indicating a flight to quality within the crypto sector even amidst the downturn.

Much of Bitcoin’s price appreciation from April to October was driven by the accelerating adoption of BTC by publicly listed companies. As the influx of new corporate entrants began to plateau, the momentum behind the rally lulled. This dynamic was starkly visible between August and November, where the slowdown in public company accumulation coincided directly with the easing of upward price pressure.

Bitcoin’s price momentum also began to stall in August, a shift likely influenced by long-term holders selling their assets. According to Whale Alert, since July, 25 whale addresses that had been inactive for more than a decade moved coins on-chain, suggesting profit-taking or repositioning by early holders. This reintroduction of long-dormant BTC into the market added incremental sell-side pressure at a time when broader demand was already softening.