Cryptographic Coming-of-Age Ceremony: 2025, Reconstruction of Institutions, Assets, and Regulation

Original author: https://x.com/stacy_muur
Original compilation: Deep Tide TechFlow

Summary:

• Institutions become the marginal buyers of crypto assets.
• Real-world assets (RWAs) evolve from a narrative concept to an asset class.
• Stablecoins become both a "killer application" and a systemic weak link.
• Layer 2 networks (L2) consolidate into a "winner-takes-all" landscape.
• Prediction markets evolve from toy-like applications to financial infrastructure.
• Artificial intelligence and crypto (AI × Crypto) shift from hype narratives to actual infrastructure.
• Launchpads industrialize, becoming the internet capital markets.
• Tokens with high fully diluted valuations (FDV) and low circulation are proven structurally uninvestable.
• InfoFi experiences a boom, expansion, and then collapse.
• Consumer crypto returns to the public eye, but through new digital banks (Neobanks) rather than Web3 applications.
• Global regulation gradually normalizes.

In my view, 2025 marks a turning point in the crypto space: it transitions from a speculative cycle to a foundational, institutional-scale structure.

We witness a repositioning of capital flows, a restructuring of infrastructure, and the maturation or collapse of emerging fields. Headlines around ETF inflows or token prices are merely surface-level. My analysis reveals the deep structural trends underpinning the new paradigm for 2026.

Below, I will analyze the 11 pillars of this transformation, each supported by specific data and events from 2025.

1. Institutions Become the Dominant Force in Crypto Capital Flows

I believe that 2025 witnessed institutions gaining full control over liquidity in the crypto market. After years of observation, institutional capital finally surpassed retail, becoming the dominant force in the market.

In 2025, institutional capital not only "entered" the crypto market but crossed a significant threshold. The marginal buyers of crypto assets shifted from retail to asset allocators for the first time. In just the fourth quarter, weekly inflows into U.S. spot Bitcoin ETFs exceeded $3.5 billion, led by products like BlackRock's IBIT.

These capital flows are not random but are a reallocation of risk capital through structural authorization. Bitcoin is no longer seen as a curiosity-driven asset but as a macro tool with portfolio utility: digital gold, a convex inflation hedge, or simply an uncorrelated asset exposure.

However, this shift also brings dual effects.

Institutional capital flows are less reactive but more sensitive to interest rates. They compress market volatility while binding the crypto market to macroeconomic cycles. As one chief investment officer put it, "Bitcoin is now a liquidity sponge with a compliance shell." As a globally recognized store of value, its narrative risk has significantly decreased; yet, interest rate risk remains.

This shift in capital direction has far-reaching implications: from compressed exchange fees to reshaped demand curves for yield-bearing stablecoins and tokenized real-world assets (RWAs).

The next question is no longer whether institutions will enter, but how protocols, tokens, and products will adapt to capital demands driven by Sharpe Ratios rather than market speculation.

2. Real-World Assets (RWAs) Transition from Concept to Real Asset Class

In 2025, tokenized real-world assets (RWAs) transitioned from concept to infrastructure in capital markets.

We have now witnessed substantial supply: as of October 2025, the total market capitalization of RWA tokens exceeded $23 billion, nearly quadrupling year-over-year. About half of this is tokenized U.S. Treasuries and money market strategies. With institutions like BlackRock issuing $500 million in Treasuries to BUIDL, this is no longer a marketing gimmick but a treasury backed by on-chain insured debt rather than uncollateralized code.

Meanwhile, stablecoin issuers began supporting reserves with short-term notes, and protocols like Sky (formerly Maker DAO) integrated on-chain commercial paper into their collateral pools.

Stablecoins backed by Treasuries are no longer marginalized but are foundational to the crypto ecosystem. The assets under management (AUM) of tokenized funds nearly quadrupled within 12 months, growing from about $2 billion in August 2024 to over $7 billion in August 2025. At the same time, institutions like JPMorgan and Goldman Sachs transitioned their RWA tokenization infrastructure from testnets to production environments.

In other words, the boundary between on-chain liquidity and off-chain asset classes is gradually collapsing. Traditional financial asset allocators no longer need to purchase tokens related to real-world assets; they now hold assets issued in on-chain native forms directly. This shift from synthetic asset representation to actual asset tokenization is one of the most impactful structural advancements of 2025.

3. Stablecoins: Both a "Killer Application" and a Systemic Weak Link

Stablecoins have fulfilled their core promise: a massively programmable dollar. Over the past 12 months, on-chain stablecoin transaction volume reached $46 trillion, a 106% year-over-year increase, averaging nearly $4 trillion per month.

From cross-border settlements to ETF infrastructure and DeFi liquidity, these tokens have become the funding hub of the crypto space, making blockchain a truly functional dollar network. However, the success of stablecoins has also revealed systemic vulnerabilities.

2025 exposed the pitfalls of yield-bearing and algorithmic stablecoins, especially those relying on endogenous leverage support. Stream Finance's XUSD collapsed to $0.18, evaporating $93 million of user funds and leaving $285 million in protocol-level debt.

Elixir's deUSD collapsed due to a large loan default. USDx on AVAX fell due to alleged manipulation. These cases unequivocally revealed how opaque collateral, recursive rehypothecation, and concentrated risk can lead to stablecoins losing their peg.

The profit-seeking frenzy of 2025 further amplified these vulnerabilities. Capital flooded into yield-bearing stablecoins, some offering annual yields of 20% to 60% through complex treasury strategies. Platforms like ++@ethenalabs++, ++@sparkdotfi++, and ++@pendlefi++ absorbed billions, as traders chased synthetic dollar-based structural yields. However, with the collapse of deUSD, XUSD, and others, it became evident that DeFi had not truly matured but was trending towards centralization. Nearly half of the total value locked (TVL) on Ethereum is concentrated in @aave and @LidoFinance, while other funds are clustered in a few strategies related to yield-bearing stablecoins (YBS). This has led to a fragile ecosystem based on excessive leverage, recursive capital flows, and shallow diversification.

Thus, while stablecoins provide the system with momentum, they also exacerbate systemic pressure. We are not saying stablecoins are "bankrupt"; they are crucial to the industry. However, 2025 proved that the design of stablecoins is as important as their functionality. As we move into 2026, the integrity of dollar-denominated assets has become a primary concern, not only for DeFi protocols but for all participants allocating capital or building on-chain financial infrastructure.

4. L2 Integration and the Illusion of Chain Stacks

In 2025, Ethereum's "Rollup-centric" roadmap collided with market realities. Once home to dozens of L2 projects on L2Beat, the landscape has now evolved into a "winner-takes-all" scenario: @arbitrum, @base, and @Optimism attract most of the new TVL and capital flows, while smaller Rollup projects have seen their revenue and activity drop by 70% to 90% after incentives ended. Liquidity, MEV bots, and arbitrageurs follow depth and tight spreads, reinforcing this flywheel effect, draining order flow from marginal chains.

Meanwhile, cross-chain bridge transaction volumes surged, reaching $56.1 billion in July 2025 alone, clearly indicating that "everything is Rollup" actually still means "everything is fragmented." Users still need to deal with isolated balances, L2 native assets, and duplicated liquidity.

It is important to clarify that this is not a failure but a process of consolidation. Fusaka achieved 5-8 times the Blob throughput, zk application chains like @Lighter_xyz reached 24,000 TPS, and some emerging dedicated solutions (like Aztec/Ten providing privacy features, MegaETH offering ultra-high performance) all indicate that a few execution environments are emerging.

Other projects have entered "sleep mode" until they can prove their moats are deep enough that leaders cannot simply fork to replicate their advantages.

5. The Rise of Prediction Markets: From Marginal Tools to Financial Infrastructure

Another major surprise of 2025 was the formal legitimization of prediction markets.

Once seen as a marginal curiosity, prediction markets are gradually integrating into financial infrastructure. Long-time industry leader ++@Polymarket++ has returned to the U.S. market in a regulated form: its U.S. division received approval from the Commodity Futures Trading Commission (CFTC) to become a Designated Contract Market. Additionally, reports indicate that the Intercontinental Exchange (ICE) invested billions of dollars in capital, valuing it at nearly $10 billion. Capital flows followed.

Prediction markets have surged from "interesting niche markets" to billions of dollars in weekly trading volume, with @Kalshi alone handling hundreds of billions in event contracts in 2025.

I believe this marks the transition of blockchain markets from "toys" to true financial infrastructure.

Mainstream sports betting platforms, hedge funds, and DeFi-native managers now view Polymarket and Kalshi as predictive tools rather than entertainment products. Crypto projects and DAOs are also beginning to see these order books as sources of real-time governance and risk signals.

However, this "weaponization" of DeFi also has its downsides. Regulatory scrutiny will become stricter, liquidity remains highly concentrated on specific events, and the correlation between "prediction markets as signals" and real-world outcomes has yet to be validated under stress scenarios.

Looking ahead to 2026, it is clear that event markets have now entered the institutional spotlight alongside options and perpetual contracts. Portfolios will need to form clear views on whether—and how—to allocate exposure to such instruments.

6. The Fusion of AI and Crypto: From Buzzword to Structural Realities

In 2025, the combination of AI and crypto transitioned from a noisy narrative to structured practical applications.

I believe three themes defined the developments of this year:

First, the agentic economy shifted from a speculative concept to an actionable reality. Protocols like x402 enable AI agents to autonomously trade using stablecoins. The integration of Circle's USDC, along with the rise of orchestration frameworks, reputation layers, and verifiable systems (like EigenAI and Virtuals), highlights that useful AI agents need collaboration, not just reasoning capabilities.

Second, decentralized AI infrastructure became a core pillar of the field. Bittensor's dynamic TAO upgrades and the halving event in December redefined it as "Bitcoin for AI"; NEAR's chain abstraction brought actual intent trading volume; while @rendernetwork, ICP, and @SentientAGI validated the feasibility of decentralized computing, model provenance, and hybrid AI networks. It is clear that infrastructure has gained a premium, while the value of "AI packaging" is gradually diminishing.

Third, the vertical integration of practicality accelerated.

++@almanak++'s AI community deployed quant-level DeFi strategies, @virtuals_io generated $2.6 million in fee revenue on Base, and bots, prediction markets, and geospatial networks became trusted agent environments.

The shift from "AI packaging" to verifiable agents and bot integration indicates that product-market fit is maturing. However, trust infrastructure remains a critical missing link, and the risk of hallucination still looms over autonomous trading.

Overall, market sentiment at the end of 2025 is optimistic about infrastructure while remaining cautious about the practicality of agents, with a general belief that 2026 could be a breakthrough year for verifiable and economically valuable on-chain AI developments.

7. The Return of Launchpads: A New Era for Retail Capital

We believe that the launchpad craze of 2025 is not a "return of ICOs," but rather the industrialization of ICOs. What is referred to as "ICO 2.0" is, in fact, the maturation of the crypto capital formation stack, gradually evolving into Internet Capital Markets (ICM): a programmable, regulated, around-the-clock underwriting track, rather than merely a "lottery-style" token sale.

The repeal of SAB 121 accelerated regulatory clarity, transforming tokens into financial instruments with vesting periods, disclosures, and recourse, rather than simple issuances. Platforms like Alignerz embed fairness into their mechanisms: hashed bidding, refund windows, and token vesting schedules based on lock-up periods rather than internal channel allocations. "No VC sell-offs, no insiders profiting" is no longer a slogan but a structural choice.

At the same time, we observe that launchpads are integrating into exchanges, signaling a structural shift: platforms related to Coinbase, Binance, OKX, and Kraken offer KYC/AML compliance, liquidity guarantees, and carefully curated issuance pipelines accessible to institutions. Independent launchpads are being forced to concentrate on verticals (like gaming, memes, and early infrastructure).

From a narrative perspective, AI, RWAs (real-world assets), and DePIN (decentralized physical infrastructure networks) dominate the primary issuance channels, with launchpads acting more as routers for narratives rather than hype machines. The real story is that the crypto space is quietly building an ICM layer that supports institutional-grade issuance and long-term alignment of interests, rather than replaying the nostalgic trends of 2017.

8. The Uninvestability of High FDV Projects is Structural

Throughout much of 2025, we witnessed the repeated validation of a simple rule: high FDV (Fully Diluted Valuation), low circulation projects are structurally uninvestable.

Many projects—especially new L1 (layer one blockchains), sidechains, and "real yield" tokens—entered the market with FDVs exceeding a billion dollars and single-digit circulating supplies.

As one research firm stated, "High FDV, low circulation is a liquidity time bomb"; any large-scale sell-off by early buyers would directly destroy the order book.

The results were predictable. These tokens soared in price upon launch, but as lock-up periods ended and insiders exited, prices quickly plummeted. Cobie's famous saying—"Refuse to buy tokens with inflated FDVs"—transformed from a meme into a risk assessment framework. Market makers widened bid-ask spreads, and retail investors simply stopped participating, with many of these tokens showing little improvement over the following year.

In contrast, tokens with actual utility, deflationary mechanisms, or cash flow linkage significantly outperformed those whose only selling point was "high FDV."

I believe that 2025 has permanently reshaped buyers' tolerance for "token economic dramatization." FDV and circulation are now viewed as hard constraints rather than trivial footnotes. Looking ahead to 2026, if a project's token supply cannot be absorbed by the exchange's order book without disrupting price trends, then that project is effectively uninvestable.

9. InfoFi: Rise, Frenzy, and Collapse

I believe that the boom and bust of InfoFi in 2025 became the clearest cyclical stress test for "tokenized attention."

InfoFi platforms like ++@KaitoAI++, ++@cookiedotfun++, and ++@stayloudio++ promised to reward analysts, creators, and community managers for their "knowledge work" through points and token payments. Within a brief window, this concept became a hot venture capital theme, with firms like Sequoia, Pantera, and Spartan pouring in massive investments.

The information overload in the crypto industry and the popular trend of combining AI with DeFi made the curation of on-chain content seem like an obvious missing foundational module.

However, this design choice of measuring attention is a double-edged sword: when attention becomes the core metric, content quality collapses. Platforms like Loud and their peers were inundated with AI-generated low-quality content, bot farms, and interactive alliances; a few accounts captured most of the rewards while long-tail users realized the rules were stacked against them.

Multiple tokens experienced 80-90% retracements, with some completely collapsing (e.g., WAGMI Hub raised nine-figure funds only to suffer a major exploit), further damaging the credibility of the field.

The ultimate conclusion indicates that the first generation of InfoFi attempts is structurally unstable. While the core idea—monetizing valuable crypto signals—remains attractive, the incentive mechanisms need redesigning, based on verified contributions rather than mere click counts.

I believe that by 2026, the next generation of projects will learn from these lessons and improve.

10. The Return of Consumer Crypto: A New Paradigm Led by New Banks

In 2025, the return of consumer crypto is increasingly seen as a structural shift driven by new banks (Neobanks), rather than a result of local Web2 applications.

I believe this shift reflects a deeper understanding: when users onboard through financial vernacular they are already familiar with (like deposits, yields), adoption accelerates, while the underlying settlement, yield, and liquidity tracks quietly migrate on-chain.

What emerges is a hybrid banking stack, where new banks shield users from the complexities of gas fees, custody, and cross-chain bridges, while providing direct access to stablecoin yields, tokenized Treasuries, and global payment tracks. The result is a consumer funnel capable of attracting millions of users "deeper on-chain" without requiring them to think about complex technical details like seasoned users.

The mainstream view across the industry indicates that new banks (Neobanks) are gradually becoming the de facto standard interface for mainstream crypto demand.

++@etherfi++, ++@Plasma++, ++@URglobal++, ++@SolidYield++, ++@raincards++, and Metamask Card are typical representatives of this shift: they offer instant deposit channels, 3-4% cashback cards, annual yields (APY) of 5-16% through tokenized Treasuries, and self-custody smart accounts, all packaged in a compliant and KYC-supported environment.

These applications benefit from the regulatory reset of 2025, including the repeal of SAB 121, the establishment of stablecoin frameworks, and clearer guidance for tokenized funds. These changes reduce operational friction and expand their potential market size in emerging economies, particularly in regions where yield, forex savings, and remittances are pressing pain points.

11. The Normalization of Global Crypto Regulation

I believe that 2025 is the year when crypto regulation finally achieves normalization.

Conflicting regulatory directives have gradually formed three identifiable regulatory models:

1. European Framework: Including the Markets in Crypto-Assets (MiCA) and the Digital Operational Resilience Act (DORA), with over 50 MiCA licenses issued, and stablecoin issuers treated as electronic money institutions.
2. U.S. Framework: Including stablecoin legislation similar to the GENIUS Act, SEC/CFTC guidance, and the launch of spot Bitcoin ETFs.
3. Patchwork Model in the Asia-Pacific Region: Such as Hong Kong's full-reserve stablecoin regulations, Singapore's license optimization, and broader adoption of the FATF (Financial Action Task Force) travel rules.

This is not superficial; it fundamentally reshapes risk models.

Stablecoins have transitioned from "shadow banking" to regulated cash equivalents; banks like Citi and Bank of America can now operate tokenized cash pilots under clear rules; platforms like Polymarket can relaunch under CFTC oversight; and the U.S. spot Bitcoin ETF can attract over $35 billion in stable capital inflows without survival risk.

Compliance has transformed from a burden into a moat: those with robust regulatory technology (Regtech) frameworks, clear cap tables, and auditable reserves suddenly enjoy lower capital costs and faster institutional access.

In 2025, crypto assets transitioned from a curiosity in the gray area to regulated entities. Looking ahead to 2026, the focus of debate has shifted from "whether this industry is allowed to exist" to "how to implement specific structures, disclosures, and risk controls."