Crypto’s much-anticipated year-end rally in 2025 — fueled by digital asset treasuries (DATs), altcoin ETFs, and bitcoin’s historically strong seasonal performance — instead turned into one of the worst drawdowns since the 2022 crypto winter.

Heading into Q4, optimism was high. Bitcoin saw strong ETF inflows, new DATs promised leveraged exposure, and analysts pointed to the fourth quarter as the asset’s most reliable window for gains. Expectations of looser U.S. monetary policy and a friendlier political backdrop further fueled projections of record highs.

Reality diverged sharply. A $19 billion liquidation cascade in October drained liquidity, spot altcoin ETFs failed to offset selling pressure, and many treasury-heavy crypto firms shifted from buyers to potential forced sellers. Bitcoin is down 23% since early October, underperforming both equities and precious metals.

DATs: From growth driver to risk
Digital asset treasuries — largely launched this year to mimic Michael Saylor’s MSTR strategy — initially drove excitement. But as prices fell in October, DATs accelerated selling. Share prices dropped below net asset value, limiting their ability to raise funds. Some, instead of buying crypto, began repurchasing their own shares. Former high-flyer KindlyMD (NAKA) now holds bitcoin worth more than twice its enterprise value. Analysts warn other DATs could follow, dumping assets into an already fragile market and turning a promised flywheel into a tailspin.

Altcoin ETFs fail to support prices
U.S. spot altcoin ETFs saw meaningful inflows — Solana ETFs gathered $900 million and XRP vehicles surpassed $1 billion in just over a month. Yet token prices fell: SOL is down 35%, XRP nearly 20%. ETFs for smaller altcoins like Hedera (HBAR), DOGE, and LTC drew little demand as risk appetite evaporated.

Bitcoin seasonality disappoints
Historically, bitcoin’s fourth quarter is its strongest: since 2013, the average Q4 gain was 77%, with positive returns in eight of the past twelve years. Exceptions — 2014, 2018, 2019, and 2022 — coincided with bear markets. 2025 is now on track to join that list, with BTC down 23% since October, marking its worst Q4 in seven years if current levels hold.

The October 10 liquidation sent BTC from $122,500 to $107,000 in hours, with altcoins falling further. Despite ETFs and institutional adoption, crypto remains speculative. Liquidity has yet to recover, and investor confidence is low. Open interest has declined from $30 billion to $28 billion, suggesting recent gains largely reflect short-covering rather than genuine buying.

Crypto has lagged traditional assets since October: the Nasdaq is up 5.6%, gold 6.2%, while BTC is down 21%. This underscores the failure of 2025 catalysts and the absence of strong drivers for 2026.

DAT risks remain
Many DATs invested heavily at market peaks, with several now trading below mNAV, creating the risk of forced liquidations. Strategy (MSTR) CEO Phong Le noted the company could sell BTC if mNAV falls below 1.0, though purchases continue. CoinShares has said the DAT bubble has “already burst” in many respects.

A cautious silver lining
Historically, sell-offs from treasury-heavy firms can create buying opportunities. Similar conditions occurred during the 2022 bear market following the collapses of Celsius, Three Arrows Capital, and FTX, suggesting investors may find attractive entry points as DATs unwind.