Bitwise Asset Management argues in its Q4 2025 market review that the cryptocurrency sector's current drawdown mirrors the conditions of Q1 2023, when weak prices coincided with strengthening on-chain fundamentals before a multi-year rally.
What Happened: Asset Manager Compares Current Conditions to 2023
Matt Hougan, Bitwise's chief investment officer, characterized the quarter as an inflection point in the firm's "Crypto Market Review" report, pointing to diverging signals between price performance and underlying business metrics.
The firm's data showed Ethereum (ETH) fell 29% during Q4 while transaction activity on Ethereum and Layer 2 networks reached all-time highs, up 24.5%. Crypto equities dropped 20% by Bitwise's measure even as the underlying companies' revenues were "on pace to grow 3x faster than any other sector of the stock market."
Bitcoin (BTC) declined 23.48% in Q4 and finished 2025 down 6.26% year-to-date. The Bitwise 10 Large Cap Crypto Index fell 26.29% for the quarter and ended 2025 down 10.64%.
The total crypto market capitalization stood at roughly $2.78 trillion as of Dec. 31, with Bitcoin representing 63.6% and Ether about 12.9%.
Bitwise identified four catalysts for 2026: pending U.S. market-structure legislation through the CLARITY Act, stablecoin adoption that saw annual transaction volume top $32 trillion, Federal Reserve leadership changes following Chair Jerome Powell's departure in May, and expanded distribution at major wealth platforms where advisors controlling approximately $16 trillion in assets gained access to crypto ETFs in Q4.
"The last one I remember was Q1 2023," Hougan wrote of the mixed signal environment. "In the two years that followed, crypto prices soared."
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Why It Matters: Fundamentals Diverging From Price
The report suggests the current environment represents a buying opportunity based on the historical pattern of fundamentals leading price recovery.
Bitwise pointed to stablecoin assets under management and transaction activity reaching new all-time highs as evidence of durable adoption. The firm noted stablecoin volume more than doubled Visa's throughput during the first nine months of 2025.
The asset manager expects early wirehouse flows to start slowly in Q1 before accelerating, following Q4 approvals that gave financial advisors at three of four major wirehouses access to crypto ETFs.
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