Crypto was supposed to go out with a bang this year.

Heading into the fourth quarter, bitcoin was riding a wave of strong ETF inflows, digital asset treasuries (DATs) pitching themselves as leveraged bets on the next leg higher, and analysts dusting off charts showing the year's final three months as crypto’s most reliable winning streak.

Add in the promise of looser monetary policy and a friendlier political backdrop in Washington, and many investors convinced themselves of bitcoin heading to fresh record prices into the end of the year.

Instead, here's what happened: A $19 billion liquidation cascade in October blew a hole in liquidity, spot altcoin ETFs failed to offset selling pressure, and the new crop of treasury-heavy crypto stocks have already started morphing from structural buyers into potential forced sellers.

Bitcoin is down 23% since the start of October — by itself ugly performance, but even uglier considering the continued rallies in equities and precious metals.

Here’s how each of the big year‑end “catalysts” went from promised flywheel to grinding headwind.

DATs flywheel turns into tailspin

The frenzy of digital asset treasuries – hastily-formed publicly-traded companies (mostly this year) attempting to replicate Michael Saylor's Strategy (MSTR) – promised a flywheel for crypto prices and steady buying pressure.

After a brief bout of buying excitement in the spring though, investors quickly lost enthusiasm. Then, as crypto prices began sinking through October, the sellings in DATs really accelerated. Their sock prices plunged, with most companies falling below their net asset value, limiting their ability to issue shares and debt to raise money. At first, purchases slowed down, then they completely stopped – with only a couple exceptions. Now, DATs, instead of their initial plans to turn investor fiat currency into crypto holdings, are now beginning to use dollars to repurchase shares. The latest was former highflyer turned penny stock, KindlyMD (NAKA), whose shares have fallen so low that its bitcoin holdings are worth more than twice the company's enterprise value.

The concern goes that many more could follow and possibly become forced sellers, unloading assets onto an already fragile market turning the supposed flywheel into a tailspin, weighing on the market.

Altcoin ETFs

As market sentiment deteriorated across the board, the long-anticipated debut of spot altcoin ETFs in the U.S. didn't stand a chance to make an impact – despite some of them gathering commendable inflows.

Solana ETFs have brought in $900 million in assets since late October, SoSoValue data shows. XRP vehicles surpassed $1 billion in net inflows in little more than a month.

That strong demand, however, didn't translate to prices of the underlying tokens. SOL has plummeted to 35% since the ETF debut, while XRP is down almost 20%.

ETFs of smaller altcoins – hedera (HBAR), DOGE$0.1204, LTC$77.52 – meanwhile, saw negligible demand as risk appetite disappeared.

Seasonality

Analysts pointed to bitcoin's historically strong year-end run, with the fourth quarter producing the asset's strongest returns. This year is on track to hand investors a stark reminder of an old adage: past performance does not guarantee future results.

Since 2013, bitcoin's average fourth quarter return was 77%, with a median gain of 47%, CoinGlass data shows. In the past twelve years, eight of those had positive returns – the best hit ratio among all quarters.

The outliers? 2022, 2019, 2018, and 2014 – deep bear markets.

2025 is well on its way to join them. BTC is 23% down since the start of October. That would qualify as its worst last-quarter in seven years if bitcoin remains at current levels.

Liquidity void

The $19 billion liquidation cascade on Oct. 10 — which sent BTC crumbling from $122,500 to $107,000 in a manner of hours, with far larger percentage declines across the rest of crypto — was damaging in more ways than one. Many thought the institutionalization via ETFs would make crypto immune to this kind of drawdown, but in reality it demonstrated that a market historically dominated by speculative mania had not changed, just shifted into a new form.

Two months on and not only did liquidity and market depth fail to recover from the sell-off, but it also knocked the confidence of investors, who are now taking a wide berth from any kind of leverage.

Bitcoin effectively made a local low on Nov. 21 at $80,500, since then it has rallied back to relative safety after reaching a high of $94,500 on Dec. 9. But during that period, open interest has continued to trend downwards, falling from $30 billion to $28 billion, according to Coinalyze.

This shows that the recent price appreciation can be attributed to short positions closing as opposed to genuine buyer demand, a scenario unthinkable to many that got wrapped up in the Trump, ETF and DAT narratives of 2025.

What are the 2026 catalysts?

Bitcoin and the broader crypto market have underperformed equities and precious metals since the October blow out; the Nasdaq Composite is up by 5.6% since Oct. 12, gold is up by 6.2% while bitcoin is down by 21% over the same period.

This radically poor performance signals two things: The 2025 catalysts didn’t live up to expectations and the 2026 catalysts simply aren’t there.

At the start of the year Trump season was in full effect, lighter regulations around crypto and a U.S. bitcoin strategy were being touted while spot ETF flows continued to break records.

But that excitement slowly tapered off to a point now where one of the only bullish catalysts is a rate cutting cycle that is perceived to have a positive impact on risk assets like bitcoin. The Federal Reserve cut in September, October and December, only for BTC to shed 24% of its value since the September meeting.

While bitcoin bulls begin clutching at straws over potential bullish catalysts, agnostic traders can see the warning signs. DATs invested heavily into crypto at the top, with several of those treasury company mNAVs now falling below one. CoinShares said in early December that the DAT bubble has, in many ways, already burst.

This could lead to a major crypto market fallout as some companies may be forced to liquidate holdings into a market that lacks any kind of liquidity to deal with waves of sell pressure.

Even Strategy (MSTR) CEO Phong Le recently alluded to the company potentially selling BTC if mNAV drops below 1.0, although it’s worth noting that the technology company is still raising billions of dollars to purchase BTC, so that remains a worst case scenario.

There is a bullish spin on all of this, as when these companies begin to wind down it is probably a good time to buy, as seen in the 2022 bear market following the collapse of Celsius, Three Arrows Capital and FTX.