Author: Merkle3s Capital
This article is based on the annual report The Crypto Theses 2026 released by Messari in December 2025. The full report exceeds 100,000 words, with an official estimated reading time of 401 minutes.
This content is supported by Block Analytics Ltd X Merkle 3s Capital. The information herein is for reference only and does not constitute any investment advice or offer. We are not responsible for the accuracy of the content, nor for any consequences arising therefrom.
Introduction | The Worst Year for Sentiment, But Not the Most Fragile Year for the System
If we only look at sentiment indicators, the crypto market in 2025 could almost be pronounced "dead."
In November 2025, the Crypto Fear & Greed Index fell to 10, entering the "Extreme Fear" zone.
Historically, there have been very few moments when sentiment has fallen to this level:
March 2020: Liquidity stampede triggered by the global pandemic
May 2021: Cascading leveraged liquidations
May–June 2022: Systemic collapse of Luna and 3AC
2018–2019: Industry-wide bear market
These periods all share a commonality: the industry itself was failing, and the future was highly uncertain.
But 2025 does not fit this characteristic.
No major exchange misappropriated user assets.
No Ponzi projects with market caps of hundreds of billions of dollars dominated the narrative.
The total market capitalization did not fall below the previous cycle's high.
Stablecoin supply反而 reached a new all-time high.
Regulatory and institutionalization processes continued to advance.
At the "factual level," this is not a year of industry collapse.
However, at the "perceptual level," it might be the most painful year for many practitioners, investors, and long-time users.
Why Did Sentiment Collapse?
Messari presents a highly impactful contrast at the beginning of the report:
If you were participating in crypto asset allocation from a Wall Street office building, 2025 might have been the best year since you entered the industry. But if you were staying up late staring at charts on Telegram and Discord, searching for Alpha, this was probably the year you missed the "old days" the most.
The same market, two almost diametrically opposite experiences.
This is not a random mood swing, nor a simple bull-bear transition.
It is a deeper structural misalignment:
The market is changing its participants, but most people are still participating in the new system with their old identities.
This Is Not a Market Recap
This article does not intend to discuss short-term price movements, nor does it attempt to answer "will it go up next?".
It is more like a structural explanation:
Why did market sentiment slide to a historically low point while institutions, capital, and infrastructure were continuously strengthening?
Why did many people feel they "chose the wrong track," yet the system itself did not fail?
In this 100,000-word report, Messari chooses to start from an extremely fundamental question:
If crypto assets are ultimately a form of "money," then who deserves to be treated as money?
Understanding this is the prerequisite for understanding the complete collapse of market sentiment in 2025.
Chapter 1 | Why Was Sentiment Abnormally Low?
If we only look at the outcome, the sentiment collapse of 2025 is almost "incomprehensible."
In the absence of exchange blow-ups, systemic credit collapses, or core narrative failures, the market nonetheless provided sentiment feedback near its historical lows.
Messari's judgment is very direct: This is an extreme case of "severe decoupling between sentiment and reality."
1. Sentiment indicators have entered a "historical anomaly zone"
The Crypto Fear & Greed Index falling to 10 is not an ordinary correction signal.
In the past decade, this value has only appeared at a very few moments, and each time it appeared, it was accompanied by a real and profound industry-level crisis:
Breakdown of the funding system
Collapse of credit chains
Market doubt about "whether the future exists"
But these problems did not appear in 2025.
No core infrastructure failed.
No mainstream assets were liquidated to zero.
No systemic events occurred that could shake the industry's legitimacy.
Statistically, this sentiment reading does not match any known historical template.
2. The market did not fail; "personal experience" failed
The collapse of sentiment did not come from the market itself, but from the subjective experience of the participants.
Messari repeatedly emphasizes an overlooked fact in the report:
2025 was a year where the institutional experience was far better than the retail experience.
For institutions, this was an extremely clear, even comfortable environment:
ETFs provided low-friction, low-risk allocation channels
DATs (Digital Asset Treasuries) became stable, predictable long-term buyers
Regulatory frameworks began to clarify, and compliance boundaries became gradually visible
But for a large number of participants under the old structure, this year was exceptionally brutal:
Alpha significantly decreased
Narrative rotation failed
Most assets underperformed BTC over the long term
The relationship between "effort" and "results" was completely broken
The market did not reject people; it just changed the reward mechanism.
3. "Not making money" was misinterpreted as "the industry is failing"
The real trigger for sentiment was not the price drop, but the cognitive gap.
In past cycles, the implicit assumption of Crypto was:
As long as you are diligent enough, early enough, and aggressive enough, you can achieve超额回报 (excess returns).
But 2025 was the first time this assumption was systematically broken.
Most assets no longer gained premiums for "storytelling"
L1 ecosystem growth no longer automatically translated into token returns
High volatility no longer meant high returns
The result was that many participants began to develop an illusion:
If I didn't make money, then the entire industry must have a problem.
Messari's conclusion is恰恰相反 (precisely the opposite):
The industry is becoming more like a mature financial system, not a machine that continuously produces speculative红利 (dividends).
4. The essence of the sentiment collapse is identity misplacement
Considering all phenomena, the implicit answer given by Messari is only one:
The sentiment collapse of 2025 is essentially an identity misplacement.
The market is tilting towards "asset allocators," "long-term holders," and "institutional participants"
But a large number of participants still exist as "short-term alpha seekers"
When the system's reward logic changes, and the participation method does not adjust simultaneously, sentiment is bound to collapse first.
This is not a problem of personal ability, but the friction cost of switching roles in the era.
Summary | Sentiment did not tell you the truth
The market sentiment of 2025 truly reflected the pain of the participants, but it did not accurately reflect the state of the system.
Sentiment collapse ≠ Industry failure
Increased pain ≠ Value disappearance
It only提示 (indicated) one thing:
The old way of participating is quickly becoming obsolete.
And understanding this is the prerequisite for entering the next chapter.
Chapter 2 | The Real Root of Sentiment Collapse: The Monetary System is Failing
If we only stay at the market structure level, the sentiment collapse of 2025 is still not fully explained.
The real problem is not:
Alpha decreased
BTC is too strong
Institutions entered
These are only surface phenomena.
The deeper judgment given by Messari in the report is:
The collapse of market sentiment essentially stems from a long-ignored fact—the monetary system we are in is continuously putting pressure on savers.
A chart that must be faced: Global government debt is out of control
This chart is not a macroeconomic background decoration, but the logical starting point of the entire Cryptomoney argument.
Over the past 50 years, the ratio of government debt to GDP in major global economies has shown a highly consistent, almost irreversible upward trend:
🇺🇸 US: 120.8%
🇯🇵 Japan: 236.7%
🇫🇷 France: 113.1%
🇬🇧 UK: 101.3%
🇨🇳 China: 88.3%
🇮🇳 India: 81.3%
🇩🇪 Germany: 63.9%
This is not the result of governance failure in a particular country, but a common outcome spanning systems, political structures, and development stages.
Whether democratic countries, authoritarian states, developed economies, or emerging markets, government debt has consistently outpaced economic growth in the long run.
What this chart really shows is not "high debt," but "savings are being systematically sacrificed"
When government debt growth consistently outpaces economic output, the system can only maintain stability in three ways:
Inflation
Long-term low real interest rates
Financial repression (capital controls, withdrawal restrictions, regulatory intervention)
Regardless of which path is adopted, the ultimate cost will be borne by the same group:
Savers.
Messari uses an extremely restrained but weighty sentence in the report:
When debt grows faster than economic output, the costs fall most heavily on savers.
Why did sentiment collapse集中 (concentratedly) in 2025?
Because 2025 is the year when more and more participants clearly realized this for the first time.
Before this:
"Inflation is only temporary"
"Cash is always safe"
"Fiat currency is stable in the long run"
And reality is constantly否定 (negating) these assumptions.
When people发现 (discover):
>Hard work ≠ Wealth preservationThe act of saving itself is continuously shrinking in value
The difficulty of asset allocation has increased significantly
The collapse of sentiment does not come from Crypto, but from the shaken confidence in the entire financial system.
Crypto is just the place where this impact is felt first.
The significance of Cryptomoney is not "higher returns"
This is also a point that Messari repeatedly emphasizes but is极易 (extremely easy) to misinterpret.
Cryptomoney does not exist to promise higher returns.
Its core value lies in:
Predictable rules
Monetary policy not arbitrarily changed by a single entity
Assets can be self-custodied
Value can be transferred cross-border without permission
In other words, what it provides is not a "money-making tool," but:
In a world of high debt and low certainty, it重新赋予 (re-grants) individuals the right to choose their money.
The sentiment collapse is actually a form of "清醒" (clarity/awakening)
When you place this debt chart alongside the 2025 market sentiment, you find a counterintuitive conclusion:
Extreme pessimism in sentiment does not mean industry failure, but means more and more people are beginning to realize that the problems of the old system are real.
The problem with Crypto has never been that it is "useless."
The real problem is: It no longer produces easy excess returns for everyone.
Summary | From sentiment, to structure, to money itself
This chapter addresses a fundamental question:
Why, in the absence of a systemic crash, did market sentiment fall to a historical low?
The answer is not in the price charts, but in the monetary structure.
Sentiment collapse, is the表象 (surface manifestation)
Paradigm shift, is the process
Monetary system imbalance, is the root cause
And this is precisely why Messari chose to start the entire report from "money" rather than from "applications."
Chapter 3 | Why Only BTC is Treated as "Real Money"
If you have read this far, it is easy to have a question:
If the problem lies in the monetary system, then why is the answer BTC, and not something else?
Messari's judgment in the report is exceptionally clear:
BTC is no longer on the same competitive dimension as other Crypto assets.
1. Money is not a technical problem, but a consensus problem
This is the first key to understanding BTC.
Messari repeatedly emphasizes a fact easily overlooked by engineers in the original text:
Money is a social consensus, not a technical optimization problem.
In other words:
Money is not about "who is faster"
Not "who is cheaper"
Nor "who has more functions"
But who is treated as a store of value, long-term and stably.
From this perspective, Bitcoin's victory is not mysterious.
2. Three years of data have written the answer on its face
From December 1, 2022, to November 2025:
BTC rose 429%
Market cap from $318 billion → $1.81 trillion
Entered the top 10 global asset rankings
And more importantly, the relative performance:
BTC.D (Bitcoin Dominance) from 36.6% → 57.3%
In a cycle that "theoretically should have seen altcoins soar," funds instead continuously flowed back to BTC
This is not an偶然 (accidental) result of a market cycle; this is the market reclassifying assets.
3. ETFs and DATs are essentially "institutionalizing consensus"
Messari's evaluation of ETFs is very restrained, but the conclusion is extremely weighty.
The Bitcoin ETF is not simply "new buying pressure"; what it truly changes is:
Who is buying + Why they are buying + How long they can hold
ETFs made BTC a compliant asset
DATs made BTC part of corporate balance sheets
National reserves elevated BTC to a "strategic asset" level
When BTC is held by these actors, it is no longer:
"A high-volatility risky asset that can be abandoned at any time"
But rather:
A monetary asset that must be held long-term and cannot afford to make mistakes
Money, once treated this way, finds it difficult to go back.
4. Why BTC becomes more like money the more "boring" it is
This might be the most counterintuitive point of 2025.
BTC has no applications
No narrative rotation
No ecosystem stories
Not even "new things"
But precisely because of this, it meets all the characteristics of "money":
It does not rely on future promises
It does not need growth narratives
It does not require a team to deliver continuously
It only needs to not fail.
And in a world of high debt and low certainty, "not failing" is itself a scarce asset.
5. BTC's strength is not a market failure
The pain of many people comes from an illusion:
"BTC's strength indicates something is wrong with the market."
Messari's judgment is恰恰相反 (precisely the opposite):
BTC's strength is the market becoming more rational.
When the system begins to reward:
Stability
Predictability
Long-term credibility
Then all strategies relying on "high volatility for high returns" will appear increasingly painful.
This is not BTC's problem; this is a problem of participation methods.
Summary | BTC didn't win; it was selected
BTC did not "defeat" other assets.
It was just repeatedly verified by the market in an era of continuous monetary system failure as:
The asset that needs the least explanation
The asset that relies the least on trust
The asset that needs the fewest promises about the future
This is not the result of a market cycle,
But a confirmation of role.
Chapter 4 | When the Market Only Needs One Kind of "Money," the L1 Story Begins to Fail
After confirming that BTC has been selected by the market as the "primary Cryptomoney," one question is unavoidable:
If the answer for money already exists, what is left for Layer 1?
Messari does not give a direct conclusion, but after reading this section, a trend is very clear:
L1 valuations are being forced to move from "future narratives" back to "real-world constraints."
1. A harsh but true fact: 81% of the market cap is in the "money" narrative
As of the end of 2025, the entire crypto market capitalization is approximately $3.26T:
BTC: $1.80T
Other L1s: approx. $0.83T
Remaining assets: less than $0.63T
Combined:
Approximately 81% of crypto asset market cap is being valued by the market as "money" or "potential money."
What does this mean?
It means L1 valuations are早已 (long) no longer based on the pricing logic of "application platforms,"
But on the pricing logic of "does it qualify to be money?"
2. The problem is: Most L1s do not qualify
The data provided by Messari is very direct and very冷酷 (cold).
After excluding outliers with abnormally high revenue like TRON and Hyperliquid:
L1 overall revenue持续下滑 (continuously declined)
But valuation multiples却在 (instead)持续抬升 (continuously rose)
The adjusted P/S ratios are as follows:
2021: 40x
2022: 212x
2023: 137x
2024: 205x
2025: 536x
Meanwhile, total L1 revenue:
2021: $12.3B
2022: $4.9B
2023: $2.7B
2024: $3.6B
2025 (annualized): $1.7B
This is a scissors gap that cannot be reasonably explained by "future growth."
3. L1s are not "undervalued"; they are "reclassified"
The pain of many people stems from a misunderstanding:
"Were L1s wrongfully sold off by the market?"
Messari's judgment is恰恰相反 (precisely the opposite):
The market did not wrongfully sell off L1s; it is reducing their 'monetary imagination space.'
If an asset:
Cannot store value stably
Cannot be held long-term
And cannot provide certain cash flow
Then it ultimately only has one pricing method left:
High-beta risky asset.
4. The example of Solana actually explains everything
SOL was one of the few L1s that outperformed BTC in 2025.
But Messari points out a highly damaging fact:
SOL ecosystem data grew 20–30 times
The price only outperformed BTC by an additional 87%
In other words:
To achieve "significant excess returns" against BTC, an L1 needs ecosystem爆发 (explosion) on an order-of-magnitude scale.
This is not "not trying hard enough"; it's that the回报函数 (return function) has been rewritten.
5. When BTC becomes "money," the burden on L1s actually becomes heavier
This is a structural change that many people have not realized.
Before BTC's monetary status was clear:
L1s could tell the story of "becoming money in the future"
The market was willing to pay upfront for this possibility
Now:
BTC has solidified its position
The market is no longer willing to pay the same premium for a "second money"
Thus, L1s face a more difficult question:
If not money, then what exactly are you?
Summary | The problem for L1s is not competition, but positioning
L1s did not "lose to BTC."
What they lost is:
In the dimension of money
The market no longer needs more answers
And once the shelter of the "monetary narrative" is lost, all valuations must重新接受 (re-accept)现实约束 (real-world constraints).
This is the direct source of the sentiment collapse for many participants in 2025.
