The cryptocurrency market's decline is approaching its sixth consecutive month with no end in sight, forcing companies to implement layoffs and pivot toward businesses such as stock trading and prediction markets.
Since Bitcoin peaked at $126,080 in early October of last year, its value has been cut in half, with other digital assets experiencing even steeper declines. Data from CoinGecko indicates that monthly cryptocurrency trading volume is on track to hit its lowest level since January 2024, amounting to less than a third of the peak seen after the presidential election. According to data from crypto advisory firm Architect Partners, funding for crypto startups plunged approximately 69% quarter-over-quarter to around $2.9 billion in the first quarter.
"The current situation is quite bleak," said John D'Agostino, Head of Strategy at Coinbase Institutional, a division serving large investors of the crypto exchange. He suggested that when market sentiment falls to such depressed levels, it often signals that a market bottom has been reached.
"Now, the main thing many crypto project founders can do is find ways to survive," stated Atif Khan, Co-founder and CEO of early-stage crypto startup Button Labs, which secured $5.1 million in funding last year.
Last month, the San Francisco-based team shifted its focus from offering yield products for Bitcoin holders to developing AI-powered crypto trading tools. "Waiting passively for the market to recover is not the best option for us," he said.
A wave of layoffs has hit the industry. Crypto exchange Gemini cut 30% of its workforce this year, and Crypto.com reduced its staff by 12% this month. Daniela Stojanovic, Interim CFO at Gemini, stated during an earnings call this month that the company is using "conservative assumptions" for business planning, including scenarios where trading volumes remain below 2025 levels for the next two years.
Investors are exiting the crypto market and moving into flourishing prediction markets, as well as traditional assets like stocks and gold. Exchanges such as Coinbase, Kraken, and Gemini are attempting to transform into comprehensive fintech applications, offering multi-market trading, savings, and payment services, while also making bets on prediction markets. This puts them in competition with prediction market platforms like Robinhood, Kalshi, and Polymarket.
Crypto firms are partnering with stock exchanges to promote tokenized stocks—where shares of public companies like Nvidia are traded in the form of crypto tokens. Intercontinental Exchange, the parent company of the New York Stock Exchange, invested in crypto exchange OKX at a $25 billion valuation; Nasdaq is collaborating with Kraken, with both aiming to build a tokenized stock market.
Lasse Clausen, Founding Partner of crypto venture fund 1KX, who plans to relocate from Lisbon to New York, stated that the next phase for the crypto industry "is fundamentally about building relationships with Wall Street."
However, stock investors may remain skeptical of crypto. A hallmark of the last bull market was public companies making large-scale cryptocurrency purchases, allowing average investors to easily bet on Bitcoin and numerous highly speculative tokens. These investors suffered significant losses in the current downturn, undermining the industry's hype that "crypto trading is a path to massive gains."
The downturn has also compressed the crypto lending market—once one of the industry's most profitable sectors. Traders borrowed funds to leverage and amplify returns, while lenders earned interest by lending out Bitcoin or stablecoins, with some products previously offering annualized yields exceeding 20%.
But a sharp decline in borrowing demand has led to lower lending rates, substantially eroding profitability for lending businesses.
On Aave, the largest decentralized lending platform, the annualized yield for Circle's stablecoin USDC is just 2.2%, far below the over 6% seen in November 2025. The yield for USDe, a popular digital dollar issued by Ethena, has fallen from 5.5% in October to the current 3.5%, while the product's size has shrunk from $15 billion to $6 billion. The yield on risk-free U.S. short-term Treasury notes is approximately 4%.
The crypto market is mirroring a pattern seen in stock market bear markets: investors typically sell off their holdings in waves, followed by the market consolidating at lower levels and with reduced trading volume. In the most severe bear markets, such as during the 2008 financial crisis, this pattern can persist for years, until nearly all investors capitulate and sell their positions.
Prior to this downturn, the crypto market reached a feverish peak following the re-election of President Trump. The industry contributed significant funds to his campaign, and Trump pledged to embrace crypto. Last summer, he signed the stablecoin bill, boosting tokens pegged to the U.S. dollar; his administration also pushed for deeper integration of cryptocurrencies into the mainstream financial system.
Another crypto bill championed by Trump is stalled in Congress due to a standoff between the crypto industry and large banks. The crypto industry appears to be losing ground in this battle, and the bill remains at an impasse.
Some crypto industry executives and investors privately worry that the bill may not pass this year. Without the legal framework the bill would provide, large investors are likely to stay away from crypto. The legal risks of operating crypto businesses without a clear legal framework could constrain the industry's growth in the U.S. There are concerns this could lead to a stricter regulatory environment, reverting to the hardline stance on crypto seen during the Biden administration.
"My only systemic concern is a major regulatory reversal," said Coinbase's D'Agostino. "If regulation were to significantly revert to the past, creating a system that actively suppresses the technology and forces it overseas, that would be a systemic risk."
Comments