Wintermute used a 28-page report to reveal the flow of off-exchange funds.

_This article is from: _Wintermute

Translation｜Odaily Planet Daily (@OdailyChina); Translator｜Azuma (@azumaeth)_

Editor's Note: On January 13, Wintermute released an analysis report on the cryptocurrency over-the-counter market for 2025. As the industry's leading market maker, Wintermute is undoubtedly very sensitive to the trends in market liquidity. In this 28-page report, the institution reviews the changes in liquidity in the cryptocurrency market for 2025 and concludes that the market is shifting from clear, narrative-driven cyclical fluctuations to a mechanism with stronger structural constraints and execution dominance. Based on this conclusion, Wintermute also outlines three key scenarios necessary for the market to achieve recovery in 2026.

The following is the original report content from Wintermute, compiled and organized by Odaily Planet Daily (some content has been omitted).

Report Summary

2025 marks a fundamental shift in the liquidity mechanism of the cryptocurrency market. Capital is no longer widely dispersed across the market; liquidity has become more concentrated and unevenly distributed, leading to a greater divergence in returns and market activity. As a result, a significant amount of trading volume is confined to a few tokens. The duration of market uptrends is shorter, and price performance is more reliant on the channels and methods through which liquidity enters the market compared to previous years.

The following report summarizes the main changes in liquidity and trading dynamics observed by Wintermute in 2025:

Trading activity is concentrated in a few large tokens. BTC, ETH, and a select few altcoins account for the majority of trading activity. This reflects the gradual expansion of ETF and Digital Asset Trust (DAT) products to a broader range of altcoins, as well as the waning of the meme coin cycle at the beginning of 2025.
The speed of narrative belief decay has accelerated, and the exhaustion of altcoin trends has doubled. Investors no longer follow narratives with sustained belief but engage in opportunistic trading around themes such as meme coin launch platforms, perpetual contract exchanges, emerging payment systems, and API infrastructure (like x402), with limited follow-up.
As the influence of professional trading counterparties increases, trading execution becomes more cautious. This is manifested in more prudent periodic trading execution (breaking the previous four-year fixed cycle), broader use of leveraged OTC trading products, and diversified applications of options as core asset allocation tools.
The way capital enters the crypto market is as important as the overall liquidity environment. Capital increasingly flows into the market through structured channels like ETFs and DATs, affecting the direction and final aggregation areas of liquidity in the market.

This report primarily interprets the above market developments based on Wintermute's proprietary OTC trading data. As one of the largest OTC trading platforms in the industry, Wintermute provides liquidity services across regions, products, and diverse counterparties, offering a unique and comprehensive off-chain perspective on cryptocurrency OTC trading. Price trends reflect market outcomes, while OTC trading activity reveals how risks are deployed, how participant behavior evolves, and which parts of the market remain active. From this perspective, the market structure and liquidity dynamics of 2025 have undergone significant changes compared to earlier cycles.

Part 1: Spot

Wintermute's OTC trading data shows that trading activity in 2025 has shifted from being purely volume-driven to a more mature and strategic trading environment. Trading volume continues to grow, but trading execution has become more planned, with OTC trading increasingly favored for its ability to handle large trades, privacy, and controllability.

Market position deployment has also shifted from simple directional trading to more customized execution plans, as well as broader use of derivatives and structured products. This indicates that market participants are becoming more experienced and disciplined.

In Wintermute's spot OTC trading activity, the aforementioned structural changes are primarily reflected in the following three aspects:

Volume Growth: OTC trading volume continues to grow, highlighting the persistent demand for off-chain liquidity and efficient execution of large trades (while limiting market impact).
Counterparty Growth: The range of participants has further expanded, driven by venture capital funds shifting from pure private placements to liquidity markets; corporations and institutions executing large trades through OTC channels; and individual investors seeking alternatives outside centralized and decentralized exchanges.
Token Landscape: The overall active range of tokens has surpassed BTC and ETH, with funds flowing into a broader range of altcoins through DAT and ETFs. Nevertheless, throughout the year, position data shows that after the major liquidation on October 11, 2025, both institutions and retail investors have returned to major tokens. The duration of altcoin trends is shorter and more selective, reflecting the waning of the meme coin cycle and an overall contraction in market breadth as liquidity and risk capital become more selective.

Next, Wintermute will provide further detailed analysis on these three aspects.

Volume Growth: Cyclical Patterns Replaced by Short-Term Fluctuations

“The characteristic of the market in 2025 is volatility, with price fluctuations primarily driven by short-term trends rather than longer-term seasonal changes.”

Wintermute's OTC trading data shows that trading activity in 2025 exhibits distinctly different seasonal patterns compared to previous years. Optimism regarding the new pro-crypto U.S. government quickly faded, and as the narratives around meme coins and AI Agents cooled at the end of the quarter, risk sentiment sharply deteriorated at the end of the first quarter. Negative news from the top down, such as Trump's announcement of tariff increases on April 2, 2025, further pressured the market.

As a result, market activity in 2025 was concentrated in the first half of the year, with strong performance at the beginning of the year, followed by a comprehensive weakening in spring and early summer. The year-end rebound seen in 2023 and 2024 did not reoccur, breaking what seemed to be an established seasonal pattern—often reinforced by narratives like "October Rally." In reality, this was never a true seasonal pattern but rather year-end rallies driven by specific catalysts, such as the approval of ETFs in 2023 and the new government taking office in 2024.

Entering the first quarter of 2025, the upward momentum from the fourth quarter of 2024 never fully recovered. Market volatility increased, and as macro factors dominated market direction, price movements exhibited more short-term fluctuations rather than sustained trends.

In short, capital flows became passive and intermittent, with pulse-like fluctuations around macro headlines, but showing no signs of sustained momentum. In this volatile environment, as market liquidity thinned and execution certainty became increasingly important, OTC trading maintained its status as the preferred execution method.

Counterparties: Institutional Foundations Deepening

“Despite the lackluster price trends in 2025, institutional counterparties have established a foothold.”

Wintermute observed strong growth across most types of counterparties, with the largest increases seen among institutional and retail brokers. Within the institutional category, while growth among traditional financial institutions and corporations remained moderate, their participation has significantly deepened—activities have become more sustained and increasingly focused on prudent execution strategies.

Although the market performance in 2025 was lackluster, institutions have clearly established themselves. Compared to last year’s more tentative and sporadic participation, 2025 is characterized by deeper integration, larger trading volumes, and more frequent activities. These all provide constructive and positive signals for the long-term future of the industry.

Token Landscape: Increasing Diversification in the Leading Market

“Trading volume is increasingly flowing to large tokens outside of BTC and ETH, driven by both DAT and ETFs.”

In 2025, the total number of tokens traded remained stable overall. However, based on 30-day rolling data, Wintermute averaged trading 160 different tokens, up from 133 in 2024. This indicates that OTC trading activity has expanded to a broader and more stable range of tokens.

A key difference from 2024 is that the speculative cycle driving token activity in 2025 has weakened— the range of trading tokens remained relatively stable throughout the year, rather than experiencing sharp jumps in breadth around specific themes or narratives.

Since 2023, Wintermute's total nominal trading volume has become increasingly diversified, with other segments of trading volume surpassing the total trading volume of BTC plus ETH. Although BTC and ETH remain important components of trading flows, their total trading volume share has decreased from 54% in 2023 to 49% in 2025.

Notably, where these funds are flowing is significant—while the share of trading volume from long-tail tokens continues to decline, blue-chip assets (the top 10 assets by market capitalization, excluding BTC, ETH, wrapped assets, and stablecoins) have increased their share of total nominal trading volume by 8 percentage points over the past two years.

Despite some funds and individuals concentrating investments in large-cap tokens this year, the growth in trading volume is also attributed to ETFs and DATs expanding their investment scope beyond mainstream assets. DAT has been authorized to invest in these assets, while ETFs are also broadening their investment scope, including the launch of staking ETFs (like SOL) and index funds.

These investment tools continue to lean towards over-the-counter (OTC) trading rather than exchange trading, especially when the required liquidity is not provided by exchanges.

Analysis of Spot Capital Flows for Various Types of Tokens

Mainstream Coins: Capital Gradually Flows Back by Year-End

“By the end of 2025, both institutional and retail investors are reallocating back to mainstream coins, indicating that they expect mainstream coins to rebound before altcoins do.”

As the narrative around altcoins gradually fades and macro uncertainties resurface in early 2025, capital allocation has returned to BTC and ETH. Wintermute's OTC liquidity data shows that since the second quarter of 2025, institutional investors have consistently maintained an overweight position in mainstream coins; however, retail investors shifted towards altcoins in the second and third quarters of 2025, hoping for a market recovery in altcoins, but quickly reverted back to mainstream coins after the deleveraging event on October 11.

The trend of capital shifting towards mainstream coins is driven by market fatigue, as the "altcoin season" has failed to truly kick off, leading to a gradual state of disappointment in the market. This trend was initially led by institutions (which have long been net buyers of mainstream coins), but by the end of the year, retail investors also turned into net buyers.

This positioning aligns with the prevailing market sentiment: BTC (and ETH) need to lead the market for risk appetite to return to altcoins. Retail investors now seem to increasingly agree with this stance.

Altcoins: Uptrends Become More Brief

“In 2025, the average duration of altcoin narrative-driven uptrends is about 19 days, significantly shortened from 61 days the previous year, indicating that the market has shown signs of fatigue after last year's excessive rally.”

In 2025, altcoins performed significantly poorly overall, with annual returns dropping sharply, failing to achieve any meaningful sustained recovery aside from brief rebounds. While individual themes may attract attention temporarily, these themes have consistently struggled to build momentum or translate into broader market participation. From a capital flow perspective, this is not due to a lack of narrative, but rather that the market has shown clear signs of exhaustion—uptrends are repeatedly tested but quickly fade due to a lack of cohesive belief.

To understand this dynamic, we look beyond price appearances and focus on sustainability analysis. Here, "sustainability" is defined as the duration during which altcoins maintain participation in OTC trading flows above recent normal levels. In practice, sustainability indicators are used to measure whether a rally can attract ongoing participation or if market activity quickly dissipates after initial fluctuations. This perspective allows us to distinguish between altcoin rallies with sustainability and those that only exhibit intermittent, rotational bursts without evolving into widespread trends.

The above chart shows a clear shift in altcoin rallies. Between 2022 and 2024, altcoin rallies typically lasted about 45 to 60 days, with 2024 being a strong year for BTC, driving wealth effects into altcoins and maintaining the heat of narratives like meme coins and AI. In 2025, despite the emergence of new narratives including meme coin launch platforms, Perp DEX, and x402 concepts, the median sustainability dropped sharply to about 20 days.

While these narratives can trigger brief market activity, they have failed to develop into lasting, market-wide uptrends. This reflects the volatility of the macro environment, market fatigue after last year's excessive rally, and the insufficient liquidity of altcoins to support narrative breakthroughs in the early stages. As a result, altcoin trends appear more as tactical trades rather than high-confidence trend movements.

Meme Coins: Active Range Narrows

“Meme coins peaked in the first quarter of 2025 but failed to recover, as trading became more decentralized and narrowed, unable to regain support.”

Meme coins entered 2025 in the most crowded manner, characterized by a dense issuance rhythm, sustained bullish market sentiment, and price movements that reinforced narratives, but this state abruptly halted. Unlike other sectors with higher beta coefficients, meme coins turned downward earlier and more decisively, and have consistently failed to rebuild upward momentum.

While prices have significantly retraced, the absolute number of meme coins in OTC trading has remained healthy at any given time. Even by the end of 2025, the monthly number of traded tokens remained above 20, indicating that trading interest has not disappeared. The change lies in the manner of activity performance. In practice, this means that the number of tokens involved by counterparties each month has significantly decreased, with activity concentrated on specific tokens rather than broadly trading across the entire meme coin sector.

Part 2: Derivatives

Wintermute's OTC trading derivatives data shows strong growth, as increased market volatility and larger trades have made OTC trading the preferred venue for executing complex, capital-efficient structured products, providing price certainty and operational privacy.

Contracts for Difference: Underlying Asset Range Expands

“In 2025, the underlying assets for contracts for difference further expanded, with futures increasingly favored as a capital-efficient way to gain market exposure.”

The number of tokens used as underlying assets for contracts for difference in Wintermute's OTC trading desk has doubled year-on-year, increasing from 15 in the fourth quarter of 2024 to 46 in the fourth quarter of 2025. This sustained growth reflects the market's increasing adaptability to contracts for difference as a capital-efficient way to access a broader range of assets, including long-tail tokens.

The growing demand for contracts for difference reflects a trend in the entire market towards obtaining capital-efficient exposure through futures. Open positions in perpetual contracts increased from $120 billion at the beginning of the year to $245 billion in October, before a significant decline in market risk appetite during the liquidation event on October 11.

Options: Increasing Complexity of Strategies

“As systematic strategies and yield generation become the main drivers of trading volume growth, the options market is rapidly maturing.”

Building on the previous increase in contracts for difference and futures activity, Wintermute's OTC data shows that counterparties are increasingly turning to options to construct more customized and complex exposures to crypto assets.

This shift has driven a dramatic increase in options market activity: from the fourth quarter of 2024 to the fourth quarter of 2025, both nominal trading volume and the number of trades achieved approximately 2.5 times year-on-year growth. This is primarily due to more counterparties—especially crypto funds and digital asset trusts—adopting options strategies to generate passive income.

The chart below tracks the quarterly changes in OTC options activity relative to the first quarter of 2025, clearly showing the growth trend throughout 2025. By the fourth quarter, nominal trading volume reached 3.8 times that of the first quarter, and the number of trades reached 2.1 times, highlighting the continued growth in trade size and frequency.

Part of the growth in nominal trading volume stems from the rise of systematic options strategies, which involve maintaining exposure over time and rolling positions. This marks a significant shift compared to previous years—options were more often used to express purely directional views.

To understand the evolution of options capital flows, we further observe BTC (which still accounts for a significant share of nominal trading volume in 2025). The chart below shows the quarterly distribution of long and short positions in call/put options.

The composition of BTC options capital flows in 2025 reflects a clear shift: from focusing on bullish call option purchases to a more balanced use of both call and put options, with the activity increasingly leaning towards yield generation and structured, repeatable strategies. Yield strategies have become more common, with investors earning income by selling put options and covered call options, increasing the stable supply of options and lowering volatility. Meanwhile, as BTC failed to break previous highs, the demand for downside protection remains strong, with long put options continuing to be utilized. Overall, the market is more focused on earning income and managing risk rather than betting on further price increases.

The reduction in naked call option purchases further confirms that options are being used less for directional upside exposure and more for executing systematic strategies. These dynamics collectively indicate that, compared to previous years, the options market in 2025 is becoming more mature and the user base is more professional.

Part 3: Liquidity

Cryptocurrencies have long been a channel for excess risk appetite. Due to weak valuation anchors, embedded leverage, and a high dependence on marginal capital flows, cryptocurrency prices are extremely sensitive to changes in the global financial environment. When liquidity is loose, risk tolerance rises, and capital naturally flows into the crypto space; when the environment tightens, the lack of structural buying pressure quickly becomes apparent. Thus, cryptocurrencies have historically relied, and will continue to fundamentally rely, on global liquidity.

In 2025, the macro environment is a key driver of crypto prices. Despite the current backdrop showing signs of easing interest rates, improving liquidity, and strengthening economies—factors that typically support the prices of risk assets—the performance of the crypto market remains weak. We believe there are two key reasons behind this disconnect: retail attention and new liquidity channels.

Retail Attention: Cryptocurrencies No Longer the "Preferred" Risk Asset

“In 2025, cryptocurrencies lost their status as the preferred risk asset for retail investors.”

Despite increased institutional participation, retail investors remain the cornerstone of the crypto market. A significant reason for the poor market performance in 2025 is the dispersion of retail attention and the weakening of the rotation effect of cryptocurrencies as the preferred risk asset.

Despite the numerous influencing factors, the following two points stand out: Technological advancements have lowered the market entry barriers, making other investment opportunities (especially in areas like AI) more accessible. These assets offer similar risk characteristics, narrative logic, and return potential, thereby diverting attention away from the crypto space. At the same time, we are experiencing a return to normalcy post-2024—when retail participation was extremely high, initially concentrated in meme coins, and then shifting towards the AI sector by year-end. The normalization of market enthusiasm is an inevitable trend.

As a result, retail investors are more inclined towards stock market themes such as AI, robotics, and quantum technology, while BTC, ETH, and most altcoins lag behind in performance among major risk assets. Cryptocurrencies are no longer the default outlet for excess risk appetite.

Liquidity Channels: ETFs and DAT Become New Pathways

“Today, ETFs and DAT are becoming significant channels driving capital inflows into the crypto market alongside stablecoins.”

BTC and ETH prices have slightly declined, but the most significant relative weakness is observed in the altcoin sector. In addition to weak retail participation, a key factor is the change in the way liquidity and capital enter the market.

Until two years ago, stablecoins and direct investments were the primary channels for capital entering the crypto market. However, ETFs and DAT have structurally changed the pathways for liquidity injection into the ecosystem.

Earlier this year, we summarized crypto liquidity into three core pillars: stablecoins, ETFs, and DAT. Together, they form the main channels for capital flowing into the crypto market.

Stablecoins have become one of many entry points: They remain crucial for settlement and collateral but now only play a role in capital entry rather than a dominant position.
ETFs direct liquidity towards the top two assets: The constrained capital inflows enhance the depth and resilience of major assets, but the spillover effects beyond BTC and ETH are limited.
DAT introduces stable and non-cyclical demand: Treasury fund allocations further strengthen the concentration on major assets, absorbing liquidity without naturally expanding risk appetite.

Liquidity does not flow solely through ETFs and DAT, but the above chart illustrates how important these channels have become. As mentioned earlier, their investment scope is expanding and beginning to allow exposure beyond BTC and ETH, primarily involving other blue-chip tokens. However, this process is gradual, so the benefits for the altcoin market will take time to manifest.

In 2025, cryptocurrencies are no longer driven by broad market cycles. Instead, uptrends are limited to a few assets with concentrated liquidity, while the majority of the market performs poorly. Looking ahead to 2026, market performance will depend on whether liquidity spreads to more tokens or continues to concentrate on a few large tokens.

2026 Market Outlook: Farewell to Purely Cyclical Patterns

“The market failed to achieve the expected uptrend in 2025, but this may mark the beginning of cryptocurrencies transitioning from speculative assets to a mature asset class.”

The market performance in 2025 proves that the traditional four-year cycle model is gradually becoming ineffective. Our observations indicate that market performance is no longer dominated by self-fulfilling four-year narratives but is instead dependent on liquidity flows and investor focus.

Historically, the native wealth of cryptocurrencies has functioned as a single, interchangeable pool of funds, with Bitcoin's gains naturally spilling over to mainstream coins and then to altcoins. Wintermute's OTC trading data shows that this transmission effect has significantly weakened. New capital tools—especially ETFs and DAT—have evolved into a "closed ecosystem." While they provide sustained demand for a few blue-chip assets, capital does not naturally rotate into the broader market. Due to a significant shift in retail interest towards stocks and prediction markets, 2025 became an extremely concentrated year—where a few mainstream assets absorbed the vast majority of new funds, while the rest of the market struggled to maintain sustained uptrends.

Three Possible Paths for 2026

2025 was a year of significantly narrowed market breadth, as previously mentioned, with the average duration of altcoin rallies shrinking from about 60 days last year to around 20 days. Only a few selected tokens performed outstandingly, while the broader market continued to decline under the pressure of unlocking selling.

To reverse this trend, at least one of the following three conditions must occur:

ETFs and DAT expand their investment scope: Currently, most new liquidity remains confined to institutional channels like ETFs and DAT. A broader market recovery requires these institutions to expand their investable range, and preliminary signs are emerging, with more ETF applications for SOL and XRP being submitted.
Mainstream coins lead the rally: Similar to 2024, if Bitcoin (and/or ETH) can rise strongly, it is likely to generate a wealth effect that spills over into the broader market. However, how much capital will ultimately flow back into the digital asset space remains to be seen.
Market attention returns: A less likely scenario is that retail investors significantly shift their focus back from the stock market (including themes like AI and rare earths) to the crypto space, bringing new capital inflows and stablecoin issuance.

The direction of the market in 2026 will depend on whether at least one of the aforementioned catalysts can effectively drive liquidity to spread beyond a few mainstream assets; otherwise, the market's concentration will persist.

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