Cryptocurrency Market Performance in Q3 2025
All six cryptocurrency sectors reported positive price performance in the third quarter of 2025, but fundamental changes showed divergent trends. The cryptocurrency sectors are part of a proprietary framework developed in collaboration with index provider FTSE Russell to organize the digital asset market and measure returns.
Bitcoin underperformed compared to other cryptocurrency market sectors. Although this represents a deviation from historical patterns, its return profile can be interpreted as indicative of an 'altcoin season'.
The ranking of the top 20 tokens in the third quarter based on volatility-adjusted price returns highlights the growing importance of stablecoin legislation and adoption, increased trading volumes on centralized exchanges, and digital asset treasuries (DATs).
Every asset within the cryptocurrency space is linked to blockchain technology in some form and shares the same underlying market structure—but the similarities end there. This asset class encompasses a wide range of software technologies applied across consumer finance, artificial intelligence (AI), media, entertainment, and more. To facilitate systematic management, Grayscale Research employs a proprietary classification system and family of indices developed in partnership with FTSE Russell—the Cryptocurrency Sector Framework. This industry classification framework includes six distinct market sectors and covers 261 tokens with a combined market capitalization of $3.5 trillion.
Chart 1: The Cryptocurrency Industry Classification Framework Aids in Systematizing the Digital Asset Market
Measuring Blockchain Fundamentals
Although blockchains are not corporate entities, their economic activity and financial health can be assessed through analogous measures. Three core metrics for on-chain activity are user count, transaction volume, and fees. Due to the anonymity inherent in blockchain design, analysts often use 'active addresses' (blockchain addresses that have conducted at least one transaction) as an imperfect proxy for user numbers.
Key indicators of blockchain health in the third quarter presented mixed results. On the negative side, the number of users, transaction volumes, and fees in both the cryptocurrency sector and smart contract platforms declined relative to the previous quarter. Speculative activity related to meme coins has generally decreased since the first quarter of 2025, leading to reduced trading volume and activity.
More encouragingly, fees generated by blockchain-based applications grew by 28% quarter-over-quarter. This growth was primarily driven by a few applications with leading fee revenues: (1) Jupiter, a decentralized exchange on the Solana chain; (2) Aave, a leading lending protocol in the crypto space; and (3) Hyperliquid, a leading perpetual contract exchange. On an annualized basis, application-layer fee revenue has now exceeded $10 billion. As blockchains function both as digital transaction networks and application platforms, the rise in application fees reflects increasing adoption of blockchain technology.
Chart 2: Mixed Fundamental Performance Across Cryptocurrency Sectors in Q3 2025
Tracking Price Performance
In Q3 2025, all six cryptocurrency sectors delivered positive returns. Bitcoin underperformed relative to other market segments, with its return pattern reflecting a "altcoin season" for cryptocurrencies — albeit differing from other periods historically marked by declines in Bitcoin dominance. The financial crypto sector led gains, supported by rising trading volumes on centralized exchanges (CEX); the smart contract platform sector likely benefited from regulatory developments and broader adoption of stablecoins (these platforms facilitate peer-to-peer payments using stablecoins). Despite positive returns across all sectors, the artificial intelligence sector lagged behind others, mirroring a period of subdued performance in AI-related equities. The monetary-focused cryptocurrency sector also showed weaker results, reflecting Bitcoin's relatively limited price appreciation.
Chart 3: Bitcoin Underperforms Other Cryptocurrency Sectors
The diversity within the crypto asset class implies frequent shifts in dominant themes and market leadership. Chart 3 highlights the top 20 index-eligible tokens ranked by volatility-adjusted price returns in Q3 2025. This list includes some large-cap tokens with market capitalizations exceeding $10 billion, such as ETH, BNB, SOL, LINK, and AVAX, as well as smaller tokens with market caps below $500 million. The financial crypto sector (seven assets) and the smart contract platform crypto sector (five assets) accounted for the largest share of this quarter’s top 20 performers.
Chart 4: Best Performing Assets by Sector Based on Risk-Adjusted Returns
Key Market Themes in Q3 2025
Four key themes emerged from recent market performance:
(1) Digital Asset Treasuries (DATs)
Last quarter saw a surge in digital asset treasury institutions—these are publicly traded companies holding cryptocurrencies on their balance sheets, offering equity investors exposure. Among the top 20 tokens, ETH, SOL, BNB, ENA, and CRO may benefit from the establishment of new digital asset treasuries.
(2) Stablecoin Adoption
Another key theme last quarter was stablecoin legislation and application. On July 18, President Trump signed the 'Talent Act' into law, which established a comprehensive regulatory framework for U.S. stablecoins. Following the bill's passage, the circulating supply of stablecoins accelerated, increasing by 16% to over $290 billion. The primary beneficiaries were smart contract platforms hosting stablecoins, including ETH, TRX, and AVAX—with AVAX experiencing a significant surge in stablecoin trading volume. Despite its USDe stablecoin not meeting the requirements of the Talent Act (USDe is widely used in decentralized finance, and Ethena has launched a new compliant stablecoin), Ethena (ENA), the issuer, still achieved strong price returns.
Chart 5: Stablecoin supply growth this quarter, led by Ethereum
(3) Rising Exchange Volumes
Exchanges emerged as another important theme, with centralized exchange monthly trading volumes reaching a high not seen since January. This increased activity appears to have benefited several assets associated with centralized exchanges—including BNB, CRO, OKB, and KCS—all of which rank among the top 20 (some also overlap with smart contract platforms).
(4) Continued Growth of Decentralized Perpetual Contracts
Hyperliquid, a leading perpetual contracts exchange, experienced rapid growth this quarter, ranking in the top three for fee revenue. Smaller competitor DRIFT, following a substantial increase in trading volume, entered the top 20 in the cryptocurrency industry. Another decentralized perpetual contracts protocol, ASTER, launched in mid-September and surged from a market capitalization of $145 million to $3.4 billion within just one week.
Chart 6: Perpetual contract trading volume on centralized exchanges hit a yearly high in August
Outlook for Q4 2025
In the fourth quarter, returns across various segments of the cryptocurrency market may be driven by a series of unique themes.
First, following bipartisan passage of relevant legislation by the House of Representatives in July, Senate committees have begun drafting legislation on crypto market structure. This represents comprehensive financial services legislation targeting the cryptocurrency industry and could serve as a catalyst for its deep integration with traditional financial services. Second, the U.S. SEC has approved generic listing standards for commodity-based exchange-traded products (ETPs). This may lead to an increase in the number of crypto assets accessible to U.S. investors through the ETP structure.
Finally, the macro environment may continue to evolve. Last week, the Federal Reserve approved a 25-basis-point interest rate cut and signaled the possibility of two more rate cuts later this year. Ceteris paribus, crypto assets are expected to benefit from the Fed's rate cuts (as rate cuts reduce the opportunity cost of holding non-interest-bearing currencies and can support investors' risk appetite). Meanwhile, weakness in the U.S. labor market, rising stock valuations, and geopolitical uncertainties may all be considered sources of downside risks in the fourth quarter.
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