The 2025 Cryptocurrency Market Structure Transformation: Institutionalization, On-Chain Dollar System, and Regulatory Normalization Turn Speculative Assets into Infrastructure

Part 1: How the Market Changed After Becoming an Institutional Investor

The most noticeable change in the 2025 crypto market is one thing: who drives this market has shifted 180 degrees.

Initially, the crypto market was led by retail investors and short-term speculative capital. Their trading logic was simple—social media hype, new narratives, on-chain activity metrics. Sentiment dictated prices, FOMO fueled bull markets, and panic selling accelerated bear markets. In such a market, assets like Bitcoin and Ethereum experienced sharp rises and intense declines repeatedly, and market cycles were driven more by emotion than capital size.

However, starting in 2024, the situation changed. The approval and normal operation of the US spot Bitcoin ETF marked a turning point. The ETF was not just a trading tool; it opened a legitimate and standardized pathway for large-scale institutional capital to enter crypto assets for the first time. Unlike “off-ramp” routes such as trusts, futures, and on-chain custody, ETFs dramatically lowered operational costs and regulatory entry barriers.

By 2025, institutional funds are no longer in the “testing phase.” They are continuously accumulating positions through ETFs and regulated asset management products, gradually becoming the market’s marginal buyer(.

The core of this change is not the scale of funds but their nature. The new demand in the market has shifted from emotion-driven retail investors to institutional investors following asset allocation logic.

The first characteristic of institutional funds is low trading frequency and long holding periods. While retail investors react sensitively to short-term price fluctuations, decisions by pension funds, sovereign funds, family offices, and large hedge funds go through investment committee reviews, risk management assessments, and regulatory scrutiny. This decision-making structure fundamentally suppresses impulsive trading.

As a result, the proportion of high-frequency short-term trading in market volume has decreased. Price trends now reflect more the direction of capital allocation than immediate emotional shifts. This is directly evident in volatility structures. Prices still adjust according to macro issues or systemic events, but extreme volatility triggered by emotion has noticeably converged, especially in highly liquid assets like Bitcoin and Ethereum.

The entire market now exhibits a “static order” more akin to traditional assets. Price movements no longer rely solely on narrative jumps but are increasingly driven by capital constraints.

The second characteristic of institutional funds is high sensitivity to macro variables. The goal of institutional investment is not absolute returns but risk-adjusted return optimization. This means that the price behavior of crypto assets is now deeply influenced by macroeconomic environments.

In traditional financial systems, key variables such as interest rate levels, liquidity tightening, risk appetite shifts, and arbitrage conditions between assets determine institutional position adjustments. When applied to the crypto market, changes in interest rate expectations in 2025 have significantly impacted Bitcoin and overall crypto assets. Every time the Federal Reserve) adjusts interest rate policies, institutional crypto allocations are reevaluated. This is not a change in confidence in crypto narratives but a recalculation of opportunity costs and portfolio risks.

In summary, the process of institutions becoming market marginal buyers in 2025 signifies the evolution of crypto assets from “narrative-driven, emotion-based pricing” to “liquidity-driven, macro-driven pricing.”

A decline in volatility does not mean the disappearance of risk. Instead, the source of risk has shifted—from internal emotional shocks to sensitivity to macro interest rates, liquidity, and risk appetite.

The analytical framework for 2026 must be fundamentally reconstructed. Moving away from focusing solely on on-chain indicators and narrative shifts, it should advance toward systematic studies of capital structure, institutional behavioral constraints, and macro transmission mechanisms. The crypto market is now part of the global asset allocation system. Prices are increasingly reflecting “how capital allocates risk” rather than “what the market is saying.”

Part 2: Maturation of the On-Chain Dollar System—Stablecoins as Infrastructure, RWA Bringing On-Chain Yields

If the answer to “who” is buying crypto assets is institutional, then the maturation of stablecoins and RWA answers the more fundamental questions: “What to buy, how to pay, and where do yields come from?”

By 2025, the crypto market has made a significant leap from “crypto peripheral financial experiments” to an “on-chain dollar financial system.”

Stablecoins are no longer just a medium of exchange or a refuge asset. They are now the payment standard and pricing foundation of the entire on-chain economic system. Simultaneously, with large-scale realization of RWA centered on US Treasuries on-chain, a sustainable and monitorable low-risk yield anchor has emerged for the first time on-chain. This fundamentally changed the profit structure and risk pricing logic of DeFi.

Looking at the functional role of stablecoins, 2025 marks a clear turning point. They now serve multiple functions—cross-border payments, trading pair pricing, DeFi liquidity centers, and gateways for institutional capital inflows and outflows. In centralized exchanges, decentralized protocols, RWA, derivatives, and payment systems, stablecoins form the backbone of capital flows.

On-chain transaction volume data clearly shows that stablecoins have become an important extension of the global dollar system. The annual on-chain transaction volume reaches tens of trillions of dollars, far exceeding most single-country payment systems. In 2025, blockchain has taken on the role of a true “functional dollar network” for the first time.

The widespread adoption of stablecoins has transformed the risk structure of on-chain finance. Once stablecoins became the fundamental unit of pricing, market participants could conduct trading, lending, and asset allocation without direct exposure to crypto price volatility. This significantly lowered participation barriers.

This is especially important for institutional investors. They do not inherently seek high volatility returns; they prioritize predictable cash flows and controllable sources of income. The maturation of stablecoins allows institutions to gain “dollar exposure” on-chain, avoiding traditional crypto price risks. This lays the foundation for subsequent RWA and income-generating product expansions.

Against this backdrop, the large-scale realization of RWA, especially on-chain US Treasuries, became one of the most structurally significant developments in 2025.

Unlike early “synthetic assets” or “income mapping” attempts, RWA in 2025 has begun to directly bring real low-risk assets on-chain in a manner closer to traditional financial asset issuance. On-chain US Treasuries are no longer conceptual narratives; they exist in a monitorable, traceable, and composable form, with clear cash flow sources, distinct maturity structures, and direct links to the risk-free rate curve of the traditional financial system.

However, alongside the rapid expansion of stablecoins and RWA, another aspect of the on-chain dollar system has been prominently exposed in 2025: potential systemic vulnerabilities.

Particularly in yield-bearing and algorithmic stablecoins, several breakages and collapses have occurred. These failures are not isolated incidents; they reflect the same structural issues: implicit leverage due to recursive collateral, opacity of collateral structures, and high concentration of risk.

When stablecoins do not only collateralize short-term Treasuries or cash equivalents but also pursue higher yields through complex DeFi strategies, their stability no longer solely depends on the assets themselves. Instead, it relies on implicit assumptions of market continued prosperity. If these assumptions break down, the escape from risk is not a technical fluctuation but a systemic shock.

Various incidents in 2025 demonstrate that the risk of stablecoins is not “whether they are stable” but “whether their stability sources can be clearly identified and monitored.”

Income-bearing stablecoins can offer yields much higher than risk-free rates in the short term. However, these yields often rely on layered leverage and liquidity mismatches. Risks are not fully priced. When market participants treat these products as “cash-like,” systemic risks are amplified.

This phenomenon forces the market to reconsider the role of stablecoins. Are they a payment/settlement tool, or a financial product with embedded high-risk strategies? This question was raised explicitly for the first time in 2025 through actual costs.

Looking ahead to 2026, research and investment should focus less on “will stablecoins and RWA continue to grow” and more on the fact that the expansion of the on-chain dollar system is almost irreversible.

The truly critical question is “quality differentiation.” Differences in collateral transparency, maturity structures, risk separation, and regulatory compliance among various stablecoins will directly impact capital costs and usage scenarios. Similarly, differences in legal structures, payment mechanisms, and yield stability of RWA products will determine whether they can be institutional-grade assets.

What can be expected is that the on-chain dollar system will no longer be a homogeneous market but will form a clear hierarchy. Products with high transparency, low risk, and strong regulation will enjoy lower capital costs and broader adoption. Products relying on complex strategies and implicit leverage may become marginalized or gradually phased out.

From a macro perspective, the maturation of stablecoins and RWA signifies that the crypto market has truly integrated into the global dollar financial system for the first time. On-chain is no longer an experimental space for value transfer; it has become an extension of dollar liquidity, yield curves, and asset allocation logic. This transition is mutually reinforced by the inflow of institutional capital and the normalization of the regulatory environment, jointly driving the crypto industry from cyclical speculation toward infrastructural development.

Part 3: Regulatory Normalization—Rules as Walls, Reorganizing Evaluation and Industry Structure

In 2025, global crypto regulation entered a phase of normalization. This is not limited to specific laws or regulatory incidents; it reflects a fundamental change in the “survival hypothesis” of the entire industry.

In previous years, the crypto market operated in an environment of high uncertainty. The core issue was not growth or efficiency but whether “this industry can exist.”

Regulatory uncertainty was regarded as part of systemic risk. When capital entered, it had to leave room for potential regulatory shocks, enforcement risks, and policy reversals, adding risk premiums.

By 2025, this long-standing unresolved issue was gradually addressed for the first time. As major jurisdictions in Europe and Asia-Pacific formed relatively clear and actionable regulatory frameworks, market focus shifted from “can it exist” to “can it expand in compliance.” This change profoundly impacted capital behavior, business models, and asset pricing logic.

Clarification of regulation significantly lowered institutional barriers for entering the crypto market. For institutional capital, uncertainty itself is a cost. Ambiguity in regulation often implies unquantifiable tail risks.

As core stages like stablecoins, ETFs, asset management, and trading platforms gradually fall within clear regulatory boundaries in 2025, institutions can finally evaluate the risks and returns of crypto assets within existing regulatory and risk management frameworks.

This does not mean regulation has loosened; rather, it has become more predictable. Predictability itself is a prerequisite for large-scale capital entry.

Once regulatory boundaries are clear, institutions can accommodate these constraints through internal processes, legal structures, and risk models. There is no need to regard them as “uncontrollable variables.” As a result, more long-term capital begins to systematically enter the market, with depth and deployment scale increasing simultaneously, and crypto assets gradually integrating into broader asset allocation systems.

More importantly, regulatory normalization has changed the competitive logic at the corporate and protocol levels. The profound impact of regulatory normalization lies in the reorganization of industry organizational forms.

As regulatory requirements are gradually realized in issuance, trading, asset management, and settlement stages, the crypto industry has begun to show tendencies toward greater concentration and platformization. More products are issued and distributed on regulated platforms, and trading activities are increasingly concentrated in licensed and regulated venues.

This trend does not imply the disappearance of decentralization concepts; rather, it indicates a reorganization of the “entry” points for capital formation and flow.

Token issuance is evolving from increasingly disorderly P2P sales toward more process-oriented, standardized procedures closer to traditional capital markets. This forms a new type of “internet capital market.”

Within this system, issuance, disclosure, lock-up periods, distribution, and secondary market liquidity are more tightly integrated. Market participants’ risk and return expectations become more stable.

These industry organizational changes are directly reflected in asset valuation methods.

In previous cycles, crypto asset valuation heavily relied on narrative strength, user growth, and TVL metrics, with relatively limited consideration of institutional and legal factors.

From 2026 onward, as regulation becomes a quantifiable constraint, valuation models will begin to incorporate new dimensions. Regulatory capital occupancy, compliance costs, legal structure stability, reserve transparency, and access to regulatory distribution channels will gradually become important variables influencing asset prices.

In other words, the market will start to assign “institutional premiums” or “institutional discounts” to different projects and platforms.

Entities that operate efficiently within regulatory frameworks and internalize regulatory requirements as operational advantages often enjoy lower capital costs. Models relying on regulatory arbitrage or institutional ambiguity face risks of valuation compression or marginalization.

Conclusion: A New Paradigm Created by Three Concurrent Changes

The turning point of the 2025 crypto market fundamentally involves three simultaneous developments:

1. Capital shifts from retail to institutional.
2. Assets are formed from narratives into the on-chain dollar system(stablecoins + RWA).
3. Rules transition from gray areas to normalized regulation.

These three propel crypto from “high-volatility speculative assets” to “modelable financial infrastructure.”

Looking toward 2026, research and investment should focus on three core variables:

1. The strength of macro interest rate and liquidity transmission into crypto. As institutions become major capital, interest rate changes directly move the market.
2. The quality differentiation of on-chain dollars and the sustainability of actual yields. The differences between stablecoins and RWA will influence investment decisions.
3. The institutional walls formed by regulatory costs and distribution capacity. Regulatory compliance ability has become a new source of competitive advantage.

Under this new paradigm, the winners are not the projects that tell the best stories. They are the infrastructures and assets that can continuously expand under the constraints of capital, returns, and rules.