Grayscale Crypto Market Q3 Report: $3.5 Trillion Market Cap Reaches New High, Bitcoin Gives Way to Altcoin Season

Chainfeeds Guide:

Bitcoin underperforms, altcoin season reemerges, and the macro environment may continue to evolve.

Source:

Author:

Grayscale

Opinion:

Grayscale: In the third quarter of 2025, the overall crypto market continued its upward trend, with all six Crypto Sectors posting positive price returns, though fundamental data showed divergence. Bitcoin lagged behind other market sectors in this round, creating an altcoin season-like pattern, but with differences from previous cycles. According to the Crypto Sectors framework jointly developed by Grayscale and FTSE/Russell, the entire market can be divided into six sectors, covering 261 tokens with a total market cap of $3.5 trillion. Blockchains are not traditional companies, but their economic activity and health can be measured by user numbers, transaction volume, and transaction fees. Q3 data shows that both the currency and smart contract platform sectors saw declines in users, transactions, and fees quarter-on-quarter, partly due to a decrease in meme coin speculation since Q1, which led to reduced on-chain trading and activity. However, application layer fee income grew by 28%, driven by leading applications such as Jupiter on Solana, lending protocol Aave, and derivatives exchange Hyperliquid. On an annualized basis, application layer fee income has surpassed $10 billion. This indicates that blockchains are not only transfer networks but also application platforms, and higher application fees can be seen as a signal of increased adoption. In terms of price, all six sectors achieved positive returns in Q3, with the financial sector leading the gains, benefiting from a rebound in centralized exchange (CEX) trading volume; the smart contract platform sector followed, boosted by stablecoin legislation and accelerated adoption. In contrast, the currency sector where Bitcoin resides saw relatively limited gains, while the AI sector continued to underperform, similar to the AI sector in the US stock market. Among the top 20 tokens with the best risk-adjusted performance, there are large-cap projects such as ETH, BNB, SOL, LINK, and AVAX, as well as a few mid- and small-cap projects with market caps under $500 million. The financial and smart contract platform sectors occupy the most spots on this list. In summary, Q3 presented three major themes: First, digital asset treasuries (DATs) became a highlight, with listed companies incorporating crypto assets into their balance sheets, benefiting tokens such as ETH, SOL, BNB, ENA, and CRO; second, after the implementation of stablecoin legislation, circulating supply grew by 16% in a single quarter to over $290 billion, with smart contract platforms hosting stablecoins such as Ethereum, TRX, and AVAX seeing significant benefits, and stablecoin issuer Ethena also performing well; third, trading volume rebounded, with centralized exchange trading volume hitting a yearly high in August, driving exchange tokens such as BNB, CRO, OKB, and KCS to the forefront. Meanwhile, decentralized perpetual contracts continued to heat up, with Hyperliquid becoming one of the top three protocols by fees, and DRIFT and the new project ASTER also entering the top 20. Looking ahead to Q4 2025, market performance may be driven by three new themes. First, the US Senate has begun reviewing the crypto market structure bill, after the House passed related legislation in July with bipartisan support. This marks the prospect of the crypto industry ushering in its first comprehensive financial services regulatory framework, promoting deeper integration with the traditional financial system. Second, the US Securities and Exchange Commission (SEC) has approved universal listing standards for commodity-based exchange-traded products (ETPs), and more crypto assets may become available to US investors through ETPs in the future. Third, the macro environment will remain a key variable. The Federal Reserve has just announced a 25 basis point rate cut and hinted at two more cuts within the year. In theory, rate cuts reduce the opportunity cost of holding non-interest-bearing assets and boost risk appetite, which is favorable for crypto assets. However, potential risk factors remain: a weak US labor market, high US stock valuations, and geopolitical uncertainties could all act as headwinds for market performance. Overall, Q4 will unfold amid the interplay of policy dividends, financial product expansion, and macro volatility, and the leading market themes may differ significantly from Q3. Investors should closely monitor policy developments and liquidity conditions.