This year has broken many long-standing traditions in the crypto space. For the first time, we’ve seen a clear decoupling between Bitcoin and altcoins, with the top asset soaring while most others lag far behind and continue to struggle. Confidence in DeFi has faded as many promised catalysts failed to materialize, while lingering security concerns haven’t helped.
The wave of institutional adoption continues to remain strong. We see ETF flows are dominating investor sentiment, and Bitcoin’s proxy to tech stocks is scrutinized whenever AI moves the market. Investors are becoming more nimble when entering crypto as more options become available, from Digital Asset Treasuries (DATs) to RWA and tokenization. However, recent market pullbacks have left investors nervous about the prospects of crypto investing as the next Fed rate decision remains elusive and the AI bubble chatter further fuels uncertainty.
Looking back on the year, we have seen tremendous growth in infrastructure. Major upgrades on Layer-1s such as Ethereum’s Pectra fork, widespread adoption of account abstraction, and the maturation of modular rollups, plus the explosion of institutional-grade custodians, prime brokerage offerings, and regulated perpetuals platforms. However, the record liquidation event on October 10th shows that there is still room for more secure and robust trading infrastructure.
More room to build
A sudden double-digit percent drop in Bitcoin’s price on October 10th triggered the largest single-day liquidation cascade in crypto history. Within an hour, over $9 billion in derivative positions were wiped out across centralized exchanges. The severity exposed a critical weakness in many CEX risk engines: auto-deleveraging (ADL). This liquidation mechanism aggressively forced profitable counterparties to absorb losses from under-margined positions even when their own trades were well collateralized. High-profile traders and market makers ranked in the top ADL priority tiers saw millions liquidated against them despite healthy margin ratios.
The incident highlighted that even top-tier exchanges still rely on deleveraging mechanisms that can punish liquidity providers during extreme volatility. Exchanges have since promised improved transparency, dynamic insurance fund contributions, and real-time ADL warnings, but the event remains a reminder that leverage infrastructure is not yet ready for institutional-scale flows.
Security concerns remain a top priority for investors when it comes to DeFi as Balancer Protocol suffered a sophisticated exploit in early November targeting its V2 vaults that drained around $128 million in assets. The incident dented confidence in one of DeFi’s oldest and most audited liquidity providers. To make matters worse for DeFi users, lending and stablecoin protocol Stream Finance lost $93 million, which spread more losses across other lending protocols as the xUSD collateral of overleveraged curators and their lenders quickly became worthless.
While one hack questioned the idea of trusted legacy protocols, the other showcased that DeFi needs better design for institutional integration as protocols delegate risk management to vault curators who chase higher APYs and TVL. These events reinforced the need for better formal verification, timelock upgrades, and third-party bug bounty escalation before chasing aggressive growth and fundraising.
DeFi jumping back
DeFi appears poised for a measured recovery next year as capital rotates back from pure Bitcoin exposure toward higher-yield opportunities. Key innovations driving renewed interest include intent-centric architectures, fully on-chain order books with deep liquidity like Hyperliquid, and the rapid maturation of restaking primitives across EigenLayer, Babylon, and Symbiotic ecosystems.
Real-world asset tokenization platforms such as Centrifuge, Ondo, and BlackRock’s BUIDL fund are bridging institutional supply with on-chain demand, while permissioned pools and KYC-gated liquidity layers are making DeFi palatable to regulated entities. Combined with falling gas costs from Layer-2 maturity and the emergence of chain-specific app layers, total value locked could realistically reclaim all-time highs if macro conditions stabilize.
Looking ahead
Traditional finance giants are quietly building the rails for a stablecoin-native payment future, with Visa and Mastercard expanding stablecoin settlement pilots, Stripe re-enabling USDC payouts, and PayPal deepening PYUSD integration across its network. JPMorgan, Citi, and other international banking institutions continue to expand their own permissioned stablecoin and tokenized deposit offerings on private blockchains while simultaneously connecting to public chains via bridges and oracles.
On the global regulatory development, the MiCA framework in Europe and clearer US regulatory guidance are accelerating institutional issuance of yield-bearing stablecoins backed by short-term treasuries. These developments point to a hybrid future where stablecoins become the default settlement layer for cross-border corporate treasury, remittances, and eventually everyday merchant acceptance.
As 2025 comes to an end, next year looks promising for the crypto industry. The combination of continuing improvements in global regulation, long-term investment visions, and exciting DeFi innovations at the crossroads with TradFi participants all showcase a maturing industry that makes huge leaps in progress every year.
With contributions from Nick Ruck, Director at LVRG Research.
Yiwei Wang is a passionate blockchain enthusiast who aims to create interesting storytelling at the intersection of crypto, economics, and public policy. He navigated the complex landscape of the blockchain industry with effective financial communications and has worked with various industry leaders and companies.
LVRG Research serves as the research and analysis division of LVRG PR. It delivers data-driven insights on market trends, macroeconomic developments, and industry shifts, with its frequent media presence underscoring its reputation as a trusted source for timely and thought-provoking narratives.
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