Wintermute Market Report Review: 2025 Liquidity Changes and Outlook for 2026

Author: Wintermute Translation: Azuma, Odaily Planet Daily

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Editor’s Note: On January 13, Wintermute released an analysis report on the 2025 cryptocurrency over-the-counter (OTC) market. As the industry’s leading market maker, Wintermute is undoubtedly highly sensitive to market liquidity trends. In this 28-page report, the firm reviews liquidity changes in the 2025 crypto market and concludes that — the market is shifting from clear, narrative-driven cyclical fluctuations to a mechanism with stronger structural constraints and execution-led dynamics. Based on this conclusion, Wintermute also pre-sets three key scenarios necessary for the market to recover in 2026.

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

Executive Summary

2025 marks a fundamental shift in the liquidity mechanism of the cryptocurrency market. Capital is no longer widely dispersed across the entire market; liquidity has become more concentrated and unevenly distributed, leading to increased divergence between returns and market activity. As a result, a large portion of trading volume is confined to a few tokens. The duration of bullish trends is shorter, and price performance relies more on the channels and deployment methods through which liquidity enters the market.

This 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 some selected altcoins account for most trading activity. This reflects the gradual expansion of ETF and Digital Asset Custody (DAT) products to a broader range of altcoins, and the retreat of Meme coin cycles at the beginning of 2025.

· The pace of narrative belief fading accelerates, and altcoin rallies double in speed. Investors no longer follow narratives with sustained conviction but instead opportunistically trade themes such as Meme coin launch platforms, perpetual contract trading platforms, emerging payment and API infrastructure (like x402). Follow-up engagement is limited.

· As the influence of professional trading counterparties grows, trade execution becomes more cautious. This manifests as more prudent cyclical trading execution (breaking the previous fixed four-year cycle), wider use of leveraged OTC 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. Increasingly, capital flows through structured channels like ETF and DAT, affecting liquidity distribution and the final concentration areas in the market.

This report mainly interprets these market developments based on Wintermute’s proprietary OTC trading data. As one of the industry’s largest OTC platforms, Wintermute provides liquidity services across regions, products, and diverse counterparties, offering a unique and comprehensive off-chain crypto OTC perspective. Price movements reflect market outcomes, while OTC 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 in 2025 have significantly shifted compared to early cycles.

Part 1: Spot

Wintermute’s OTC data shows that in 2025, trading activity has shifted from purely volume-driven to a more mature, strategic trading environment. Trading volume continues to grow, but execution is more planned, with OTC increasingly favored for its bulk trading capacity, privacy, and controllability.

Market positioning has also transitioned from simple directional trades to more customized execution strategies, with broader use of derivatives and structured products. This indicates that market participants are becoming more experienced and disciplined.

In Wintermute’s spot OTC activities, these structural shifts are mainly reflected in three aspects:

· Volume growth: OTC trading volume continues to increase, highlighting persistent demand for off-chain liquidity and efficient execution of large trades (while limiting market impact).

· Counterparty growth: The range of participants further expands, driven by factors such as venture capital funds shifting from private allocations to liquidity markets; enterprises and institutions executing large trades OTC; and individual investors seeking alternatives outside centralized and decentralized trading platforms.

· Token landscape: The overall active token universe exceeds BTC and ETH, with funds flowing into a wider range of altcoins via DAT and ETFs. Nonetheless, data from positions throughout the year show that after the major liquidation on October 11, 2025, both institutional and retail investors refocused on main tokens. Altcoin rallies are shorter and more selective, reflecting the retreat of Meme coin cycles and an overall market contraction in breadth as liquidity and risk capital become more selective.

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

Volume growth: Cyclical patterns replaced by short-term volatility

“2025’s market features oscillations, with price fluctuations mainly driven by short-term trends rather than longer-term seasonal patterns.”

Wintermute’s OTC data shows that in 2025, trading activity exhibits a distinct seasonal pattern, markedly different from previous years. Optimism around the new pro-cryptocurrency US government quickly dissipated, and as Meme coins and AI agent narratives cooled at quarter-end, risk sentiment sharply worsened by the end of Q1. On April 2, 2025, Trump’s announcement of tariffs and other negative news further pressured the market.

Thus, market activity in 2025 was concentrated in the first half of the year, with strong performance early on, followed by a broad weakening in spring and early summer. The end-of-year rebound patterns seen in 2023 and 2024 did not recur, breaking what seemed to be a regular seasonal pattern — often reinforced by narratives like “October rally.” In reality, this was never a true seasonal pattern but driven by specific catalysts such as ETF approvals in 2023 and the US new government taking office in 2024.

After entering Q1 2025, the bullish momentum from Q4 2024 never fully recovered. Market volatility increased, and macro factors dominated the trend, with price movements showing more short-term fluctuations than sustained trends.

In short, capital flows became passive and intermittent, with pulse-like volatility around macro headlines, but no sustained momentum. In this oscillating environment, as market liquidity thins and execution certainty becomes more critical, OTC remains the preferred execution method.

Counterparty: Institutional foundations deepen

“Although 2025’s price movements are flat, institutional counterparties are already rooted in the market.”

Wintermute observed strong growth across most counterparty types, especially among institutions and retail brokers. Among institutional players, traditional financial institutions and corporates grew modestly but with significantly deeper engagement — activity became more sustained and increasingly focused on cautious execution strategies.

Despite the flat market performance in 2025, institutions are clearly established. Compared to more tentative and scattered participation last year, 2025 features deeper integration, larger trade volumes, and more frequent activity — all positive signals for the industry’s long-term future.

Token landscape: Leading market increasingly diversified

“Trading volume is increasingly flowing into large tokens beyond BTC and ETH, driven jointly by DAT and ETF.”

In 2025, the total number of tokens traded remained relatively stable. However, based on 30-day rolling data, Wintermute traded an average of 160 different tokens, up from 133 in 2024. This indicates OTC activity has expanded into a broader and more stable token universe.

Compared to 2024, a key difference is that the speculative cycles driving token activity in 2025 have weakened — the range of tokens traded remains relatively steady throughout the year, rather than experiencing sharp increases around specific themes or narratives.

Since 2023, Wintermute’s total nominal trading volume has become more diversified, with other segments surpassing the combined volume of BTC and ETH. While BTC and ETH still dominate trading flows, their share has decreased from 54% in 2023 to 49% in 2025.

Notably, where is the flow going? Although the share of long-tail tokens continues to decline, blue-chip assets (top 10 by market cap, excluding BTC, ETH, wrapped assets, and stablecoins) have increased their share of total nominal volume by 8 percentage points over the past two years.

While some funds and individuals have concentrated investments in large-cap tokens this year, the growth in trading volume is also driven by ETF and DAT expanding their investment scope beyond mainstream assets. DAT is authorized to invest in these assets, and ETFs are broadening their offerings, including staking ETFs (like SOL) and index funds.

These investment tools continue to favor OTC over exchange trading, especially when the required liquidity cannot be provided on trading platforms.

Analysis of spot capital flows across token types

Mainstream coins: Funds gradually flow back at year-end

“By the end of 2025, both institutional and retail investors are reallocating into mainstream coins, indicating expectations of a rebound before altcoins recover.”

As altcoin narratives fade and macro uncertainties re-emerge early in 2025, capital reflows into BTC and ETH. Wintermute’s OTC liquidity data shows that since Q2 2025, institutional investors have maintained an overweight position in mainstream coins; retail investors, however, shifted toward altcoins in Q2 and Q3, hoping for a market rebound, but after the deleveraging event on October 11, 2025, they quickly reverted to main tokens.

The trend of capital moving into main tokens is driven by market fatigue, as “altcoin season” has yet to truly start, and the market is gradually entering disappointment. Initially led by institutions (which have been long-term net buyers of main tokens), by year-end retail investors also became net buyers.

This positioning aligns with the prevailing market view: BTC (and ETH) need to lead the market first for risk appetite to return to altcoins. Retail investors now increasingly share this view.

Altcoins: Shorter rally durations

“In 2025, the average duration of altcoin narrative-driven rallies was about 19 days, significantly shorter than 61 days in the previous year, indicating market fatigue after overextended gains last year.”

Altcoins performed poorly overall in 2025, with a sharp decline in annual total returns, and no meaningful sustained recovery apart from brief rebounds. While certain themes attracted temporary attention, these themes struggled to gather momentum or translate into broader market participation. From a capital flow perspective, this is not due to a lack of narratives but rather clear signs of market exhaustion — rallies were repeatedly tested but quickly faded due to lack of conviction.

To understand this dynamic, we go beyond price action and focus on sustainability analysis. Here, “sustainability” is defined as the duration during which altcoins’ participation in OTC flows remains above recent normal levels. In practice, sustainability metrics measure whether a rally can attract ongoing participation or whether market activity dissipates quickly after initial volatility. This perspective helps distinguish between sustained altcoin rallies and short-lived, rotational bursts that do not evolve into broad trends.

The chart shows a clear shift in altcoin rally characteristics. 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 meme coin and AI narratives. In 2025, despite new narratives emerging — including Meme coin launch platforms, Perp DEX, and x402 concepts — the median sustainability dropped sharply to about 20 days.

While these narratives can trigger short-term market activity, they fail to develop into lasting, market-wide rallies. This reflects macro volatility, market fatigue after last year’s overextension, and insufficient liquidity in altcoins to sustain narrative breakthroughs. As a result, altcoin rallies tend to be tactical rather than high-confidence trend moves.

Meme coins: Narrowing active scope

“In 2025, Meme coins peaked in Q1 and failed to recover, as trading became more dispersed and narrowed, unable to regain support.”

Meme coins entered 2025 with the most crowded market profile, characterized by rapid issuance, sustained bullish sentiment, and price action reinforcing narratives. However, this state abruptly ended. Unlike other sectors with higher Beta coefficients, Meme coins turned downward earlier and more decisively, and never regained upward momentum.

Despite sharp price retracements, the absolute OTC volume of Meme coins remained healthy at all times. Even at year-end, the monthly number of traded tokens stayed above 20, indicating trading interest persisted. The change was in activity patterns: in practice, the number of tokens involved per month decreased significantly, with activity concentrated on specific tokens rather than broad trading across the Meme coin universe.

Part 2: Derivatives

Wintermute’s OTC derivatives data shows strong growth, driven by increased market volatility and larger trades, making OTC the preferred venue for executing complex, capital-efficient structured products, offering price certainty and privacy.

CFDs: Underlying assets expand

“2025 saw further expansion of underlying assets for CFDs, with futures increasingly favored as a capital-efficient way to gain market exposure.”

Wintermute’s OTC desks saw the number of tokens used as underlying assets for CFDs double year-over-year, from 15 in Q4 2024 to 46 in Q4 2025. This sustained growth reflects increased market acceptance of futures as a capital-efficient means to access a broader range of assets, including long-tail tokens.

The rising demand for CFDs indicates a market shift toward using futures for capital-efficient exposure. Perpetual open interest grew from $120 billion at the start of the year to $245 billion in October, but the market’s risk appetite sharply declined after the October 11 liquidation event.

Options: Increasing strategic complexity

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

Building on the previous activity in CFDs and futures, Wintermute’s OTC data shows that more counterparties are turning to options to construct more customized and complex crypto exposures.

This shift has led to a sharp increase in options activity: from Q4 2024 to Q4 2025, nominal trading volume and number of trades grew by approximately 2.5 times year-over-year. This is mainly due to more counterparties — especially crypto funds and digital asset treasuries — adopting options strategies to generate passive income.

The chart below tracks quarterly OTC options activity relative to Q1 2025, clearly illustrating the growth trend throughout the year. By Q4, nominal volume reached 3.8 times Q1 levels, and trade counts 2.1 times, indicating continued growth in trade size and frequency.

Part of this growth stems from the rise of systematic options strategies involving holding and rolling positions over time. This marks a significant shift from previous years, where options were mainly used for directional bets.

To understand the evolution of options flows, we further examine BTC (which still accounts for a large share of 2025 nominal volume). The chart shows quarterly distributions of bullish/bearish options positions.

The composition of BTC options flows in 2025 reflects a clear shift: from a focus on buying bullish options to a more balanced use of both calls and puts, with activity increasingly oriented toward yield generation and structured, repeatable strategies. Yield strategies have become more common, with investors selling puts and covered calls to earn income, increasing supply and suppressing volatility. Meanwhile, demand for downside protection remains strong, with persistent use of puts by long positions. Overall, the market is more focused on earning yields and managing risks rather than betting on further upside.

Naked call buying has decreased further, confirming that options are used less for directional bullish exposure and more for systematic strategies. These dynamics collectively indicate that, compared to previous years, the options market in 2025 is becoming more mature and user base more professional.

Part 3: Liquidity

Cryptocurrencies have historically been a channel for excess risk appetite. Due to weak valuation anchors, embedded leverage, and high dependence on marginal capital flows, crypto prices are highly sensitive to changes in the global financial environment. When liquidity is abundant, risk tolerance rises, and capital naturally flows into crypto; when liquidity tightens, structural buy-side deficits quickly surface. Therefore, crypto has always fundamentally depended on global liquidity.

In 2025, macroeconomic conditions are the key driver of crypto prices. Although the current environment features easing interest rates, improved liquidity, and economic strength — factors typically supporting risk assets — the crypto market remains weak. We believe this disconnect is driven by two key reasons: retail investor attention and new liquidity channels.

Retail investor attention: Crypto is no longer the “first choice” risk asset

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

Despite increased institutional participation, retail remains the cornerstone of crypto markets. The poor performance in 2025 is mainly due to dispersed retail attention and a weakening rotation effect of crypto as the top risk asset.

Many factors influence this, but two stand out: technological advances lowering entry barriers, making other opportunities (especially in AI and related fields) more accessible, offering similar risk profiles, narratives, and return potentials, thus diverting attention from crypto. At the same time, we are witnessing a normalization after 2024 — high retail participation in Meme coins early on, shifting to AI themes later in the year. Market normalization is an inevitable trend.

Hence, retail investors now prefer stock themes like AI, robotics, and quantum tech, while BTC, ETH, and most altcoins lag behind as major risk assets. Crypto is no longer the default outlet for excess risk-taking.

Liquidity channels: ETFs and DAT as new pathways

“Today, ETFs and DAT, together with stablecoins, have become prominent channels driving capital into crypto markets.”

BTC and ETH prices have slightly declined, but the relative weakness is most evident in altcoins. Besides weak retail participation, the key factors are the shifts in liquidity and capital entry methods.

Until two years ago, stablecoins and direct investments were the main channels for capital inflows. Now, ETFs and DAT have structurally changed the pathways of liquidity injection.

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

· Stablecoins remain important for settlement and collateral but now mainly serve as a conduit rather than a dominant source.

· ETFs direct liquidity into the top two assets: constrained by investment scope, they deepen and strengthen the liquidity of major assets but have limited spillover effects beyond BTC and ETH.

· DAT introduces stable, non-cyclical demand: treasury allocations further reinforce concentration in major assets, absorbing liquidity without naturally expanding risk appetite.

Liquidity does not solely flow through ETFs and DAT, but these channels have become increasingly important. As mentioned earlier, their investment scope is expanding, allowing exposure beyond BTC and ETH, mainly involving other blue-chip tokens. However, this process is gradual, and benefits for altcoins will take time to materialize.

In 2025, crypto is no longer driven by broad market cycles. Instead, rallies are limited to a few assets with concentrated liquidity, while most of the market underperforms. Looking ahead to 2026, market performance will depend on whether liquidity disperses to more tokens or continues to concentrate in a few large ones.

2026 Market Outlook: Farewell to Pure Cyclical Patterns

“2025’s market failed to deliver the expected rally, but this may mark the beginning of crypto’s shift from speculative assets to a mature asset class.”

The 2025 market performance demonstrates that the traditional four-year cycle pattern is gradually losing effectiveness. Our observations suggest that market behavior is no longer dominated by a self-fulfilling four-year narrative but instead depends on liquidity flows and investor focus.

Historically, crypto-native wealth has functioned as a single, interchangeable pool of capital, with Bitcoin’s gains naturally spilling over into main tokens and then into altcoins. Wintermute’s OTC data shows this transmission effect has weakened significantly. New capital tools — especially ETFs and DAT — have evolved into “closed ecosystems.” While they sustain demand for a few blue-chip assets, capital does not naturally rotate into broader markets. With retail interest shifting heavily toward stocks and prediction markets, 2025 has become an extremely concentrated year — the majority of new funds are absorbed by a handful of main assets, while the rest of the market struggles to sustain sustained rallies.

Three possible paths for 2026

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

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

· Expansion of ETF and DAT 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 universe. Signs are emerging, with more ETF applications for SOL and XRP being filed.

· Mainstream coins lead the rally: Like in 2024, a strong rally in Bitcoin (and/or ETH) could generate wealth effects that spill over into a broader market. However, how much capital will ultimately flow back into digital assets remains uncertain.

· Market attention reverts: A less likely scenario is a significant return of retail focus from stocks (including AI, rare earths, etc.) back into crypto, bringing new capital inflows and stablecoin issuance.

The market’s direction in 2026 will depend on whether at least one of these catalysts effectively drives liquidity beyond a few main assets. Otherwise, market concentration will persist.