2025 marked the year crypto markets saw significant institutional adoption, with lasting implications for volatility, price discovery, and the evolving relationship between retail and professional capital. As digital assets made their long-awaited entry into traditional capital markets with record-setting launches and unprecedented adoption, the derivatives sector, particularly options, emerged as the critical infrastructure enabling this change.
Continuing off last year's momentum, the popular ETF products surpassed even the most optimistic expectations, with BTC ETFs taking in around $60 billion of net inflows, followed by ETH with around $15 billion year-to-date. In fact, BlackRock's iShares ETF (IBIT) became the asset management giant's most profitable ETF in just nearly 21 months after launch and was also reported to be the single largest holding for Harvard University's endowment fund ($57 billion AUM), according to their latest filing.
Capital markets were ablaze with crypto-related transactions, with DATs (Digital Asset Treasuries) becoming a new industry buzzword, as Michael Saylor's Strategy (Nasdaq: MSTR) and Tom Lee's Bitmine (Nasdaq: BNMR) led the charge by quickly becoming some of the single largest BTC and ETH holders via public listed structures. In addition, M&A transactions abounded with Coinbase's $2.9 billion acquisition of Deribit (crypto options), Ripple's $1.25 billion purchase of Hidden Road (custody), and a number of high-profile IPOs (e.g., Circle , Bullish ) dominated mainstream attention like never before.
The Coinbase-Deribit deal is particularly noteworthy. At $2.9 billion, it represents the largest crypto-options platform acquisition to date and signals the institutional vision for the future. Crypto trading will evolve beyond pure spot exposure and make significant strides toward building out an entire derivatives ecosystem that enables hedging, yield generation, and risk management strategies familiar to traditional finance. Deribit's proven infrastructure has handled billions in daily options volume over a deep order book across a wide range of expiries and strike prices, providing the liquidity and operational depth necessary to execute institutional strategies at scale. Furthermore, by combining Deribit's global franchise under Coinbase's significant local footprint, there is now a viable and scalable path for crypto options & derivatives to be made available to US institutions at scale.
Going Mainstream
From the regulation side, we saw increasing clarity with the passage of the Genius Act in the US and the Stablecoins Ordinance in HK, paving the way for stablecoin proliferation and RWA initiatives across mainstream finance. The SEC has also narrowed their "security" definition on tokens and have taken a much more collaborative approach with the crypto industry, allowing Coinbase to conduct their first ICO (Initial Coin Offering) to a domestic US audience for the first time since their 2021 listing.
On the other hand, while the adoption pace was undoubtedly positive, token prices struggled with a roller coaster ride, with BTC hitting a record high of around $126,000 and ETH reaching around $5,000 in the first half before retracing 30-40% into year-end on a number
of community setbacks. A CEX-led "flash crash" in October , unexpected DeFi protocol failures, a collapse in DAT premium, and a diversion of retail interest into AI stocks have inflicted unfortunate and considerable damage to the ecosystem.
Yet this volatility itself reveals the new market structure at work. The October flash crash wasn't just driven by spot selling, it was amplified by dealer hedging and margin management dynamics familiar to traditional options markets. Negative reflexivity kicked in as volatility spiked on cratering prices as traders needed to sell increasing delta exposures into declining markets, further exacerbating the collapse. As option usage continues to pick up across the board, the impact of their dynamic hedging mechanics will leave an ever-increasing footprint on price movements, similar to what we are witnessing in TradFi markets.
Structural Change
The contrasting outlook between "TradFi" and "native" sentiment is of particular interest and reflects the structural changes of an increasingly mature crypto market where price action is increasingly dominated by traditional capital. A top-heavy ecosystem with concentrated BTC and ETH dominance, a preference for ETF and equity exposure over self-custody needs, and increasing price correlation with traditional macro factors (e.g., liquidity conditions) offer undeniable signs of an institutionalized market.
This shift has profound implications. Institutional capital does not trade off pure ecosystem enthusiasm or community sentiment but operates under their respective investment mandates with pre-specific risk parameters, draw-down tolerances, macro considerations, and well-defined investment horizons. BTC's rising correlation with TradFi liquidity conditions reflects rising institutional adoption, as crypto exposures are managed under the same macro lens against Fed policies, liquidity conditions, and general risk appetite similar to other major macro asset classes.
As such, while recent price action might suggest otherwise, the longer-term outlook for BTC and mainstream participation has never been better, especially for the US market. With perpetual futures finally available to US traders, Robinhood expanding into tokenized stocks, and Square accepting BTC payments across its merchant network, we have passed the inflection point of crypto adoption and expect to see a proliferation of new investment products and real-world use cases in 2026 and beyond.
Looking Ahead
2025 has been a bittersweet year for crypto, with significant positives stemming from rising TradFi capital inflows, a regulatory-friendly environment, large-scale M&A deals, and a proliferation of equity-linked proxies (DATs, ETFs) made available to the mainstream. However, these were somewhat offset by disappointing year-to-date price action, a significant underperformance in non-BTC/ETH tokens, dwindling on-chain ecosystem excitement, and lingering questions over trading infrastructure robustness.
2026 will be an important inflection year for the crypto space. With crypto no longer 'esoteric' and well-embraced by mainstream traders, focus will shift back to innovation and ecosystem
development as investors gauge what will be the 'killer use case' for crypto beyond BTC and stablecoins. Optimism in US derivatives growth (perps and options), rising stablecoin usage in day-to-day settlements, and the arrival of tokenized RWA products will be needed to keep the positive momentum going.
With Bitcoin hovering around $88,000 as we close out a volatile year, the market remains cautiously optimistic for the longer-term outlook, with analysts forecasting a potential resurgence driven by continued institutional inflows, Fed rate cuts, and the convergence of crypto with AI and DeFi narratives. However, risks loom large, including potential bear market resets from liquidity tightening, regulatory delays on altcoin ETFs, DAT asset concentration, and heightened volatility from overleveraged positions in derivatives trading.
The crypto adoption trend has happened and is here to stay, but it's now up to the industry to innovate and deliver on our long-held potential during this prime time moment.
Augustine Fan is an experienced professional with over two decades of distinctive track records across Wall Street, family offices, private equity, and now crypto. Along with his current leadership efforts at SOFA.org, he also serves as Partner & CFO of SignalPlus, a leading digital asset software technology for crypto options. Prior to joining crypto, Augustine worked for a decade at Goldman Sachs as a US interest rates trader and macro specialist in NY, London, Tokyo, and HK offices. Following his time on Wall Street, he joined a significant shipping-based family office in HK to help manage one of the most active secondary macro trading portfolios in Asia. He further refined his investment acumen as the CIO for another HK-based family office, with a deeper focus on private equity, credit, real estate, listed vehicles, and frontier investments.
