Bitcoin Q4 2025 Return Drops 23% Marking Second Worst Performance Ever

Bitcoin’s fourth quarter of 2025 ended with a 23% decline, its second-worst Q4 performance in history according to reports. The cryptocurrency dropped from its early October peak of over $122,500 to below $94,500 before rebounding slightly in late December. The drop followed a $19 billion liquidation cascade in October, which exposed the market's fragility.

Ethereum fared worse, declining by 28.28% in Q4 2025, making it one of the worst-performing altcoins during the year's final months. This decline was driven by broader risk aversion and weak inflows into altcoin ETFs, which failed to offset selling pressure.

The digital asset treasuries (DATs) that had previously fueled buying momentum also shifted from buyers to potential sellers. Many DATs saw their share prices fall below net asset values, limiting their ability to issue new shares.

Why Did This Happen?

The fourth quarter of 2025 was expected to deliver strong returns for Bitcoin, historically averaging 77% and median returns of 47% since 2013. However, this year's performance fell well below historical averages and placed it among the worst Q4s since the 2018 bear market.

The liquidation event in October was a key turning point. It exposed the market's vulnerability to leveraged bets and the lack of institutional safeguards. The sell-off not only damaged liquidity but also eroded investor confidence, leading to reduced open interest and speculative activity.

Digital asset treasuries and spot altcoin ETFs were also expected to provide new inflows and price support. However, their performance failed to live up to expectations. While XRP and Solana ETFs recorded inflows, their underlying tokens still declined significantly.

How Did Markets React?

Investor behavior shifted to a more defensive stance as 2025 came to a close. Bitcoin ETFs saw a net outflow of $825 million in the last five trading sessions of December, with BlackRock's IBIT and Grayscale's GBTC leading the sell-off. This selling pressure was driven by tax-loss harvesting and portfolio rebalancing ahead of 2026.

Ethereum ETFs also recorded outflows, with spot Ether products losing $196 million in the prior four sessions. The broader altcoin market, meanwhile, saw over 60% of tokens fall into the graveyard zone, with many declining by 70-99%.

Bitcoin's underperformance contrasted with traditional assets. While the Nasdaq Composite and gold rose by 5.6% and 6.2% respectively since October, Bitcoin declined by 21% over the same period.

What Are Analysts Watching Next?

The fourth quarter's poor performance raises questions about the durability of the bullish narratives that fueled much of 2025's momentum. Analysts are now watching for any signs of renewed institutional demand and regulatory clarity in 2026.

Grayscale's latest report highlighted that while the broader market turned cautious, some underlying metrics remained positive. Transaction volumes in the currencies sector rose, and total fee revenue in Q4 2025 more than doubled compared to Q3 2024.

Regulatory developments could shape the next phase of crypto adoption. A bipartisan crypto bill in the U.S. could provide clearer frameworks for digital assets and enable broader participation by financial institutions.

Bitcoin's ETFs have also shown signs of stabilization. Spot Bitcoin ETFs recorded a $355 million inflow on December 31, ending a seven-day outflow streak. This suggests that some investors are beginning to see value as prices stabilize and macroeconomic conditions evolve.

The coming year will test the resilience of the crypto market. While the Q4 2025 decline was sharp, the long-term outlook for digital assets remains tied to regulatory progress, macroeconomic factors, and institutional adoption according to market analysis.