The year 2025 can easily be credited the rise of cryptocurrencies. Bitcoin surpassed the mark of $1,26,000 to hit an all-time high in October. However, the rally couldn’t last long and the Bitcoin slumped to the level of $91,881 at the time of writing. So far this year, Bitcoin is now down by 1.7%.
The rally in initial phase of 2025 has been fueled by supportive regulations from the Trump administration, solid spot Bitcoin ETF inflows and rising demand from institutional investors. In fact, many started to view Bitcoin as a safe asset amid heightened trade tensions earlier in the year 2025.
Inside the Performance of Other Cryptocurrencies
Ethereum has lost 5.3% in the year-to-date frame. Ethereum price has topped a $4,830-level in August and tried to hit highs on several occasions in subsequent months, though in vain. Solana price has lost 26.9% in the year-to-date frame. Solana price has hit a yearly high of $261.78 in January and $247.62 in September. Meanwhile, Ripple is flat for the year and has hit an all-time high of $3.56 in July.
What’s Behind the Recent Slump?
Sentiment weakened lately after the People’s Bank of China issued a statement Saturday, cautioning against illegal digital currency activities, as quoted on CNBC. Muted trading volumes on both centralized and decentralized exchanges hint at subdued risk appetite across the crypto market, as mentioned on CNBC.
A rise of risk-off sentiments amid tepid economic conditions, and profit-booking probably led to the year-end of slump in the crypto market. Trade tensions have eased a lot now, and investors have likely begun shifting their focus toward global equities and away from cryptocurrencies (unlike what it was in early 2025), as global economic, corporate, and trade conditions are now far more certain than they were at the start of 2025.
What Lies Ahead of 2026?
Against this backdrop, let’s find out what could be the setup for cryptocurrencies in 2026.
Are Latest Price Swings Normal?
Bitcoin’s more than 30% slide from its record high is a reminder of the dramatic price swings that define the cryptocurrency market. However, historical patterns suggest that such moves are not only typical but often follow major rallies, according to CoinDesk Data shared with CNBC.
Note that the Bitcoin market cycle has seen a 32.7% drop (Mar–Aug 2024) and a 31.7% decline (Jan–Apr 2025). CoinDesk analyst Jacob Joseph noted that such corrections align with long-term trends, as quoted on CNBC. Hence, the latest correction may not be seen as erratic.
The CNBC article went on to highlight that during the 2017-cycle, there were slumps of around 40% twice that year and then a 29% fall in November before bitcoin reached a new record high in December. In 2021, there were slides of 31.2% and 26%, followed by a 55% plunge during China’s mining ban, before surging to new highs in November that year.
How Low Bitcoin Go Now?
Some pessimistic analysts warn — if macroeconomic stress or institutional exits gain momentum — a crash below $50,000 can’t be ruled out by 2026, as quoted on Economic Times. In “crypto winter,” Bitcoin has tended to go 70% to 80% below its all-time high, as quoted on CNBC.
Any Silver Linings?
Rate Cuts Could Favor Risk-On Assets Like Bitcoin
The Fed enacted two rate cuts so far this year, with the first one enacted in September. The central bank is expected cut more in the coming days to restore a weakening labor market. Lower rates normally favor risk-on assets like Bitcoin by reducing the opportunity cost of holding non-yielding assets.
Bitcoin Miners Focusing on AI Infrastructure
Bitcoin miners are evolving fast. Originally focused on mining, they are now leveraging their power-dense data centers to tap into the booming AI infrastructure market. By mid-2025, dozens of former Bitcoin mining companies started redirecting their infrastructure into AI data centers, converting their GPU-heavy, energy-intensive setups into rentable compute farms for training, inference, and high-performance computing, as quoted on datacenters.com.
Some Investment Firms Suggest 1% to 4% Crypto Exposure
Bank of America BAC advises its wealth management clients to consider adding a small amount of cryptocurrency to their portfolios. The firm recommends a 1-4% allocation to digital assets for clients of Merrill, Bank of America Private Bank and Merrill Edge, as quoted on Yahoo Finance.
In an early October note, Morgan Stanley suggested that 2-4% of a portfolio should be in crypto, describing it as a "speculative but increasingly popular asset class that many investors, but not all, will seek to explore," as mentioned on a Yahoo Finance article.
Outlook
With regulatory clarity improving and demand rising, we believe the crypto bull cycle may still have room to run. However, risks are also there as cryptos are volatile and still have less mainstream acceptance. However, a small allocation of your portfolio toward cryptocurrencies may be a good idea.
Investors can play Bitcoin ETFs like Bitwise Bitcoin ETF BITB, Fidelity's Wise Origin Bitcoin Fund FBTC, Grayscale's Bitcoin Mini Trust BTC, and BlackRock's iShares Bitcoin Trust IBIT as well as Ethereum ETFs like iShares Ethereum Trust ETF ETHA, Grayscale Ethereum Trust ETF ETHE and Fidelity Ethereum Fund ETF FETH.
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Bank of America Corporation (BAC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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