What once appeared as a niche and highly speculative market is rapidly evolving into a fully-fledged financial ecosystem attracting institutional capital, sovereign interest, and global regulatory attention.
In this discussion, Sina Meier and Quentin Barrou from 21shares examine the forces driving that evolution: the growing sophistication of market infrastructure, the emergence of new value-creation models across blockchain applications, and the increasing integration of digital assets into traditional financial frameworks.
From Bitcoin’s role as a macro asset to the rise of app-specific blockchains and token-based economic models, the conversation offers a deeper look at how the crypto industry is entering a new phase of maturity.
Beyond market cycles, what structural changes are making the digital asset ecosystem more mature and "institution-friendly" than it was a few years ago?
What's different about this cycle is the way the market behaves, and that is the result of three main factors: infrastructure, regulatory clarity, and a fundamentally different cohort of capital.
US spot Bitcoin ETFs have channelled institutional capital at scale through familiar, regulated instruments, what was operationally awkward pre-2024 is now a ticker that fits inside existing workflows. Europe was earlier in this evolution; physically-backed ETPs have been listed in the region since 2018, and the regulatory perimeter has continued to widen, with frameworks now in place across 58 jurisdictions globally. Liquidity has followed: daily Bitcoin trading volumes regularly exceed $50 billion, surpassing those of Nvidia, the world's most valuable publicly traded company. This is institutional-grade market depth, not a thin, illiquid market.
That infrastructure has changed who is buying. Corporates, ETFs, and sovereign entities have absorbed Bitcoin at more than five times the pace of new issuance over the past year, a different cohort from the retail-led flows of prior cycles, and their behaviour is different too. Through the Q4 2025 correction, US spot ETF holdings have stayed remarkably sticky, with European Bitcoin ETPs continuing to see over $1.5 billion in cumulative net inflows since the all-time high. The marginal buyer has stopped panic-selling on drawdowns; they accumulate.
The downstream consequence is a healthier market structure. Annualized volatility has compressed from above 100% in prior cycles, to roughly 40%, and the drawdown profile has changed materially: historical Bitcoin bear markets bottomed around -82%; the current correction has bottomed at roughly half that depth. Patient capital has compressed both the depth and the duration of corrections, a hallmark of a maturing asset class.
If you had to identify three non-obvious but significant trends that are actually changing the way value is created and captured in crypto today, what would they be?
Beyond the obvious, Three connected trends tell one story about where value is migrating in this asset class.
First, the rise of the "Fat App Thesis.”
For nearly a decade, the dominant idea was that blockchains would capture more value than the applications built on them. That has decisively flipped. The biggest winners of this cycle have been applications, not protocols: Polymarket, Pump.fun, Hyperliquid, Virtuals, ai16z. The parallel to the internet era is direct, most economic value did not accrue to the actual internet protocols (TCP/IP, HTTP, or DNS); it accrued to the businesses built on top. Protocols remain essential, but apps are increasingly where moats are built around real user bases and real revenue, which is a trend we expect to continue.
Second, the rise of app-specific blockchains.
As applications become the dominant locus of value creation, the most successful ones are choosing to own the full stack rather than rent it. Hyperliquid is the cleanest example: a purpose-built network underneath the application itself, with all of the application’s value flowing to one asset rather than being fragmented across L1, L2 sequencers, and middleware. The results speak for themselves with roughly $80 million in revenue per employee, and total revenue overtaking Ethereum last year ($844 million versus $524 million).
Third, stronger economics between application activity and token value.
Historically, even successful applications often had no mechanism to translate economic success into token value. Hyperliquid's 97% fee-to-buyback model is the most aggressive version of this emerging pattern; Morpho restructured as a subsidiary of a tokenholder-governed association. Combined with the regulatory path for tokens to be classified as digital commodities rather than securities, these patterns are blurring the line between token and equity, where value flow and economic rights are designed to align.
While Bitcoin and large-cap assets are widely discussed, are we seeing the emergence of a more nuanced market segmentation, where different digital assets play distinct roles in an allocation?
Yes, and it follows from the fact that these are distinct asset types with different behavioural profiles, each tapping into different structural trends. Our framework at 21Shares (the GCCS, our equivalent of MSCI's GICS framework for equities) maps Bitcoin, Ethereum, Solana, and the broader altcoin universe against the same classes allocators already use for traditional markets.
Bitcoin is best understood as an emerging digital store-of-value asset, supply capped at 21 million, not controlled by any central bank, and bears no counterparty risk. Under normal conditions it shows moderate, regime-dependent correlation to both risk-on equities and gold, with episodes of decoupling. During systemic stress, most clearly the 2023 US regional banking crisis, that decoupling sharpens materially, with correlation to traditional risk-on assets flipping negative. Bitcoin is the cleanest expression of structural demand for a non-sovereign hedge against debasement, and belongs in the alternatives sleeve.
Ethereum and Solana behave more like technology growth assets. They exhibit moderate Nasdaq correlations but have demonstrated meaningful decoupling from traditional tech, with returns driven by network adoption, developer activity, and onchain economic usage: drivers with no direct analogue in equity indices. Both sit in the tech sleeve: Ethereum as core blockchain infrastructure, the neutral global computer for next-generation financial services; Solana as a higher-beta growth satellite, earlier-stage and faster-moving.
The rest of the altcoin universe is best framed as a venture-style allocation, liquid, protocol-level positions in early-stage blockchain businesses. The token structure transforms what would otherwise be illiquid, lock-up-bound stakes into assets tradeable around the clock. That advantage distinguishes it from a traditional venture sleeve; the sizing discipline, however, should still mirror one, as a satellite position, not a core allocation.
ETPs have contributed significantly to opening up the market. Are they also changing the way crypto is perceived, from a "class of alternative assets" to an integrated financial infrastructure?
Yes, and the shift is happening on two reinforcing levels.
On the access side, the route into digital assets is no longer "alternative" at all. An investor accessing Bitcoin through a physically-backed ETP is using the same execution venue, clearing infrastructure, and framework as for any equity or ETF. These instruments have developed their own market structure on top: listed options on the major spot Bitcoin ETFs, futures contracts, prime broker financing, and lending and collateral use through the same desks that handle traditional securities. This serves as a clear signal that the asset has been absorbed into financial infrastructure, not bracketed off from it, which mirrors the inflection point Invesco's QQQ marked for the internet era in 1999 — the regulated wrapper that brought institutional capital into an emerging asset class and pulled it into mainstream portfolios.
But the more interesting development is what the ETP wrapper has unlocked beyond access. Having built comfort with Bitcoin and Ethereum through the regulated wrapper, institutional allocators have moved a step further: into the infrastructure underneath. Bitcoin is increasingly used as pristine collateral on institutional prime broker platforms. Ethereum has become the homebase of stablecoins and tokenisation issued by major institutions. Hyperliquid is now cited by Bloomberg as the primary indicator for weekend commodity volatility, with its order books pricing oil during the Iran conflict roughly 48 hours ahead of traditional markets. Crypto is no longer "an alternative" sitting in the corner, it is slowly becoming the underlying infrastructure of the financial system itself, with ETPs as the bridge that brought capital to the rails.
Finally, beyond performance and diversification, what is the real issue for institutional investors today: exposure to an asset... or access to a new market logic?
I would push back slightly on the framing of "new market logic." Access to digital assets is largely a solved problem: through ETPs and other regulated wrappers, institutions can engage with this asset class using the same infrastructure they already use for other allocations.
The real issue, in our view, is still about exposure to a new kind of asset class, which can be mapped against traditional categories but not on a one-for-one basis. Yes, Bitcoin fits into the alternatives sleeve, Ethereum and Solana as innovation exposures, and the broader universe maps to a venture-style allocation. But the analogy stops short of being exact, because digital assets come with risk factors that don't have direct analogues: technological risk in the underlying protocols, regulatory evolution moving in real time, market-structure dynamics specific to onchain economies, and a growing maturity profile. The case for inclusion is strong, but understanding where its sensitivities sit requires a different lens than traditional asset allocation alone.
This is why education matters in this asset class more than in most. At 21Shares, we publish our research openly and freely because we believe information symmetry is what allows the industry to progress and what allows investors to make informed decisions. The institutional question on Bitcoin has clearly shifted, most allocators are no longer asking "should I invest in this?" but "how do I best structure exposure: at what size, in which sleeve, with what discipline?" That is the right level of question, but it can only be asked once the drivers of the asset class are understood.
DISCLAIMER
This report has been prepared and issued by 21Shares AG for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Crypto asset trading involves a high degree of risk. The crypto asset market is new to many and unproven and may have the potential to not grow as expected.
Currently, there is relatively small use of crypto assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in crypto assets. In order to participate in the trading of crypto assets, you should be capable of evaluating the merits and risks of the investment and be able to bear the economic risk of losing your entire investment.
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