Autumn stress test for the crypto market: A correction or a new market paradigm

The following is a guest post and opinion from Volodymyr Nosov, Founder and President at W Group, CEO at WhiteBIT.

For the second consecutive month, the cryptocurrency market has been in decline. A nearly 30% correction since early October — roughly $1.2 trillion in market capitalization — raises questions about the depth of this downturn and what is driving it.

To emphasize from the outset: the current drop is not a crisis but a temporary correction. In traditional financial systems, corrections are often much deeper and do not trigger excessive panic. The crypto market is significantly younger — many assets have existed for only a few years — so volatility is natural and does not indicate structural problems. Moreover, cryptocurrency remains one of the riskiest asset classes, which is why it is usually sold first during periods of correction.

Drivers of the Decline

The downturn that began in October cannot be attributed to a single cause. In my view, it is the result of five key factors.

1. Reduced Institutional Interest

It is important to understand that the crypto industry is undergoing a new paradigm shift, in which market dynamics are no longer shaped by retail investors but by large institutional players, hedge funds, major funds, and ETF structures. Their positioning strategies now determine market behavior and set the tone for changes.

After the industry growth in the first half of 2025, some major players executed their tactical decisions. As a result, short-term demand decreased, making the correction inevitable. Still, this should not be seen as the end of the cycle. It is a pause — a moment when capital is being redistributed between existing and new institutional participants.

2. Broader Economic Context

The crypto downturn occurred against the backdrop of a general economic slowdown.

In the autumn, investment in AI-focused technology companies contracted. Major global indices fell: Japan’s Nikkei 225 and Hong Kong’s Hang Seng dropped first, triggering a chain reaction across Western markets. Wall Street also traded lower. Gold declined as well. Such corrections are a normal part of market cycles — they occur after periods of sharp growth to “adjust” excessive valuations.

3. Excessive Leverage Flush-Out

At the beginning of 2025, during a period of rapid growth, leverage levels on derivatives exchanges became dangerously overstretched, especially among retail traders. Mass liquidations on October 10 washed out excessive borrowing. Lower liquidity and some capital outflow pushed out weaker short-term participants, while the positions of many long-term holders remained stable. For a young market, this type of reset is fairly typical.

4. Regulatory Adjustment

We are still in the implementation stage of major global regulatory frameworks, including the European MiCA. While awaiting full legal guidance on certain products, institutional players are reallocating and holding capital, preparing to invest more actively once final rules are known.

Meanwhile, another regulator — IOSCO, the global securities oversight body — highlighted new risks stemming from the rapid rise of tokenization, particularly regarding the reliability of the backing of tokenized assets. As we can see, long-term trust in crypto will depend not only on market demand, but also on whether regulators can close potential gaps before systemic risks emerge.

5. Changing Market Structure

Following the liquidations, major players trimmed part of their positions, reducing upward momentum. Retail sentiment almost no longer defines market dynamics — cycles are now shaped by large capital. The correction reflects a transitional phase, as some institutions have temporarily paused their activities, while others have not yet entered the market. As this balance normalizes, such fluctuations will likely become less abrupt.

Approaching Stability

How long will this downturn last, and what consequences might it have?

Fundamentally, the market is already more resilient than a few years ago. Its structure increasingly resembles that of mature assets — such as gold or the S&P 500 — where growth unfolds through structural waves rather than emotional spikes.

The correction may last from several weeks to a few months. Its depth and duration will depend on macroeconomic conditions and market sentiment. Corrections of around 30% are common during bullish cycles, though a recovery in large institutional inflows will require time.

The crypto market will likely return to greater stability during the first half of 2026. During this period, it may move within moderate fluctuations and even show some growth. Under favorable macroeconomic conditions, the industry could regain a confident bullish rhythm by 2027.

Full regulatory implementation, renewed institutional capital inflows, the development of the RWA market, supportive Federal Reserve rate policies, and the recovery of liquidity will all contribute to stability.

A Sprint, Not a Marathon

Finally, it is worth noting some positive outcomes of the recent downturn. The temporary shake-out cleared the market of weak projects and questionable assets. Most participants will seek quality: capital is likely to shift from speculative tokens to assets with clear utility and strong compliance standards.

Importantly, many exchanges passed an infrastructure stress test, successfully handling technical load during mass liquidations.

The level of irresponsible risk-taking in the market has decreased, allowing the industry to demonstrate real progress and structural resilience after this pause.

At the same time, I advise market participants to shift from a marathon mentality to a sprint-focused one. Prioritize long-term strategies and risk management rather than chasing rapid peak valuations. Opportunities remain — and will continue to grow — but the path to sustainable capital may become longer and more demanding.

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