Crypto’s $1 Trillion Come-Down Collides With Wall Street’s AI Boom

A record high, then a rapid reversal

On an October morning last year, bitcoin looked untouchable. The world’s largest cryptocurrency surged past $125,000 for the first time, lifting the total value of digital assets above $4.3 trillion and capping a decade‑long quest for mainstream legitimacy with new exchange‑traded funds and federal laws.

By New Year’s Eve, more than $1 trillion of that paper wealth had disappeared. Bitcoin ended 2025 below $88,500, more than 30% off its October peak and on track for its first annual loss since 2022. At the same time, the stock market’s standout winners were not token issuers or crypto miners but companies selling the chips and software that power artificial intelligence.

The abrupt reversal marked a turning point in where investors were willing to take risk. Crypto still won some of the structural victories its industry had long sought — from a surge in spot bitcoin exchange‑traded funds to the first comprehensive U.S. stablecoin law. But as the year closed, the center of gravity for speculative capital had shifted decisively to AI.

Bitcoin’s boom and bust

Bitcoin’s 2025 arc was unusually compressed. After a choppy first quarter, it rallied through the summer and early fall, hitting an all‑time high above $125,000 on Oct. 5, according to multiple price indexes. Some outlets put the intraday peak closer to $126,300. At that level, bitcoin’s market capitalization hovered around $2.4 trillion, rivaling the world’s largest public companies.

The broader crypto universe followed. Data providers estimated the total market value of digital assets reached about $4.35 trillion in early October, a record that eclipsed the peaks of the 2017 and 2021 booms.

Several forces combined to push prices higher:

• New spot bitcoin ETFs made the asset easier to buy in brokerage and retirement accounts.
• The U.S. political climate turned more supportive after Donald Trump returned to the White House in January.
• Congress advanced legislation that many in the industry saw as a long‑awaited framework for stablecoins and token trading platforms.

Then the mood turned.

In late October and November, the Trump administration announced sweeping new tariffs on Chinese imports and tightened export controls on advanced semiconductors. The moves rattled global markets already uneasy about lofty valuations in technology and crypto. In digital asset markets, where traders had piled on leverage, the reaction was swift.

Over roughly six weeks, about $1.2 trillion was wiped from the crypto market’s value, according to major financial publications that track sector capitalization. Bitcoin slid below $100,000, then briefly under $90,000, before stabilizing in the high‑$80,000s. By Dec. 31, it closed near $88,500 — down roughly 5% for the year and more than 30% below its October record.

Market analysts said the quarter ranked among bitcoin’s worst on record. CoinDesk described the final three months of 2025 as its weakest fourth quarter since 2018, with declines in the low‑ to mid‑20% range and widespread forced liquidations in derivatives markets.

“It was a classic leverage reset,” one digital‑asset strategist said. “People chased the ETF narrative and the regulatory wins right into a macro shock.”

ETFs kept buying — until they didn’t

The sell‑off came even as 2025 was, by one measure, a breakthrough year for institutional access to crypto.

Spot crypto exchange‑traded funds in the United States attracted roughly $32 billion in net inflows across bitcoin, ether and newer products such as solana funds, data compiled by ETF analysts show. Spot bitcoin ETFs alone took in about $21 billion, a sizable figure though below their 2024 launch‑year totals.

BlackRock’s iShares Bitcoin Trust emerged as the dominant vehicle. The fund absorbed about $25 billion in net new money during 2025, placing it among the top exchange‑traded products globally by inflows, even as bitcoin itself finished the year lower. Its success underscored how quickly the world’s largest asset manager was able to sell a crypto product to financial advisers, family offices and other mainstream investors.

“Flows into IBIT tell you this isn’t just day traders anymore — it’s model portfolios and long‑only allocators,” one ETF researcher said.

Beneath the headline numbers, however, the picture grew more mixed as the year wore on. Stripping out BlackRock’s fund, the other nine U.S. spot bitcoin ETFs collectively saw net outflows of about $3 billion, led by an exodus of nearly $4 billion from Grayscale’s converted trust as investors switched to cheaper products.

By November, even IBIT’s momentum stalled. Bloomberg data showed more than $2.7 billion pulled from the fund over a five‑week stretch through Nov. 28, the longest run of withdrawals since its debut. Industry trackers said spot bitcoin ETFs as a group turned net sellers of bitcoin late in the fourth quarter.

That divergence — strong full‑year inflows paired with late‑year redemptions — captured the broader mood around crypto by December: still embedded in portfolios, but no longer the trade of the moment.

AI’s banner year

While crypto cooled, AI‑linked stocks and funds cemented their status as 2025’s biggest winners.

The S&P 500 rose about 16% for the year, and the tech‑heavy Nasdaq Composite gained roughly 20%. Market commentators widely credited a handful of mega‑capitalization companies tied to artificial intelligence for driving those returns.

None loomed larger than Nvidia. The chipmaker’s shares climbed around 35% to 40% in 2025, and its market capitalization swelled into the $4.5 trillion to $5 trillion range, briefly making it the world’s most valuable public company by some measures.

The gains were underpinned by eye‑catching financial results. In February, Nvidia reported that its fiscal 2025 revenue had more than doubled from the prior year to $130.5 billion, driven mainly by demand for data‑center processors used to train and run large language models. Chief Executive Jensen Huang described the company as “at the center of two industry transitions — accelerated computing and generative AI” and touted the rollout of its next generation of AI supercomputers.

AI‑themed exchange‑traded funds also outpaced broader markets. The Global X Artificial Intelligence & Technology ETF reported a roughly 32% to 34% total return over 12 months, while its robotics and AI sibling delivered mid‑teens gains on a one‑year basis. Those products, which hold baskets of companies such as Alphabet, Advanced Micro Devices, Tesla and Taiwan Semiconductor Manufacturing Co., benefited from steady inflows from investors seeking diversified exposure to the AI theme.

The juxtaposition was striking. As bitcoin surrendered much of its year’s gains in the final quarter, index‑level measures of AI exposure closed near highs. One Wall Street Journal year‑end analysis noted that investor interest had “shifted strongly toward AI,” pointing to Nvidia’s nearly 40% stock gain as evidence that capital was being pulled away from crypto and toward companies promising tangible earnings growth from artificial intelligence.

From mines to model farms

The rotation was not just financial. In some corners of the real economy, pieces of the crypto industry itself began pivoting toward AI.

Large bitcoin mining firms, which operate power‑hungry server farms to compete for new coins, have started repurposing some of their infrastructure as data centers for AI workloads, according to executives and regulatory filings. The same cheap electricity contracts, cooling systems and industrial‑scale racks that support mining rigs can be used to host graphics processors for cloud‑based AI services.

That shift reflects pure economics: with bitcoin prices off their peaks and competition for mining rewards intense, some operators see higher margins in leasing space to technology companies training and deploying AI models.

Local officials in U.S. regions with clusters of crypto mines say the transition carries similar benefits and concerns. The facilities still draw substantial power and raise questions about grid resilience and emissions. But proponents argue that AI tenants may offer more stable, long‑term demand than the volatile mining business.

A different kind of crypto downturn

For longtime participants, 2025’s late‑year slide felt painful but different from prior “crypto winters.”

In 2018, bitcoin fell more than 80% from its 2017 peak as the market for initial coin offerings collapsed and regulators cracked down on unregistered token sales. In 2022, a string of high‑profile failures — including the implosions of the TerraUSD stablecoin and the FTX exchange — drove bitcoin below $20,000 and prompted a wave of enforcement actions.

This time, there was no comparable collapse of a major platform, and the percentage drawdown from the peak was smaller. More importantly for the industry, the legal and institutional landscape looked more favorable than in previous busts.

In July, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the GENIUS Act, after bipartisan passage in Congress. The law created the first comprehensive federal framework for payment stablecoins, requiring issuers to hold 100% reserves in cash or short‑term Treasuries and to publish monthly disclosures of their holdings.

The White House said at the time that GENIUS would “make the United States the undisputed leader in digital assets” and provide “the first‑ever federal regulatory system for stablecoins.” Consumer groups and some lawmakers criticized the measure as too lenient on large technology firms and financial institutions, but the industry hailed it as a milestone.

Lawmakers also advanced the Digital Asset Market Clarity Act, often shortened to the Clarity Act, which aims to define key terms such as “digital commodity” and “mature blockchain system” and to clarify the jurisdictional lines between the Securities and Exchange Commission and the Commodity Futures Trading Commission. While the bill had not fully cleared Congress by year‑end, its progress signaled a shift toward rules‑based oversight rather than regulation by enforcement.

At the same time, a more crypto‑friendly SEC leadership team moved to approve additional spot exchange‑traded products beyond bitcoin, including funds tied to ether and solana.

Those steps came against a backdrop of aggressive political spending by the sector. Campaign‑finance data show crypto companies and allied political action committees poured more than $200 million into federal races and lobbying in 2025, backing candidates who favored the new laws and looser restrictions on digital‑asset businesses.

The result, analysts say, is a market that can absorb large price swings without threatening its core infrastructure.

“Calling this a ‘winter’ doesn’t fit the facts,” said one digital‑asset policy expert. “You have ETFs, you have a stablecoin statute, you have detailed legislation moving. Prices went down, but the plumbing got stronger.”

The next cycle

For investors, the question now is whether crypto’s 2025 hangover marks the end of a cycle or a pause in a longer‑term shift.

Bitcoin still trades at levels that would have been unthinkable just a few years ago, and spot ETFs have embedded it in tens of billions of dollars of retirement and wealth‑management portfolios. Lobbying victories in Washington have given large issuers and exchanges clearer rules of the road.

But the center of market excitement has moved. In 2017 and again in 2021, crypto was arguably the defining speculative story on Wall Street. By the end of 2025, that role had been taken by artificial intelligence — an industry with trillion‑dollar companies, soaring revenues and a direct link to corporate investment budgets.

The two are not mutually exclusive. Investors who trimmed bitcoin in favor of Nvidia or AI‑themed funds may return to tokens if macro conditions or narratives shift. Crypto‑built data centers now humming with AI chips could swing back to mining rigs in a future bull run.

For now, the charts tell a simple story. On one line, bitcoin shot to a record and then slipped into a bruising late‑year decline. On the other, AI‑heavy equities climbed steadily to close the year near their highs. After a decade when digital coins often stood in for the whole idea of financial disruption, 2025 ended with a different three‑letter trade setting the tone — and crypto learning what it feels like to share the stage.