2026 Crypto Outlook

• Despite an exceptionally supportive political backdrop, 2025 was a frustrating year for crypto investors, with prices ending broadly flat but punctuated by periods of high volatility.
• As 2025 drew to a close, market participants were left questioning whether the four-year cycle that has historically defined crypto market peaks still holds—raising the prospect of either a late-cycle extension or an atypically weak 2026.
• We believe this long-standing rule-of-thumb has lost relevance, as macro policy and global liquidity conditions remain expansionary, in stark contrast to the tightening environment that preceded the 2022 crypto winter.
• One of the most consequential debates likely to intensify in 2026 is the threat posed by quantum computing, particularly its implications for Bitcoin’s long-term cryptographic security and governance.
• Finally, we expect rising demand for Web3-based, privacy-preserving solutions amid tighter online regulation, alongside a renewed and accelerating push to tokenize real-world assets.

2025 was without doubt a very frustrating year for crypto investors. It started off so promising with the inauguration of the most pro-crypto US president in history, the anticipation of which powered the strong rally in the last few months of 2024. However, this positive momentum failed to be sustained and digital asst prices effectively stagnated during the remainder of the year. Actually, perhaps stagnation is not the correct adjective because even though the performance was flattish on the year, price action was anything but quiet as the yearly candle on the price of Bitcoin clearly demonstrates – see image. Neither the bulls nor the bears were right last year!

Bitcoin Annual Candle

Source: Trading View

Turning now to the three predictions we made. How did we get on?

As a recap, they were: the establishment of at least one officially-sanctioned Bitcoin strategic reserve, which should be considered part of the continued centralization trend in Bitcoin; the arrival of altcoin season (a necessary ingredient in every crypto bull market); and, finally, even greater overlap between AI and crypto.

Strategic Bitcoin Reserves

On March 6, 2025, President Donald Trump signed an executive order establishing the US Strategic Bitcoin Reserve (SBR). This outcome was widely anticipated at the time of his election win, so our prediction was always a very high probability event (as we acknowledged at the time). However, our reason for including it in our list was that it had the potential to mark the start of a trend towards greater ownership of digital assets by nation states.

Unfortunately, the follow-through has been more tentative than the bulls (and ourselves) anticipated. Part of the reason for this, in our view, is that the SBR was capitalized by coins seized through law-enforcement and court forfeitures. This is unlike the first two SBRs established in Bhutan and El Salvador, which intentionally acquire Bitcoin via mining or active government purchases. Hence, even though the US government has the largest Bitcoin bag of all nation-states (total holdings increased to over 325,000 BTC following a major seizure in October 2025) and its stated intention is to hold them for the long-term, the reality is the Trump administration essentially codified what other governments, most notably China and the UK who hold roughly 190,000 and 61,425 seized Bitcoin respectively, are already doing in practice.

Moreover, there has been no concrete outline as to how, or when, or even if, the SBR will acquire additional Bitcoin in the future aside from via criminal seizures. Indeed, the only mention in the executive order is that future acquisitions are permitted so long as they are done using “budget neutral” strategies, meaning Bitcoin purchases cannot add to the federal budget deficit or cost taxpayers. This is certainly not the active buy programme many bulls expected following the SBR’s establishment, and which could have triggered a more explosive price response due to other nation-states suffering from a bout of FOMO.

That said, despite the damp squid vibe, nation state adoption of Bitcoin is continuing. In October, Luxembourg’s Intergenerational Sovereign Wealth Fund (FSIL) announced its decision to allocate 1% of its portfolio to Bitcoin (BTC) ETFs. This makes it the first Eurozone country to invest part of its national savings in Bitcoin but it is unlikely to be the last given German, French, Swedish, Polish and Czech lawmakers are all actively considering whether include cryptocurrencies in their portfolios. Outside of Europe, nation state interest is even stronger in Asia and especially the Middle East – see image.

Country Exposure To Bitcoin (Active or Proposed)

Source: Bitcoin Policy Institute

Private DATs More Active

While crypto adoption by nation-states has been somewhat lacklustre the same cannot be said for private companies. One of the most prominent themes last year was the rise of digital asset treasuries (DATs). Seeking to emulate the success of the first ever DAT, Michael Saylor’s Strategy (formerly MicroStrategy), over a hundred companies have either pivoted their business models, or been set-up exclusively, to hold significant amounts of Bitcoin on their balance sheets. At the time of writing, they collectively hold over 1 million Bitcoin—Strategy is way out in front with holdings of more than 650,000— or more than 5% of existing circulating supply. Incorporating the Bitcoin holdings held by eight nation-states means that around 110 entities control approximately 8% of Bitcoin’s circulating supply. This increased centralization of Bitcoin ownership may not sit well with crypto anarchists because it corrupts their dream of a decentralized, incorruptible, private money taking over the world but, as we noted in last year’s annual outlook…

“… that dream was always undeliverable, at least in its purest form, because the ossification of the Bitcoin code necessarily implies increased centralization if Bitcoin is to thrive, irrespective of whether governments get involved or not.”

This centralization tendency is not just apparent in the seminal cryptocurrency, it is also occurring in the other mega cap cryptocurrencies like Ethereum. There are now 26 companies that have established ETH Treasuries and collectively they own over 5.7 million tokens, representing 4.7% of its circulating supply.

Does this mean the raison d’être of cryptocurrencies is dead?

Not really. It would be nice if a decentralized, incorruptible, form of private money existed but until the constraint of the blockchain trilemma is greatly relaxed one of those attributes has to be sacrificed and of the three a moderate increase in centralization is the least problematic. To understand why we need to go back to the very beginning.

The primary reason why Satoshi designed Bitcoin the way he/she/they [delete according to your preferred theory of who Satoshi is] did is to avoid reliance on a “trusted third party” to process transactions, namely removing the need for a central authority. That remains the case even if a significant amount of the circulating supply of Bitcoin is held by a hundred or so entities. Neither does such concentrated ownership threaten Bitcoin’s security model because transactions are verified and recorded by a vast network of independent nodes using a proof-of-work consensus, whose hash rate is a staggering 953.58 EH/s (that’s 9.5358 followed by 22 zeros hashes per second!). Combined with the open sourced code base and the voluntary nature of software upgrades (as illustrated by the heated Core v30 vs. Knots debate this year), there is no way these big bag owners can influence the evolution of Bitcoin. As such, it remains an electronic form of money that cannot be debased, unlike centrally-issued fiat money.

That said, one thing concentrated ownership by DATs and governments could trigger is increased price volatility, especially downside volatility. This is because DATs provide a new potential attack vector. We saw an instance of this just recently in relation to Strategy. In the dying days of 2025, social media was awash with posts calling the company a fraud and a Ponzi scheme. (Bitcoin hater Peter Schiff led the charge, no doubt to the annoyance of his nephew, crypto bro Anthony Pompliano, founder of Bitcoin Treasury ProCap).

One-man FUD Factory

Source: X

As we covered this topic in our October crypto update, we have no intention to rehash why such criticism of Strategy is wide of the mark, but as we acknowledged at the time, the same does not necessarily hold true of all DATs. In fact, we warned…

“Our concern is as the crypto bull market matures, less rigorous standards will be applied to the way DATs are designed (just like lending standards were relaxed during the 2000-2007 US housing bubble). And, maintaining the US housing parallel, when the cycle does eventually turn, forced selling could exacerbate the move down because this is the fuel that feeds every major financial asset bear market. We may not be at that point currently, but it is a risk that deserves closer scrutiny.”

And that provides a nice segue to our next point, the big ponderable for 2026. Namely…

… Are We There Yet?

In the aforementioned monthly update, we pointed out that the current bull run is in the ballpark time period where the prior three cycles peaked. Does this mean 2026 will be a year of pain for the crypto bulls?

We think not for a multitude of reasons, but the primary one is because macro policy (and by extension global liquidity conditions) remains expansive not contractionary like it was in 2021/2, which triggered the last crypto winter. This will likely be particularly true for the Fed, assuming the current front runner on the online prediction markets, Kevin Hassett, replaces Jerome Powell at the Fed. If confirmed, his appointment would mean the board of governors is dominated by Trump appointees (5-2) suggesting the president’s strong preference for lower US interest rates becomes a reality¹. That being said, it does raise an interesting observation, one that directly relates to our second prediction: alt-coin season.

This typical bull market phenomenon, where altcoins outperform the market leader Bitcoin, was conspicuous in its absence last year. Indeed, it has been MIA throughout the entire rally from the November 2022 lows as can be seen in the chart below, which plots the price of Bitcoin versus its dominance ratio (defined as the market cap share of Bitcoin versus the total market cap of all cryptocurrencies). Previous bull markets have seen Bitcoin’s dominance tank, with the 2021 rally seeing a 30 percentage point drop in the dominance ratio. Last year the ratio ended pretty much where it started around the 59% mark, and in contrarian fashion during part of the year it actually rose, hitting a high of 65%.

Bitcoin Price vs. Dominance Ratio

Source: Tradingview

Unchartered Territory

The absence of alt-coin season last year means this time really is different (the four scariest words in investment circles) because if the four year cycle holds and crypto peaked in Q4 2025 then it would imply that altcoin season failed to materialize in this bull market – a first. Alternatively, altcoin season may still be ahead of us, and given this is a bull market phenomenon, this implies that the four year cycle which has characterized crypto over the past decade and a half no longer holds. So, whatever happens, at least one of the two crypto investing rules-of-thumb market participants have come to expect is invalid.

As alluded to above, it is our belief that the bull market still has legs and that the recent drawdown, while painful, does not mean we can’t go higher. Does this imply alt-coin season still lies ahead? It is tempting to say yes, but we admit to being slightly more circumspect about it this time around because there has been a distinct lack of new narratives in the crypto space (ICO craze in 2017/18, NFTs 2020/21) that typically accompany altcoin season. About the closet we came to this was the 70% rally in privacy coins (like Monero and Zcash), which was the strongest performing sector in crypto last year.

The AI-Crypto Connection

One of the narratives that we expected to power altcoin season was the increased overlap between AI and crypto – our final prediction from last year. However, like our nation-state strategic reserve call, while there has been some progress and growing chatter in crypto media and on-chain analysis circles about projects combining AI technology + blockchain/crypto infrastructure — from AI-powered trading bots and analytics platforms, to AI/ML services on decentralized networks — progress has been slower than we anticipated. That said, we still hold out hope that this this nexus will strengthen in the years ahead, given increased integration of AI into the broader economy seems inevitable, so it is inconceivable that crypto will be exempt from this trend.

So in summary, last year was a mixed bag for us in terms of our forecast success. Two of the three predictions occurred but at a much slower pace than we expected while our alt-coin season was completely wide of the mark. As we said, 2025 was unquestionably a frustrating year. So what about 2026, what do we think will be three influential trends shaping the digital asset space over the coming 12 months?

The Quantum Threat

First up, and its a biggie, the quantum threat. In many regards quantum computing is like fusion energy, in that it is a technological breakthrough that always seems to be ten years away from arriving. However, the leaps and bounds made by AI technology over the past several years has significantlyshortened the predicted timeline for achieving Artificial General Intelligence (AGI) for many experts, and this has people wondering whether the same is true for quantum computing.

Certainly, if realized, quantum computers would pose a serious threat to the most popular encryption methods currently being used because quantum computers are able to use superposed or entangled states of subatomic particles to solve complex problems orders of magnitude faster than current super computers. For instance, using Shor’s algorithm, it would take a quantum computer a matter of minutes to break asymmetric encryption that a regular computer would take billions of years to achieve.

Obviously, many areas of our lives would be negatively impacted by such technology, basically anything that requires some form of secure communication. So too would digital assets, as many blockchains rely on cryptographic functions, such as signatures and hashing functions, that are not quantum-resistant.

Over recent months, there has been a small but growing groundswell of opinion warning that the quantum threat is fast approaching, with some even suggesting it could be just a couple or so years away, and when it materializes it would trigger a price collapse – see image below. But is this really the case?

Source: X

Focusing on the seminal cryptocurrency, Bitcoin’s security is built on two cryptographic primitives, the SHA-256 hash function, which is used in mining (proof-of-work) and address generation, and ECDSA (Elliptic Curve Digital Signature Algorithm), which is used to prove ownership of coins. The impact of the SHA-256 hash function is not the primary concern because the increased computational power of quantum computers is quadratic not exponential. This means that miners using a quantum computer get a boost but it would still take hours to match the power of all the current ASIC miners, who currently are performing ~10²⁰ hashes per second. Moreover, Bitcoin has an in-built method to deal with additional computational power being brought on-stream – the fortnightly difficulty adjustment, which ensures that Bitcoin block times average roughly 10 minutes. The protocol would simply require that miners find a valid hash that has an even greater number of leading zeros, which requires more brute force calculation to achieve.

Of greater concern is the ECDSA because the aforementioned Shor’s algorithm allows a quantum computer to solve the discrete logarithm problem efficiently — i.e., it can compute the private key from the public key and with this it would be possible to steal funds from the wallet. Most at risk would be early Bitcoin addresses (especially pre-2010 “P2PK” style) containing almost 2 million Bitcoin, whose public keys have been revealed as part of the transaction process. Unspent coins though are presumed safe because they have never been used in transactions and hence their public keys remain hidden.

When is Q Day?

It is estimated that breaking ECDSA requires around 2,500 logical qubits with ~10⁹ gate operations, which is far beyond far beyond current capabilities so the risk appears to be still somewhere off in the distance. Others though, including Nic Carter who wrote a couple of deep dive blog posts on this very topic (both posts are well worth reading), suggested the threat could materialize within the next decade.

As alluded to above, the threat from quantum computing is not just a blockchain/crypto thing; it would be just as devastating for tradfi firms whose entire business model and tech stack relies on encryption. However, they have one key advantage – their centralized structure. This gives them the ability to move swiftly to implement the necessary changes to protect from the quantum threat. As a decentralized protocol with no leadership, Bitcoin is a very different. Its evolution is driven by consensus amongst Bitcoin users, and as we have seen repeatedly, gaining sufficient support to implement a code change does not happen over several months, rather it is a multi-year process– see image.

Change Is Slow In the Bitcoin World

Source: X

This is why the standard riposte of many crypto thinkers that the quantum threat can be removed simply by moving from current methods to quantum-resistant cryptographic functions is not as easy as it sounds. Just imagine the controversy it would entail.

By way of illustration, one major potential sticking point would be how to deal with “lost” coins whose owners are unable to transfer them to quantum-secure address types as they have lost their private key? Does the Bitcoin community leave the coins untouched in respect of property rights but potentially hastening the arrival of quantum computing because of the very substantial honey pot these “lost” coins constitute, or do they burn them instead? The latter method is probably the one Satoshi would prefer given he previously stated that “lost coins only make everyone else’s worth slightly more². Think of it as a donation to everyone”?, but it is far from obvious that the Bitcoin community as a whole would agree to this.

What is certain though, the risk to Bitcoin and other decentralized cryptocurrencies from quantum computing will become a hot topic within the Bitcoin community in 2026 for the simple reason that no one can be sure with any degree of certainty when – or even if – Q day arrives but with a market cap of almost $4 trillion a lot is at stake.

Web3

Last year, several governments introduced legislation aimed at restricting public access to parts of the internet. In the UK, new rules impose heavy fines on online companies that fail to protect young people from harmful content, prompting many platforms to roll out strict age-verification requirements. Meanwhile, Australia’s new internet safety law, which came into effect on December 10, bans under-16s from creating social media accounts on platforms such as Instagram, X, Snapchat, Threads, TikTok, YouTube, Reddit, Kick, and Twitch. A number of other countries—particularly across the EU—are now considering similarly restrictive measures for minors’ online activities.

While the stated goals of these policies are commendable—no one wants children put at risk by what they see or do online—their implementation creates a clear problem for adults. To access any content deemed unsuitable for minors, including mainstream social media services, adults must now prove they are over the age of consent. Proposed solutions, from mandatory ID checks to centralized age-verification databases, raise significant concerns around privacy, security, and civil liberties. Most users are understandably uneasy about handing over sensitive personal information, and a centralized database of identity documents would provide an irresistible target for hackers.

Web3 technologies offer a more privacy-preserving alternative. Instead of requiring people to surrender personal details, decentralized identity systems allow users to prove specific attributes—such as being over 18—without revealing anything else. This concept, known as selective disclosure, underpins a new generation of privacy-focused identity solutions. Using zero-knowledge proofs, decentralized identifiers, and verifiable credentials, individuals can cryptographically verify their eligibility for age-restricted content without exposing their name, address, date of birth, or any behavioural data. Websites cannot store sensitive information because they never receive it, and hackers have no centralized repository to exploit.

Assuming the conspiracy theorists are wrong and the ultimate intention behind these laws is not to expand government surveillance but to protect children, demand for privacy-maximising Web3 solutions is likely to increase. For many Web3 projects that issue tokens for funding or governance—where decentralized blockchains are a natural fit—growing adoption of such technologies could also translate into stronger token performance, much like the surge seen in privacy coins in 2025 as mentioned above.

RWA Tokenization Revisited

This is not the first time we have made this prediction. For our 2024 outlook we included it in our list and it proved to be valid, with a 60% annual growth rate in the total value of on-chain real world assets. Our reason for including it again is because, in our view, the stage is set for the next big push to bring off-chain assets on-chain. Over the past few years the world’s largest asset managers and banks have built or piloted blockchain-based systems for tokenized money-market funds, Treasuries, private credit, and other traditional instruments. With the necessary foundations in place —regulatory clarity, institutional infrastructure, and real economic demand—this technology is now set to scale, especially as there are powerful economic incentives for tradfi adoption. Tokenized assets settle faster, reduce operational and reconciliation costs, and can function as globally mobile, programmable collateral. It is our expectation that on-chain settlement will come to be perceived as “financial plumbing” rather than “crypto,” with tokenized RWAs will act as a bridge between traditional markets and digital asset ecosystems.

One projection we are particularly excited about is Canton Network (disclaimer: Trakx joined Canton Network as a featured app last year). For those readers unfamiliar with Canton Network it is a smart contract “network of networks” designed to overcome the challenges of privacy and scalability, thereby paving the way for the next wave of tradfi adoption. Formed by a consortium including Goldman Sachs, BNP Paribas, and Microsoft, Canton differs from Bitcoin and Ethereum by ensuring that participants only see the transactions relevant to them. Not only does this ensure privacy, with users able to share as much or as little data/information with other users as they wish, but the design also provides a natural way to boost scalability because the set-up allows for parallel transaction processing. For those interested in learning more about Canton Network please check out a separate article here.

1 Recent Trump appointee Stephen Miran, who has been consistently more dovish than his FOMC colleagues, is set to leave the Board of Governors at the end of January 2026. However, if President Trump does not nominate a successor who is then confirmed by the Senate he could potentially remain in the post indefinitely. Of course, if he is replaced it will likely be by another dove.

2 The effective supply cap is 21 million minus the number of lost coins. So the more lost coins, the scarer Bitcoin becomes.