Crypto Market Reset: Turbulence, Regulation, and Surprising Bright Spots

Crypto markets head into the night bruised but not broken, with a sharp selloff, fresh regulatory battles, and a few surprising bright spots shaping the day’s narrative. The headline story is the reset across majors. Bitcoin (BTC) briefly crashed below 65K, touching the low 63K range as risk-off panic hit crypto stocks and broader markets. Leveraged positions were flushed out, ETFs saw outflows, and fear spiked as traders started to question Bitcoin’s short-term role as an inflation hedge under mounting macro pressure. Ethereum (ETH) fared even worse. The asset broke through key support, sliding toward 2,100 and briefly losing the 2,000 level, wiping around 27 percent from its value and contributing to a roughly 100 billion dollar drawdown across the market. That pain rippled through institutions and big treasuries. BitMine, which holds 4.2 million ETH, is now sitting on 7–8 billion dollars in unrealized losses as ETH fell below 2,000, dragging its own share price down about 8 percent. Meanwhile, Vitalik Buterin has been moving and selling millions in ETH, adding to the unease as DeFi TVL drops and ETH-related funds see redemptions. In public remarks, he also took aim at the industry’s direction, arguing that copy-paste EVM L1 chains connected by simple bridges are a dead end and calling for fewer new chains and more real innovation. Despite the tumult, some big players are signaling they view this as a reset, not a collapse. JPMorgan and other major banks framed the downturn as a necessary shakeout, not an endgame scenario, and notably said Bitcoin now looks increasingly attractive versus gold over the long term, even as they acknowledged liquidity and regulatory risks. On the stablecoin front, the day underscored just how central these assets have become. In Washington, negotiations over the CLARITY Act show how tough it is to reconcile the interests of banks, crypto firms, and privacy advocates. Crypto companies are offering community banks a bigger role in the stablecoin ecosystem to get long-stalled market-structure legislation moving, but civil liberties and data protection concerns risk getting sidelined in the rush to compromise. At the same time, Tether (USDT) is quietly consolidating its dominance. In Q4 2025, Tether reached a record market cap of around 187 billion dollars with roughly 193 billion in reserves, even as the overall crypto market cap fell by about a third and rival stablecoins shrank. Tether doubled down today on its institutional push with a 100 million dollar investment into U.S.-regulated crypto bank Anchorage Digital at a 4.2 billion dollar valuation, strengthening their partnership and the infrastructure behind the US-focused USAT stablecoin. But regulators are starting to push back on the more experimental side of stablecoins. Brazil moved ahead with Bill 4.308/2024, which would require 1:1 reserve backing for all stablecoins, effectively ban algorithmic designs like Ethena’s USDe (USDE) and Frax, and extend compliance obligations to both domestic and foreign issuers. The country is positioning this as a way to de-risk the space and prepare for its Drex digital currency, even if it means choking off some of the higher-octane innovation. In the U.S., stablecoins intersected with politics and national security. Lawmakers opened an investigation into World Liberty Financial (WLFI), a Trump-linked crypto firm, after reports that an Abu Dhabi–connected entity agreed to secretly buy a 49 percent stake for about 500 million dollars. The probe is digging into foreign influence, ownership records, stablecoin transactions, and potential conflicts of interest, highlighting how crypto deals are increasingly viewed through a geopolitical lens. Market structure and settlement rails also took a step forward. Prediction market Polymarket is migrating from bridged USDC.e to native USDC (USDC), reducing its reliance on bridges and aiming for safer, more efficient settlement. In Japan, SBI and Startale unveiled Strium, a new Layer-1 designed specifically for 24/7 trading and settlement of tokenized securities, FX, and commodities. Starting with synthetic U.S. and Japanese stocks, Strium is targeting the nearly 19 trillion dollar tokenized asset market and positioning itself as a bridge between traditional finance and onchain infrastructure. Europe, however, is being warned it may be squandering its chance to lead. Tokenization firms there say the EU’s restrictive DLT Pilot Regime—with tight limits on asset types, volumes, and time horizons—is choking off growth and pushing capital and experimentation toward the U.S., just as American institutions and regulators are becoming more comfortable with tokenized markets. Amid the turmoil, some networks chose today to lean harder into compliance and institutional friendliness. The XRP Ledger (XRP) activated Permissioned Domains after winning over 91 percent of validator support, creating controlled-access zones on a public chain. The idea is to allow regulated institutions to transact with transparency, but within fenced areas governed by credential issuers and domain owners. That design bridges the gap between open infrastructure and regulatory demands, though it also creates new risks if those credentials are compromised. XRP itself had a volatile session: after a 58 percent drop from all-time highs and a slide into the 1.35–1.43 range, traders are split between viewing the move as a deep pullback with a possible 1.00–1.20 dollar floor and a longer-term accumulation opportunity. Interestingly, while sentiment for BTC and ETH is “extremely bearish,” trader outlook for XRP has turned relatively optimistic, hinting at a potential contrarian relief rally. Not all the XRP-related headlines were about tech. Newly surfaced documents and emails tied to Jeffrey Epstein suggest his backed entities invested millions into Coinbase and had indirect ties to early Bitcoin figures and key U.S. crypto policymakers. In XRP circles, this is adding fuel to long-standing suspicions that shadowy influence, not just compliance concerns, may have played a role in Coinbase’s XRP delisting and related SEC actions. Ethereum’s broader ecosystem also saw a privacy-focused spin. Payy launched a new Ethereum Layer 2 (ETH) that makes ERC‑20 transfers private by default while integrating directly with MetaMask and existing contracts. The goal is to offer “invisible” financial activity on-chain for mainstream users and institutions that don’t want their every transaction traceable, but still want faster, cheaper rails than traditional finance. Exchanges and platforms spent much of the day on defense. Binance again denied insolvency rumors, calling a viral cease-and-desist letter a complete fabrication and saying there’s no evidence it ever hired the law firm named in the document. The exchange dismissed claims about looming bankruptcy or involvement in an October flash crash as unverified social media fiction. Gemini, meanwhile, made its retrenchment official. The exchange is exiting the UK, EU, and Australia, shifting those accounts to withdrawal-only status, cutting up to 25 percent of staff, booking around 11 million dollars in charges, and concentrating its efforts on the U.S. and Singapore with a heavier reliance on AI. On the more traditional venture and startup side, Multicoin Capital co-founder Kyle Samani announced he’s stepping down from a full-time role after nearly a decade. He called the move bittersweet but will stay active as an investor and as chairman of Forward Industries, a Solana-focused vehicle, keeping his reputation as a leading Solana advocate intact. In gaming, Playnance came out of the shadows, publicly revealing a Web3 gaming and infrastructure platform that’s already processed millions of on-chain actions and attracted over 10,000 daily active users by quietly onboarding mainstream Web2 players into Web3-style gaming, trading, and prediction products. Memecoins and altcoins saw their usual dose of drama. Shiba Inu (SHIB) is under extreme pressure, with analysts warning of a possible deeper correction or even an 80 percent-plus crash as stalled burns, a death cross, negative trend lines, and heavy long liquidations point to elevated downside risk. Dogecoin (DOGE) has also taken big hits in 2025 and is down around 18 percent over the week, but network activity is actually ticking up, with active addresses jumping 36 percent. That divergence between price and activity has some traders speculating that volatility, in one direction or another, may just be getting started. Finally, sovereign involvement in crypto remained a wildcard. Bhutan-linked wallets moved over 22 million dollars of self-mined Bitcoin (BTC) to trading firms and exchanges after months of silence, sparking fresh worries about government selling into a fragile market and adding another source of uncertainty just as traders are already on edge. As the dust settles on a chaotic session, the story of the evening is a market trying to find its footing: majors bleeding but slowly rebounding, stablecoins becoming more entrenched and more regulated, institutions quietly building, and regulators circling ever closer. The reset is real. Whether it becomes a foundation or a fracture will be decided in the days and weeks ahead.