What investors really think about crypto’s outlook in early 2026 — and why 2025’s struggles may set the stage for a stronger year.
As January 2026 closes, crypto investors are asking: Is it time to be bullish again or brace for more downturns? After a challenging 2025, peppered with mixed signals and disappointing price action, the future feels uncertain. However, a new report from Coinbase’s institutional arm and Glassnode offers fresh data-driven insights into investor sentiment, market cycles, and key risks shaping Q1 2026. This article breaks down that report into actionable takeaways. You’ll learn how both institutional and retail investors feel about Bitcoin (BTC), Ethereum (ETH), altcoins, and what to watch next — from risk appetite and Bitcoin dominance trends to market structure shifts and underlying liquidity conditions.
How Are Investors Feeling After a Rough 2025?
Shifting Risk Appetite
The report surveyed 148 investors, split almost evenly between institutions and retail traders. In Q3 2025, 59% of institutions took “normal risk” positions. By Q4, risk appetite split — 42% stuck to normal risk while 41% pushed toward higher risk. Retail investors showed a more dramatic shift: from 56% normal risk down to 43%, with half moving to higher risk despite market decline.
Investor takeaway: Even after a tough year, many investors remain willing to accept greater risks, signaling a potential build-up for the next bullish move or volatility spike.
Market Cycle Sentiment: Where Are We Now?
Investors had diverse views on which phase crypto is in:
- In Q3, 45% of institutions saw the market in late-stage bull territory.
- By Q4, only 21% felt that way, with increasing belief in accumulation (23%) or bear markets (26%).
- Retail investors’ bull market sentiment dropped from 29% to 16% between Q3 and Q4, while bear market concerns rose from 6% to 21%.
Answer Box:
Q: What phase is the crypto market in according to recent investor sentiment?
A: As of late 2025, investor sentiment is mixed but shifting — many now believe the market is in accumulation or the early part of a bear market, moving away from earlier bull market optimism.
Top Risks: Macro Headwinds, Liquidity, and Regulation
Across the board, investors ranked the primary tail risks for the next 3 to 6 months as:
- The macroeconomic environment — including inflation, interest rates, and potential recessions
- Declining liquidity affecting market depth and volatility
- Underwhelming or unclear crypto regulation slowing institutional adoption
Additional concerns include geopolitical tensions and risks of crypto-specific failures like hacks or treasury insolvencies.
Bitcoin Dominance: Institutional and Retail Views Diverge
In Q3 2025, 33% of institutions expected Bitcoin dominance (BTC’s share of total crypto market cap) to fall below 55%, implying a potential altcoin rally. By Q4, that expectation dropped to 16%, with 40% predicting dominance above 60%, suggesting Bitcoin will lead again.
Retail investors echoed this trend but with less certainty. They are collectively more bullish on Bitcoin dominance rising or stabilizing well above 55%.
While altcoins suffered steep losses in Q4, Bitcoin’s dominance remained relatively steady — reinforcing investor focus on the flagship crypto.
Is Bitcoin Undervalued? Most Say Yes
A bullish highlight: 71% of institutions and 60% of retail investors believe Bitcoin is undervalued as of late 2025, while only 4% think it’s overvalued.
This suggests many are ready to hold or increase positions if prices dip, providing potential price floor support during market slumps.
Performance Snapshot: Q4 Was Brutal for Altcoins
- ETH fell 28%
- XRP dropped 34%
- ADA plunged 56%
- The only Q4 winner in the Coinbase 50 index was Bitcoin Cash, up 7% (which may not excite most investors)
Altcoins’ sharp declines erased any “alt-season” optimism despite new altcoin ETFs launching.
On-Chain Metrics Show Market Structure Shifts
- Entity-Adjusted Net Unrealized Profit/Loss (NUPL): After October’s liquidation, Bitcoin holders shifted from confidence to anxiety.
- MVRV Ratio (Market Value to Realized Value): BTC’s MVRV is ~2.2, meaning average holders are 2x in profit, often a signal for selling pressure.
- Supply Profitability Bands: BTC’s supply profitability dropped to the “-1” accumulation zone around $80K after October, showing investors buying the dip.
- Active vs Dormant Supply: BTC active supply increased 37% in Q4, indicating more trading. Dormant supply fell only 2%, implying many long-term holders remain patient.
Data callout:
Bitcoin’s active supply surged 37% in Q4 2025 amid sudden price drops — a sign that trading activity accelerated while long-term holding remained relatively steady.
Ethereum Insights: Sentiment Rollercoaster and Institutional Promise
ETH’s 2025 journey was volatile:
- Sentiment swung from capitulation early in the year, to optimism mid-year, then fear late in 2025.
- ETH’s MVRV around 2.2 mirrors BTC, indicating many ETH investors have 2x profits, which can pressure prices via profit-taking.
- Dormant ETH supply fell 9% in Q4 vs BTC’s 2%, suggesting ETH holders more often sold or rotated during weakness.
- Ethereum and layer 2 transaction volumes have been rising steadily since early 2023.
- User fees dropped significantly post the Denun upgrade, boosting Ethereum’s scalability and institutional appeal.
With major upgrades slated for 2026, Ethereum looks positioned for renewed growth — but regulatory clarity and adoption remain critical.
What Does This Mean for Crypto in 2026?
Hopeful but Cautious: Despite macro headwinds and bear market fears, investor conviction is notable. The belief that BTC is undervalued and willingness to buy dips could stabilize prices.
Gold’s recent outperformance challenges Bitcoin’s “digital gold” narrative, but if gold momentum fades, BTC may reclaim investor attention.
Ethereum’s upcoming network improvements and dominance in tokenized assets could reignite altcoin optimism.
However, significant sell pressure exists due to many investors holding 2x profits. Without fresh catalysts, we may see choppy markets, not parabolic rallies.
Risks to Watch
- Continued macroeconomic uncertainty (inflation, interest rate hikes, geopolitical events)
- Potential regulatory crackdowns or delays
- Liquidity tightening in global markets
- Large-scale crypto hacks or institutional failures
- A steeper downward correction if investor risk appetite fades
Actionable Summary
- Both retail and institutional investors show increased risk tolerance despite 2025’s downturn.
- Market sentiment points toward accumulation or early bear markets, no clear bull cycle start.
- Bitcoin dominance expected to rise, limiting altcoin rallies in the short term.
- BTC and ETH holders largely in profit, creating near-term selling pressure.
- Ethereum’s scalability upgrades and institutional use cases key to 2026 growth potential.
For investors reshaping portfolios, consider monitoring risk indicators and on-chain metrics closely — especially Bitcoin’s supply profitability and Ethereum’s upgrade milestones.
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FAQ
Q1: What phase is the crypto market currently in?
Most investors now believe we’re in accumulation or early bear market stages after moving away from bull market optimism in 2025. Q2: Is Bitcoin considered overvalued or undervalued?
Surveys show 71% of institutional and 60% of retail investors see BTC as undervalued heading into 2026. Q3: Will altcoins outperform Bitcoin soon?
Institutions are skeptical, with 45% saying small caps are unlikely to outperform large caps in the next 12 months.
Q4: How did investors react to October 2025’s liquidation?
60% of institutions and 70% of retail investors held their positions or bought the dip rather than selling off.
Q5: How do Ethereum upgrades affect market activity?
Major upgrades like Denun have lowered transaction fees and boosted trading volume, improving scalability and institutional appeal.
Disclaimer: This article is educational and does not constitute financial advice. Crypto investments carry risk, including loss of capital. Always conduct your own research or consult a professional.
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile
