The third quarter of the year was pivotal for the cryptocurrency market, which saw notable price movements, regulatory progress and growing institutional adoption.
Bitcoin started the period near US$100,000 and periodically rose above US$120,000; it pulled back below US$110,000 in late September before staging a comeback to finish the month at around US$114,000.
Ether, the second largest cryptocurrency by market cap, delivered an impressive gain in Q3, climbing from about US$3,500 to over US$4,200, supported by robust on-chain activity and substantial treasury filings.
Regulatory clarity and technological advances played crucial roles in boosting market confidence and adoption.
Crypto exchange-traded funds (ETFs) gained significant traction in the third quarter after the US Securities and Exchange Commission (SEC) approved new generic listing standards for commodity-based trust shares, streamlining approvals and reducing the typical review timeline to 75 days. This move has led to the launch and pending approval of numerous crypto ETFs covering Bitcoin and Ether, as well as prominent altcoins such as Solana and XRP.
Existing Bitcoin ETFs saw US$55 billion in inflows year-to-date through Q3.
Collaborations bridging traditional and decentralized finance (DeFi), such as Chainlink’s partnership with Intercontinental Exchange (NYSE:ICE) to enhance oracle infrastructure, and PayPal Holdings’ (NASDAQ:PYPL) backing of Hyperliquid’s USDH stablecoin on PayPal and Venmo, further bolstered institutional momentum.
On a macro scale, crypto’s total market capitalization experienced periodic pullbacks in Q3, although it surpassed US$4 trillion in July. Volatility reflected conditions in both the macroeconomic and geopolitical spheres, including signals of potential US interest rate cuts amidst a softening labor market, tariff effect uncertainty and a government shutdown.
Ether outperforms Bitcoin in Q3
Early in Q3, Bitcoin showed a resurgence of bullish sentiment, driven by anticipated macroeconomic easing and institutional accumulation. Nevertheless, the quarter was marked by persistent volatility. The token underperformed relative to Ether, which surged 70.7 percent for the quarter, compared to Bitcoin’s 6.39 percent increase.
A rotation of capital out of Bitcoin led to a September altcoin season, with gains concentrated among smart contract platforms and financial sector tokens like Avalanche, Binance Coin, Chainlink and Solana.
DeFi growth continued robustly, with total value locked exceeding US$164 billion at quarter’s end, driven by Ethereum Layer 2 scaling solutions and real-world asset lending on platforms like Aave.
Institutional adoption grows, regulatory activity picks up
Critical regulatory milestones brought a further sense of clarity to the crypto industry, most notably the passing of the GENIUS Act in the US, which provided the first comprehensive federal framework for stablecoins.
Additionally, the SEC advanced its Project Crypto blueprint, proposing clear token classifications, and the Commodity Futures Trading Commission (CFTC) actively engaged in discussions on spot crypto trading rules. Ongoing dialogues and regulatory guidance around crypto trading rules remain in focus, but there is clearly more to be done.
“The biggest question is, can we have a global standard of regulation for trading on decentralized exchanges and for trading tokenized products, so that an institutional investor in Europe can trade with an institutional investor in the US and in Japan, and not worry about each other’s regulations getting in the way?”
Internationally, regulatory frameworks for stablecoins have progressed, with legislative advances in South Korea, the EU, Japan, the United Arab Emirates, Hong Kong and Singapore.
Stablecoin market competition
The stablecoin sector saw net inflows exceeding US$46 billion in Q3.
The market recorded a transfer volume of US$15.6 trillion, the most active period since 2021, although 71 percent of these transfers were driven by high-frequency trading bots.
Inflows were led by Tether’s USDT and Circle Internet Group’s (NYSE:CRCL) USDC, but revenue-sharing incentives among exchanges exemplified the rising competition in crypto markets to attract and retain liquidity.
Hyperliquid’s debut of its native stablecoin, USDH, symbolizes this trend. USDH is designed to capture value in the Hyperliquid ecosystem, reducing reliance on external stablecoins.
The market also saw Avalanche gain momentum as a broader DeFi ecosystem, providing strong infrastructure and liquidity for multiple decentralized applications and stablecoin projects.
Stablecoins’ increasing role as a yield-bearing asset, as well as a transactional tool, has prompted a nuanced regulatory discussions. Reflecting on the banking sector’s response, Gokhman stressed that stablecoins offering yield like traditional savings accounts should be regulated, but should not be prevented simply because they compete with banks.
Blockchain infrastructure and AI integration advances
Blockchain infrastructure also advanced in the third quarter, supporting more effective multi-chain portfolio diversification and improving institutional capital flows in decentralized finance.
Cross-chain liquidity aggregation protocols have emerged to enable seamless token swaps and liquidity sharing across more than 30 Layer 1 and Layer 2 blockchains.
Unlike isolated liquidity pools, these protocols simplify asset transfers and enhance market efficiency.
Building on an evolving infrastructure landscape, Franklin Templeton is developing its own multi-chain venture platform.
“We want to be out there early, testing which L1 chains make the most sense,” said Gokhman. “We’re also building infrastructure that is robust and institutional grade, the kind of quality clients expect. At that point, it becomes a question of who wants to jump into the pool with us first, but we’re already there. We can tell you the water is fine.”
Much like in traditional markets, where commodities futures trade on the CME and equities trade on the NASDAQ, in the tokenized world, Grokhman expects trading to be more granular. As ways to move assets between chains develop, it will be easier to pick venues based on where the asset has the best liquidity and execution fees.
Elsewhere, blockchain technology and artificial intelligence (AI) are becoming more tightly integrated.
A landmark collaboration between Google (NASDAQ:GOOGL) and Coinbase Global (NASDAQ:COIN) demonstrates a practical integration of AI with digital money at scale. The companies’ open-source Agent Payments Protocol, which allows AI applications to communicate, send and receive payments using stablecoins, has gained broad industry commitment, evidenced by support from over 60 tech and financial partners, including the Ethereum Foundation, American Express (NYSE:AXP) and Salesforce (NYSE:CRM).
Crypto market forecast for Q4
Looking ahead to the fourth quarter, critical catalysts for the cryptocurrency sector include expected SEC and CFTC finalizations on token classifications and spot trading rules. New crypto ETFs and Cboe Global Markets’ forthcoming long-dated Bitcoin and Ether futures will broaden market access and further improve liquidity.
Macroeconomic factors such as potential interest rate cuts from the US Federal Reserve could boost risk appetite and capital inflows; however, ongoing geopolitical and macro uncertainty call for careful risk management. The US government shutdown adds another layer of uncertainty, although markets have largely shrugged it off so far.
Technological highlights include Ethereum’s Fusaka hard fork in December, which promises better scalability and efficiency, alongside growth in L2 solutions and real-world asset lending in DeFi.
As Gokhman noted, tokenization of previously inaccessible assets will deepen diversification opportunities for large investors, with early adopters paving the way for broader institutional entries.
“I think that’s going to be something we see in the next several quarters. We’re going to see some of those larger players dip their toe in, and then all the others will be more comfortable jumping into the water as well.”
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.