Crypto Market Weakness Persists Year-End; Risk Assets Search for Fundamental Floor

Source: Blockworks Original Title: Grinch rally: Crypto indices track lower through the week Original Link: https://blockworks.co/news/grinch-rally

Market Overview

Crypto and risk assets continue to show weakness heading into year-end. Risk assets are in search of a floor, driven by fundamental flows supported by ETFs or protocol buybacks.

Weekly Market Performance

This week closes out with continued weakness across the board, particularly in crypto risk assets. Both the S&P 500 and the Nasdaq 100 moved over -1% lower this week, with gold being the one instrument showing strength. Concurrently, every crypto index tracked has traded lower throughout the week. Notably, exchange tokens, buyback leaders, and the 2025 crypto equity cohort outperformed BTC intra-week, while everything else underperformed.

The AI sector was the top loser on the week, trading down -26%. The downside was led by TAO, which notched new multi-month lows after being a top performer in October.

Broadly, crypto continues its downtrend, with majors like BTC, ETH and SOL showing weakness while longer tail alts make larger moves to the downside. Risk is in search of a fundamental floor, which still may remain lower until price/buybacks becomes too compelling, and buyback flows from protocol cashflows can set a low. Similarly, majors may need an uptick in ETF inflows to set their low, while the support provided by these vehicles has been anemic in the weeks past.

Key Ecosystem Updates

Sky Protocol Growth: The Sky Ecosystem saw an 86% increase in USDS supply (to $9.86B), outpacing the broader stablecoin market. Sky Protocol generated $435M in revenue and $168M in profits, with substantial SKY token buybacks and staking rewards. With new regulatory clarity and multiple Sky Agent launches, the protocol projects strong institutional adoption and expansion in 2026.

Non-USD Stablecoin Barriers: The real barrier to non-USD stablecoin adoption is not demand, but structural limitations in the global banking system. Basel III regulations, liquidity constraints, and G-SIB penalties discourage banks from holding non-USD inventories or servicing emerging market corridors. The result is a liquidity vacuum in non-USD FX markets. DeFi-native solutions may be needed to bootstrap non-USD stable liquidity.

TradFi and Tokenization: Traditional financial institutions are selectively embracing blockchain benefits while ignoring its existential threats to their legacy business models. These firms tout tokenization but avoid decentralization, risking co-opting crypto’s core values. Permissioned chains and regulatory lobbying may dilute crypto’s foundational principles, underscoring the need to defend public, permissionless networks.