Imagine pouring your hard-earned money into a promising new blockchain, convinced it’s the next big thing, only to watch its user base evaporate and its token price crater over the course of a single year. That’s exactly what happened to many Layer 1 enthusiasts in 2025. While the headlines screamed about Bitcoin hitting new highs, a quieter—but far more brutal—story unfolded in the altcoin trenches.
It wasn’t a sudden crash. It was a slow, grinding exodus. Users left, capital rotated out, and many once-hyped Layer 1 tokens ended the year looking like shadows of their former selves. Meanwhile, Bitcoin’s dominance climbed steadily, reminding everyone why it’s still the undisputed king of crypto.
The Great Rotation: Where Did Everyone Go?
Let’s start with the numbers, because they tell a story that’s hard to ignore. Across major blockchain networks, monthly active users dropped by more than 25% throughout 2025. That’s not just a dip—that’s a significant chunk of the ecosystem walking away.
One chain in particular felt the pain hardest. It lost nearly 94 million monthly active addresses, a staggering decline of over 60%. Ouch. On the flip side, one savvy competitor nearly tripled its user base, quietly scooping up the refugees fleeing other networks. If you’ve been following crypto for a while, you can probably guess which chain that was.
In my view, this wasn’t random. People weren’t just getting bored—they were voting with their wallets. They moved toward ecosystems that felt safer, more reliable, or simply offered better incentives in a maturing market.
Layer 2s: Winners and Losers Emerge
The same pattern played out among Layer 2 solutions. Not all scaling networks are created equal, and 2025 made that painfully clear.
One L2, backed by a major exchange’s distribution power, saw its total value locked explode higher. It became the go-to destination for users wanting cheap, fast transactions without sacrificing security. Others weren’t so lucky. Some watched their TVL shrink dramatically as capital chased better opportunities elsewhere.
Frankly, this divergence surprised no one who’s been paying attention. Distribution matters. A lot. When you have millions of existing users already on your platform, onboarding them to your chain is a hell of a lot easier than building from scratch.
Token Performance: A Sea of Red
Now, let’s talk prices—because that’s what most people care about at the end of the day.
Most major Layer 1 tokens closed 2025 deep in the red. Some established names lost substantial value, while newer or more speculative projects suffered even worse drawdowns. A few Layer 2 tokens managed to hang on better, but many followed the same downward trajectory despite real technical progress under the hood.
One token actually posted a modest gain, but analysts pointed out it was more about concentrated supply dynamics than genuine network strength. In other words, don’t read too much into it.
- Several high-profile L1s down 50% or more from January peaks
- Multiple L2 tokens experiencing similar heavy losses
- Only a handful of infrastructure tokens showing resilience
- Bitcoin, meanwhile, holding relative strength throughout the year
It’s a tough pill to swallow if you were heavily allocated to altcoins. But markets don’t care about your convictions—they reward fundamentals.
What Drove the Sell Pressure?
Three big forces combined to create this perfect storm for alternative Layer 1s and many Layer 2s.
First, tokenomics. So many projects launched with aggressive emission schedules and continuous unlocks. Early investors and teams kept getting rewarded with fresh supply, even as demand softened. That’s a recipe for sustained downward pressure.
Second, value capture. Or rather, the lack of it. Building a fast, cheap chain is great on paper, but if the token doesn’t accrue real economic value from network activity, why hold it long-term? Governance rights alone rarely cut it anymore.
Third, institutional preferences. Big money kept flowing primarily into Bitcoin and Ethereum. When institutions buy, they tend to stick with the most battle-tested assets. Everything else feels like extra risk without commensurate reward.
The market is maturing. Speculative capital no longer blindly rewards infrastructure without clear revenue generation.
I couldn’t agree more. We’re moving past the “build it and they will come” phase into something more pragmatic.
Developer Activity: The One Bright Spot
Here’s where things get interesting. Despite the price carnage and user exodus, developer activity actually stayed strong—or even grew—in several ecosystems.
The EVM ecosystem continues to boast the largest developer base by far. Thousands of contributors, many working full-time. Bitcoin itself saw impressive growth in dedicated developers over the past couple of years. Even some alternative virtual machine stacks expanded their teams significantly.
This disconnect between building activity and token price is fascinating. Teams kept shipping through the bearish price action, proving that real development doesn’t always stop when speculation dries up.
In my experience, these periods of quiet building often precede the next wave of adoption. The question is which ecosystems will actually benefit when the tide turns.
Revenue Reality Check
If you want to understand where value is really accruing in crypto, follow the revenue.
Stablecoin issuers absolutely dominated the leaderboard in 2025. The biggest players raked in serious income from interest on reserves and issuance fees. Derivatives platforms also generated meaningful revenue through trading fees—sustainable models that directly tie activity to income.
Generic infrastructure chains? Not so much. Many collected minimal fees relative to their fully diluted valuations. When your network doesn’t capture significant economic value, it’s hard to justify sky-high token prices.
| Revenue Leader | Primary Model |
| Stablecoin Issuers | Interest on reserves + issuance |
| Derivatives Platforms | Trading fees |
| Major L1/L2 Chains | Transaction fees (often minimal) |
The message is clear: if you’re not generating real revenue, you’re swimming upstream in this market.
Looking Ahead to 2026
So where does this leave us heading into the new year?
Consolidation seems inevitable. Not every Layer 1 or Layer 2 will survive in its current form. Some will fade into irrelevance, others may get acquired or pivot dramatically. The networks that demonstrate genuine economic activity—real revenue, real demand for blockspace—stand the best chance.
Regulatory clarity in major markets could help, but it won’t save poorly designed token economies. High inflation schedules and constant unlocks will continue to weigh on prices unless offset by explosive demand.
Perhaps the most interesting question is whether we’ll see renewed institutional interest in select altcoins. If capital starts flowing beyond Bitcoin and Ethereum again, which projects are positioned to capture it?
- Networks with strong revenue generation
- Platforms offering unique differentiation (speed, cost, security)
- Ecosystems with powerful distribution advantages
- Projects with disciplined tokenomics
Those are the ones I’d keep an eye on.
The truth is, 2025 was a wake-up call. Crypto is growing up. Speculation alone doesn’t cut it anymore. We’re entering an era where fundamentals—real users, real revenue, real value capture—matter more than ever.
Bitcoin’s dominance growth wasn’t an accident. It was the market rewarding the asset that’s proven itself over more than a decade. Whether alternative chains can carve out meaningful space in this new reality remains to be seen.
One thing feels certain: the days of every new Layer 1 pumping on hype alone are over. From here on out, survival depends on delivering actual value. And honestly? That’s probably a healthy development for the entire industry.
What do you think—will 2026 bring a revival for select altcoins, or will Bitcoin’s grip only tighten further? The market rarely moves in straight lines, but the trends we saw in 2025 feel structural rather than cyclical. Either way, it’s going to be an interesting year ahead.
