Bitcoin rose to $126,000 in 2025, and Ethereum edged to near $5,000, but this was a challenging year for cryptocurrency markets.
And many projects in the layer 1 (L1) blockchain ecosystem experienced widespread declines.
The widespread sell-off saw several high-profile networks post steep losses, this coming despite some major wins.
Key among these are regulatory developments, institutional interest and broader ecosystem growth.
A year of pain for top L1 tokens
Sui, Avalanche, and TON suffered the most severe drawdowns among top L1s.
Mainly, it’s a result of investor caution amid shifting capital flows toward more established or niche narratives.
Data from Castle Labs has outlined the broad underperformance of L1 tokens throughout 2025.
While some privacy-focused or legacy chains held ground, the majority faced significant pressure.
Notable declines included Hyperliquid (HYPE) down 6.5%, Ethereum (ETH) 15.3%, and Solana (SOL) 35.9%.
The sharpest drops came from newer high-throughput networks.
Sui (SUI) fell 67.3%, Avalanche (AVAX) 67.9%, and TON 73.8%. These losses occurred against a backdrop of robust on-chain activity in some cases, such as rising total value locked and transaction volumes.
However, market sentiment favoured selective allocation, with capital rotating away from speculative L1 bets.
Factors contributing to the downturn included competition from Layer 2 scaling solutions, delayed adoption in key sectors like gaming and DeFi, and broader risk-off behaviour in altcoins.
Smaller L1 chains, in particular, lost traffic to more mature ecosystems, exacerbating price pressure.
BNB and TRON bucked the trend
Amid the L1 sector’s struggles, Binance Coin (BNB) and Tron (TRX) stood out as rare outperformers.
The BNB token has posted gains of just over 18% YTD, having gone parabolic as the price hit a new all-time high above $1,300.
TRON also showed resilience, with just under 10% return in 2025.
BNB’s resilience stemmed from its deep integration with the Binance ecosystem, the world’s largest cryptocurrency exchange.
Key strengths include deflationary tokenomics through regular coin burns, which reduce supply and support price stability, alongside utility in trading fee discounts, staking, and governance within Binance Smart Chain.
The chain’s high activity benefited from institutional partnerships and expansions into DeFi and NFTs, as did digital asset treasury strategies.
These trends and other factors could shape the BNB price outlook in 2026.
TRX, similarly, demonstrated stability driven by Tron’s dominance in stablecoin transfers and low-cost transactions.
Memecoin activity and the network’s focus on high-throughput applications, particularly in content sharing and decentralized entertainment, helped bulls.
However, Tron’s revenue explosion, fueled by USDT dominance, provided a buffer for buyers as volatility hit peers.against market volatility.
Market outlook: Sectors to watch in 2026
Despite the 2025 downturn for many L1 tokens, broader crypto narratives painted a more nuanced picture.
According to CoinGecko’s recent analysis of profitable crypto sectors in the past year, privacy coins and real-world asset coins showed remarkable traction.
Real World Assets (RWA) emerged as the top-performing sector with average returns of nearly 186% year-to-date.
Driving this uptick has been tokenization of traditional assets like Treasuries and private credit. Interestingly, the L1 category as a whole ranked second with around 80% average gains.
Privacy coins such as Zcash and Monero exploded to push the segment into the green.
Another sector that witnessed notable gains is the “Made in USA” segment, which boasted about 30% YTD as of December 26, 2025.
However, Memecoins, AI tokens, DePIN and GameFi are all on track to end the year in the red.
Heading into 2026, analysts anticipate a cautiously optimistic environment for cryptocurrencies.
Expected interest rate cuts could enhance liquidity for risk assets, while advancing tokenization and stablecoin adoption may bolster infrastructure plays.
For L1 tokens specifically, differentiation through specialised use cases could spur recovery.
Meanwhile, institutional inflows, regulatory clarity, and renewed focus on fundamentals may favour established coins.
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