DePIN and Gaming Lead End-of-Year Rebound — Is This a Structural Shift or Low-Liquidity Rotation?

Executive summary

According to a report from Blockworks, the cryptocurrency market experienced a notable divergence in performance at the end of the year, characterized by a surprising rebound in Decentralized Physical Infrastructure Networks (DePIN) and blockchain gaming. This recovery occurred while Layer-2 (L2) networks, Real-World Assets (RWAs), and tokenized treasury trades continued to grind lower. The report noted that Bitcoin finished that specific weekly period up 1.6%, highlighting a market that was highly selective rather than universally bullish.

Our current verified market data places Bitcoin (BTC) at $64,918, representing a 24-hour decline of 2.4% but a solid 7-day gain of 6.0%. Ethereum (ETH) is trading at $1,773, up 8.2% over the last 7 days. With Bitcoin dominance standing at 56.1% and the total crypto market capitalization at $2.32T, our house regime remains classified as neutral. In this environment, the outperformance of DePIN and gaming tokens suggests that capital is actively rotating within the altcoin ecosystem rather than new, external liquidity expanding the entire asset class. To determine the sustainability of this rebound, close attention must be paid to spot trading volume and derivatives market positioning.

Why it matters

To understand this sector divergence, we must analyze the underlying capital flows, liquidity dynamics, and market structure. Layer-2 networks are currently facing severe structural headwinds. A proliferation of rollups has fragmented liquidity across the Ethereum ecosystem, while continuous token unlocks from early-stage venture capital allocations create persistent overhead supply. Similarly, RWA protocols—particularly those tied to tokenized U.S. Treasuries—are experiencing capital stagnation as macroeconomic yields stabilize, reducing the relative attractiveness of locking capital in low-velocity on-chain yield products.

In contrast, DePIN and blockchain gaming represent high-beta sectors with distinct narrative appeal. DePIN projects, which coordinate physical hardware via token incentives, have increasingly positioned themselves as AI-adjacent infrastructure (providing decentralized compute, storage, and bandwidth). This narrative has attracted institutional interest and venture capital, translating into localized capital inflows. Blockchain gaming, while historically retail-driven, benefits from concentrated community engagement and speculative momentum.

However, the economic reality of these moves may be less robust than the price action suggests. Many DePIN and gaming tokens suffer from structural illiquidity, characterized by low circulating supplies and thin order books. Consequently, even a modest increase in spot trading volume can trigger sharp, vertical price movements. This is often a function of market structure rather than organic, long-term utility demand. If these price increases are not accompanied by sustained, elevated trading volume and growing active user metrics, they are highly vulnerable to rapid mean reversion once speculative interest shifts elsewhere.