The Privacy Trend Is Back: Grayscale Highlights Q4’s Top Performers

In the final quarter of 2025, privacy-focused cryptocurrencies emerged as relative outperformers in an otherwise declining digital asset market. According to Grayscale Research, six privacy-related tokens ranked among the top 20 assets by volatility-adjusted returns in Q4, even as all major crypto sectors posted negative performance. The data shows a clear shift in investor preference toward assets that offer transaction privacy and discretion, reflecting broader changes in regulation, market structure, and risk appetite.

This renewed focus on privacy did not occur in isolation. Q4 2025 marked a pause in crypto’s momentum after a strong third quarter, as markets digested earlier gains and adjusted expectations for 2026. Against this backdrop, privacy assets stood out for their relative resilience, highlighting privacy as a functional requirement. 

A Market in Consolidation

Grayscale characterizes Q4 2025 as a consolidation phase. After broad-based gains in Q3, returns declined across the entire crypto asset class. All six segments in Grayscale’s proprietary Crypto Sectors framework finished the quarter in negative territory.

The Crypto Sectors framework, developed with index provider FTSE/Russell, groups 208 investable tokens into six categories: Currencies, Smart Contract Platforms, Utilities and Services, Consumer and Culture, Financials, and Artificial Intelligence. Together, these sectors represented a combined market capitalization of approximately $2.63 trillion as of the December 2025 index rebalance.

While losses were widespread, performance dispersion increased. The Currencies sector outperformed other segments, while application-layer sectors, particularly Artificial Intelligence, lagged. This divergence reflects a broader shift toward defensive positioning within crypto markets during periods of uncertainty.

Blockchain Fundamentals Weaken in Q4

Alongside declining prices, several on-chain indicators softened during the quarter. Key metrics for blockchain activity, users, transactions, and transaction fees generally trended downward.

Because blockchains are pseudonymous, analysts use active addresses as a proxy for user activity. In Q4, active addresses declined across both the Currencies and Smart Contract Platforms sectors. Total transaction fees across smart contract platforms fell quarter over quarter and year over year, while application-layer fee revenue also declined sequentially.

These trends mirror the reduction in speculative activity seen during the quarter. Trading volumes tied to higher-risk segments, including memecoin activity, dropped as investors reduced exposure. Importantly, similar pullbacks in on-chain usage have historically accompanied market drawdowns and do not necessarily signal structural deterioration.

Longer-term data provides additional context. Application-layer fee revenue in Q4 2025 was more than double Q3 2024 levels and significantly higher than in earlier periods. This suggests that while short-term activity slowed, the underlying economic footprint of blockchain applications continues to expand over multi-quarter horizons.

Sector Performance and Defensive Rotation

After every crypto sector posted positive returns in Q3, the reversal in Q4 was broad. Returns were negative across all six Crypto Sectors, underscoring a shift in market sentiment.

The Currencies sector held up best, driven in part by increased Bitcoin transaction activity beginning in the first half of 2025. This modest increase helped offset weakness elsewhere and positioned the sector as a relatively safe haven within the crypto asset class.

By contrast, application-layer sectors underperformed. The Artificial Intelligence Crypto Sector recorded the weakest returns, reflecting both its early-stage nature and heightened sensitivity to changing risk conditions. Many assets in this segment remain highly dependent on future adoption assumptions, which are typically discounted more aggressively during risk-off periods.

Privacy Tokens Dominate Q4’s Top Performers

The most notable theme in Grayscale’s Q4 analysis is the dominance of privacy-related assets among top performers. Of the top 20 index-eligible tokens ranked by volatility-adjusted returns, six were directly associated with privacy infrastructure.

These currencies included:

• Zcash (ZEC)
• Monero (XMR)
• Dash (DASH)
• Decred (DCR)
• Basic Attention Token (BAT)
• Beldex (BDX)

Together, these assets accounted for a significant share of positive risk-adjusted returns in a quarter where most tokens declined. Grayscale notes that privacy tokens also dominated narrative attention, suggesting that both price action and investor interest reinforced each other.

Why Privacy Resurfaced as a Core Theme?

Privacy is not a new concept in financial markets. In traditional finance, personal income, account balances, and transaction histories are not publicly visible. Public blockchains, by contrast, are transparent by default, allowing transactions and balances to be traced on-chain.

As blockchains integrate more deeply with traditional financial systems, this transparency creates friction. Regulatory compliance, institutional participation, and corporate usage all require selective disclosure rather than full public visibility. Grayscale argues that demand for privacy tools has become more apparent as regulation formalizes crypto’s role in financial markets.

This shift was reinforced in Q4 by progress on U.S. market structure legislation. While details remain under debate, the direction of travel points toward clearer rules for crypto assets, including registration, disclosure, and asset classification. In that environment, privacy-preserving infrastructure becomes a practical necessity rather than an optional feature.

Zcash Leads the Privacy Segment

Among privacy tokens, Zcash stood out in Q4 2025. Zcash operates similarly to Bitcoin but includes optional “shielded” transactions enabled by zero-knowledge proofs. These allow users to obscure transaction details while still validating transfers on-chain.

During 2025, shielded balances increased as a share of total ZEC supply, signaling rising adoption of Zcash’s privacy features. Grayscale highlights this trend as evidence of growing demand for optional privacy, particularly among users seeking compliance-friendly solutions that do not sacrifice discretion.

Zcash’s performance challenged the long-standing dominance of Monero, which had historically been the largest privacy-focused asset by market capitalization. While Monero continues to see robust usage, Zcash’s renewed traction narrowed the gap between the two networks.

Other Privacy Networks Show Usage Growth

Zcash was not alone in demonstrating improving fundamentals. Several other privacy-oriented networks recorded notable increases in activity during Q4.

Monero continued to process a high volume of transactions, supported by its use of stealth addresses and confidential transaction details. Dash, which offers an optional privacy feature called PrivateSend, more than doubled its daily transaction volume over the quarter.

Decred combines digital currency functionality with on-chain governance and privacy-enhancing CoinShuffle++ transactions, appealing to users seeking both discretion and participatory control. Meanwhile, Basic Attention Token benefited from growth in the Brave Browser ecosystem, which surpassed 100 million monthly users during the quarter.

Beldex expanded its profile through a suite of privacy-focused services, including encrypted messaging and private browsing, and improved interoperability through a LayerZero integration.

Privacy Versus Speculation

One of the most evident contrasts in Q4 was between privacy tokens and more speculative segments of the market. While privacy assets gained attention and relative strength, memecoin trading declined sharply, consistent with reduced risk tolerance.

Grayscale attributes this divergence to a defensive rotation within crypto portfolios. In uncertain conditions, investors favored assets perceived as offering structural utility, such as privacy infrastructure, over those driven primarily by short-term speculation.

This shift also aligns with improving usage metrics on privacy networks, suggesting that demand was not purely narrative-driven. In several cases, higher transaction counts and user engagement accompanied price resilience.

AI Tokens: A Secondary Theme

Outside the privacy segment, only a small number of Artificial Intelligence-related tokens appeared among the Q4 top performers. These included Alchemist, a Solana-based no-code platform for building applications; OriginTrail, a decentralized knowledge graph; and Golem, a decentralized computing network.

Their presence was notable but limited. Grayscale’s data indicates that AI-related assets remain more sensitive to changing risk conditions, given their early-stage development and reliance on future adoption scenarios.

Regulatory and Technological Debates Heading Into 2026

As 2025 closed, two debates dominated discussions among crypto investors: U.S. market structure legislation and the potential impact of quantum computing on cryptography.

Grayscale expects a bipartisan market structure bill to become law in 2026. The House passed the Clarity Act in July, and the Senate has since advanced its own version. While specifics may change, the legislation aims to provide a traditional financial framework for crypto markets, enabling regulated institutions to transact and hold digital assets on their balance sheets.

Quantum computing, by contrast, is viewed by Grayscale as a longer-term issue unlikely to affect prices in 2026. Although sufficiently powerful quantum machines could theoretically compromise existing cryptographic standards, most blockchains require updates well before such risks become practical. For now, Grayscale characterizes the topic as a “red herring” for near-term market performance.

Conclusion

Grayscale’s Q4 2025 Crypto Sectors report shows that privacy-focused cryptocurrencies outperformed in a challenging market environment. Six privacy tokens ranked among the top 20 performers by volatility-adjusted returns, supported by rising network usage and increased investor attention. The data suggests a defensive rotation toward assets that address real-world requirements for discretion as blockchains move closer to traditional financial systems.

While overall blockchain activity declined alongside prices, longer-term indicators continue to point toward maturation, particularly at the application layer. Heading into 2026, regulatory clarity and functional infrastructure, rather than speculative themes, are likely to remain central to market positioning. Privacy, as Q4 demonstrated, has reasserted itself as a core component of that infrastructure.

Sources:

• Grayscale Research: 2026 Digital Asset Outlook
• BeinCrypto: Grayscale Highlights 6 Promising Privacy Coins 
• Stocktwits: ZCash Emerges as Q4 Performer amid crypto market pullback
• Bitwise: Crypto Market in Q3 2025

Frequently Asked Questions

How many privacy tokens were in Grayscale’s Q4 top performers list?
Six privacy-focused tokens appeared among the top 20 assets by volatility-adjusted returns in Q4 2025.

Why did privacy tokens outperform in Q4 2025?
They benefited from defensive positioning, rising usage metrics, and growing demand for privacy infrastructure as regulation and institutional integration advanced.

Did all crypto sectors decline in Q4 2025?
Yes. All six Crypto Sectors posted negative returns, though the Currencies sector outperformed others due in part to privacy assets and increased Bitcoin activity.