Q1 2025 Crypto Recap: Trends, Metrics, Key Asset Performance
The first quarter of 2025 began with optimistic expectations in the cryptocurrency market: on January 20, Bitcoin reached a new all-time high, surpassing the $109,000 mark. However, by the end of the quarter, the situation shifted due to accelerating inflation and the escalation of a trade war. These factors sparked concerns about a potential recession and stagflation, leading to a change in market conditions.
Source: tradingview.com
Tokenized gold turned out to be the leader among crypto assets in the first quarter, reflecting growing investor fears about inflation and economic instability caused by trade conflicts. Bitcoin took second place in the race, losing 11% of its value over the quarter. Altcoins as a whole (excluding Ethereum) secured the third position, demonstrating relative resilience amid a liquidity outflow triggered by the collapse of meme coins and general market pessimism. Ethereum, however, emerged as the underperformer: low network activity led to an increase in total supply and a weakening of the asset’s position.
Throughout the quarter, signs of monetary policy easing have been visible on the horizon: the Federal Reserve reduced its quantitative tightening (QT) program, which could potentially have a positive impact on risk assets, including cryptocurrencies. The growing adoption of cryptocurrencies was accompanied by the development of regulations, including those regarding stablecoins, in most countries. Companies were increasingly adding Bitcoin to their balance sheets, and the SEC was reviewing applications for the launch of new cryptocurrency ETFs.
These trends point to significant changes in the crypto sector in 2025, with increased liquidity and legislative initiatives expected to be the key growth drivers. However, the trade war initiated by the Trump administration remains the primary threat for crypto’s bright future: the imposition of high tariffs could negatively affect U.S. GDP, lead to rising consumer prices, and heighten economic uncertainty, potentially turning the crypto market rally into a decline.
Bitcoin
Source: farside.co.uk
The upward trend of Bitcoin, along with many other assets, was disrupted by the start of a trade war initiated by Donald Trump, which accelerated inflation in January, despite statements about plans to create a strategic crypto reserve. By the time of Trump’s inauguration, Bitcoin had reached a new all-time high, after which a prolonged correction followed. A series of large liquidations of long positions forced Bitcoin ETF holders to sell their shares, further intensifying downward pressure on the price. Inflows into BTC ETFs began to recover only toward the end of the quarter, with the total net inflow for the period amounting to $1.033 billion.
Source: bgeometrics.com
The correction in the spot market led to significant financial consequences: short-term holders recorded a cumulative loss of $8.6 billion, while long-term investors realized a profit of $14.2 billion over 30 days.
Source: bgeometrics.com
Analysis of the Bitcoin profitability chart shows that the share of coins in profit reached 100% multiple times. In such conditions, retail investors, often referred to as ""weak hands,"" tend to engage in panic buying. However, even a slight correction after a peak often leads them to selling their assets at a loss, triggering a deeper price drop, liquidations in the futures market, and a deterioration of market sentiment. In Q1 2025, this factor initiated the correction, which was then exacerbated by Trump’s trade war and January inflation data.
Source: bgeometrics.com
In turn, long-term investors possessing significant liquidity and Bitcoin reserves act strategically in such conditions, minimizing their impact on the market. They began reducing their positions as early as September, anticipating Trump’s election victory and the end of the rally by late 2024 – early 2025. Meanwhile, short-term holders were actively buying the asset at less favorable prices. Currently, the situation has reversed: short-term investors are incurring losses and selling off their holdings, while long-term holders have resumed accumulating Bitcoin, likely expecting a slowdown in inflation and a shift by the Federal Reserve from quantitative tightening (QT) to quantitative easing (QE).
Liquidity
Source: bgeometrics.com
The global money supply M2 continues to grow. This indicator has historically preceded Bitcoin’s dynamics by approximately three months. If this trend persists, it will be possible to assume that the bottom of the March correction has already been passed. However, an increase in the money supply could trigger a new surge in inflation if consumers begin actively spending their accumulated savings. Since M2 is a global metric, not solely reflective of the U.S. economy, the Federal Reserve (Fed) does not appear to view it as a threat to its inflation-control efforts, continuing to reduce the pace of quantitative tightening (QT). Against this backdrop, analysts predict a near-term recovery in Bitcoin’s growth, provided the trade conflict eases.
Source: fred.stlouisfed.org, app.rwa.xyz
As mentioned previously, the reduction of the QT program will also impact the money supply in the U.S., boosting liquidity inflows into the cryptocurrency market. Although the Fed has been reducing the money supply in the economy in recent days, the supply of stablecoins ceased mirroring the Fed’s balance sheet as early as late 2023. Currently, liquidity in the crypto market is increasing, and capital inflows could accelerate further if the Fed continues to ease QT or transitions to QE. This creates favorable conditions for the market’s continued development.
Source: glassnode.com
In the first quarter of 2025, USDC emerged as the leader in capitalization growth among stablecoins, surpassing its main competitor, USDT. The increased issuance of USDC likely reflects market confidence that Circle, a U.S.-registered company, will obtain an American license ahead of its rivals. Nevertheless, analysts believe Tether will also eventually secure a U.S. license, given its position as one of the world’s largest holders of U.S. government securities. Regardless of the outcome, stablecoin regulation will enhance transparency in liquidity circulation, a trend already influencing the overall supply of these assets.
Source: theblock.co
Liquidity serves as the market’s fuel. Users are actively injecting funds into the crypto sector, yet trading volumes are declining. This trend is partly due to the impact of the March correction, but it also suggests that the market is awaiting additional positive signals to resume active trading. As shown in the chart, the data on spot volumes indicates that long-term investors’ purchases will account for the majority of activity in April-May, underscoring their dominant role in the current market phase.
Ethereum
Despite its pivotal role in the blockchain ecosystem and a positive backdrop in the cryptocurrency market at the start of the first quarter, Ethereum is currently showing weak performance. Regulatory improvements, prospects of crypto reserves, and the accumulation of ETH by major players and funds recorded by analytical platforms have failed to prevent a price decline. Over the past quarter, the value of ETH has dropped by 45%. The following outlines the reasons and outlook for the asset.
Inflationary Pressure Post-Dencun Update:
Source: etherscan.io
Since September 2022, following the transition to Proof-of-Stake (The Merge), Ethereum became deflationary: increased network activity led to ETH burning, reducing the total supply. However, high fees remained an issue, which the Dencun update (March 2024) was intended to address. It was expected that lowering transaction costs via blob transactions would boost activity, offsetting the reduction in burning. In practice, activity grew only marginally, burning decreased, and issuance outpaced burning. Since April 2024, the ETH supply has been rising, reaching 120.4 million ETH by February 2025 – the highest since The Merge – which has intensified inflationary pressure and driven the price down.
ETH Movement Within the Blockchain:
Source: intel.arkm.com
Data from Arkham Intelligence over 30 days reveals:- Deposits to exchanges: 1.614 million ETH, signaling potential sales.
- Validator staking: 1.494 million ETH locked via the Eth2 Beacon Deposit Contract, removed from circulation.
- Fund purchases: 22,000 ETH, withdrawn from circulation due to funds’ long-term strategies.
- Unknown wallets: 700 ETH.
- DeFi withdrawals: 449,810 ETH, confirmed by a reduction in Wrapped Ether (WETH) supply.
Positive Factors and the Role of RWA:
Source: defillama.com
Ethereum retains significant strengths:
Leadership in DeFi: Total Value Locked (TVL) in the network grew by 12% over 30 days (in ETH)
Growth in the RWA sector: The largest TVL increases came from real-world asset (RWA) tokenization projects. The top five RWA projects lead in TVL growth, while other major projects (except Pendle, Uniswap, and Aave) saw ETH outflows.
Macroeconomic factors: With Trump’s presidency beginning in 2025, the market is shifting toward integration with the global financial system. Stock exchanges are discussing 24/7 trading, new ETF applications are being filed, and RWA projects – requiring ETH for gas fees and smart contracts – are gaining traction, sustaining demand for the asset.
Ethereum’s challenges stem from post-Dencun inflation and low activity. The upcoming Pectra update (mid-2025) is expected to adjust burning and issuance. QE and the rise of RWAs create conditions for long-term growth. Ethereum remains a robust asset with high growth potential, particularly amid capital inflows and RWA development, though short-term risks from supply inflation persist.
DeFi
Source: app.artemisanalytics.com
Despite starting 2025 on a positive note, altcoins later felt the impact of a deep correction that affected all market sectors. The weighted average capitalization of altcoins showed a decline across the board. As is typically the case, NFTs remain the weakest segment due to a lack of significant innovations and high-profile projects, as well as other factors undermining investor interest.
Source: app.rwa.xyz
In contrast, the real-world asset (RWA) tokenization sector demonstrated the greatest resilience, aligning with current market trends. The RWA narrative is at the forefront: new tokenized asset funds are being launched, and some stock exchanges are exploring the possibility of introducing 24/7 trading, likely based on tokenization. According to chart data, the capitalization of all tokenized assets worldwide (excluding stablecoins) increased by 14% since the start of the year, compared to an 82% growth over the entirety of the previous year. Beyond stablecoins, private loans and U.S. Treasury Debt stand out as the most capitalized asset classes in this sector. Given the plans of the new U.S. administration, the market anticipates further improvements in the regulatory framework for RWAs, which is expected to accelerate the sector’s capitalization growth.
Source: app.artemisanalytics.com
Meanwhile, the decentralized finance (DeFi) sector is undergoing a structural reassessment, with funds being redistributed among blockchains, reflecting shifts in investor priorities. Activity on decentralized exchanges (DEXs) is declining in tandem with centralized platforms, impacting trading volumes. Active DeFi users are either exiting the market or shifting to cautious accumulation, while retail investors, disillusioned by the correction and losses, are gradually leaving. An additional factor impacting the sector is the fading interest in memecoins – a predictable outcome given the cyclical and short-lived nature of their hype.
Source: app.artemisanalytics.com
The total value locked (TVL) in DeFi blockchains has also decreased, with rare exceptions like Berachain. For instance, despite a drop in aggregate TVL since the year’s start, the Base network attracted the largest capital inflows into its protocols, primarily driven by the RWA, lending, and DEX sectors. A similar trend is observed in the Solana network: though previously associated with memecoins, it continues to see capital inflows thanks to the same key sectors as Base. In contrast, the Ethereum network continues to lose capital for reasons outlined earlier, highlighting a redistribution of activity toward other platforms.
Summary
General metrics of the cryptocurrency market indicate its gradual development and maturation of its participants. Strengthening crypto reserves and improving regulations remain key factors contributing to long-term stability. The market is shifting its focus, reassessing assets and deepening integration with traditional finance.
Nevertheless, macroeconomic uncertainty, closely tied to the risks of renewed inflation and the consequences of a global trade war, continues to exert significant influence. Bitcoin has lost its status as a protective asset and, no longer mirroring gold’s dynamics, may be vulnerable to declines under negative global economic scenarios. However, assets with the largest market capitalization demonstrate that cryptocurrencies are firmly establishing themselves in the global financial system – a trend particularly evident in the results of the first quarter of 2025.
Disclaimer: This article is for informational purposes only and not financial advice. XBO makes no guarantees about the data's accuracy. Readers should consult an advisor before making decisions and are responsible for their actions.
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