The first quarter of 2025 proved challenging for the cryptocurrency market.
Bitcoin, the bellwether of the sector world, suffered its worst first quarter performance in seven years, characterized by significant volatility and a prevailing downward trend. The top cryptocurrency’s lackluster movement was similar to price activity seen from other major coins, such as Ethereum, which also recorded substantial losses.
However, Q1 began with optimism following the results of the US presidential election.
President Donald Trump’s anticipated crypto-friendly policies initially boosted sentiment, and Bitcoin rose to its current all-time high of US$108,786 on January 20, the day he was inaugurated.
Crypto positivity was also reflected in options trading, where open interest outpaced the Bitcoin spot price.
Total Bitcoin options open interest vs. the Bitcoin price, January 2 to March 31, 2025.
Chart via Coinglass.
However, low volume provided insufficient support for high prices, foreshadowing the volatility to come.
Q1 data from Coinglass shows that Bitcoin fell 11.82 percent and Ethereum dropped 45.41 percent for the period, with February seeing the largest losses at 17.39 percent for Bitcoin and 31.95 percent for Ethereum.
Bitcoin’s price at the end of the Q1 was around US$80,000, while Ethereum — which has struggled to retake US$2,000 after dipping below that threshold mid-March — closed at around US$1,800.
Proposed economic policies, an impending trade war and poor economic data have acted as major catalysts, resulting in a turn from risky assets like crypto and tech stocks toward traditional safe havens like bonds and gold.
Institutional momentum, Stablecoin growth signal crypto’s next chapter
Despite market fluctuations, some areas of the crypto sector experienced notable growth and development in Q1.
Speaking at Benzinga’s Fintech & FODA Event in December 2024, Venable partner Chris O’Brien said that Sam Bankman-Fried’s conviction marked the end of an initial highly speculative phase for cryptocurrencies.
While cryptocurrencies and blockchain technology will persist, their future hinges on moving beyond mere speculation and focusing on practical applications that address real-world problems.
A defining feature, identified early in the quarter by Bitwise’s Matthew Hougan, is the continued and increasing involvement of institutional players in the crypto market. This trend manifested in strategic investments from companies like Strategy (NASDAQ:MSTR) and BlackRock, both of which accumulated substantial portions of Bitcoin’s supply in Q1.
Major banks like BNY Mellon, which have incorporated cryptocurrency services to allow transactions between certain clients using Circle’s USDC, also began expanding their crypto services.
Earlier this year, Bank of America (NYSE:BAC) CEO Brian Moynihan told CNBC’s Andrew Ross Sorkin that the US banking industry is eager to integrate crypto into traditional banking if — or, more likely, when — regulation allows for it.
Alongside institutional interest, stablecoins saw significant growth in Q1. The total market cap for stablecoins surged past US$200 billion, outpacing Bitcoin’s price trajectory for the period.
Total stablecoin market cap vs. the Bitcoin price, Q1 2025.
Chart via Coinglass.
A key crossover occurred in February after the US announced tariffs targeting Canada and Mexico. The move resulted in a downturn in both cryptocurrencies and traditional markets.
Amid these developments, lawmakers turned their focus to passing stablecoin legislation, specifically Senator Bill Hagerty’s (R-Tenn.) GENIUS Act, which is currently awaiting a full House vote. Kristin Smith, CEO of the Blockchain Association, said during Blockworks’ 2025 Digital Asset Summit in New York that lawmakers are on pace to pass legislation establishing rules for stablecoins and cryptocurrency market structure by August.
Divestitures into altcoins continued from Q4 2024, although momentum slowed comparatively, a shift exacerbated by speculative meme coin trading and the controversies surrounding projects like TRUMP, MELANIA and LIBRA.
Bitcoin retook its dominant position, but notable interest in SOL and XRP remained, as multiple firms sought to offer spot ETFs; their approval is all but guaranteed by former US Securities and Exchange Commission (SEC) Chair Gary Gensler’s exit. Applications have also been filed to offer ETFs tracking SUI, AVA and DOGE.
Ethereum’s Q1 presented a complex picture, marked by both progress and setbacks.
The network increased its gas limit to enhance throughput and enable complex DeFi applications; however, competition from other blockchains — particularly Solana — caused it to underperform. Additionally, the upcoming Pectra upgrade ran into testing issues on the Holesky and Sepolia testnets, causing delays.
Declining network activity contributed to price suppression, but the tripling in total value for BlackRock’s BUIDL fund in the weeks leading up to the end of Q2 signaled continued confidence in Ethereum’s long-term potential and a broader trend toward tokenization, mirrored in the growth of the real-world asset (RWA) market.
The market cap of RWAs grew by approximately US$5 billion in Q1 to reach almost US$20 billion as tokenization was applied to diverse assets and expanded across various blockchains.
Trump admin takes positive crypto steps
Q1 brought various developments in cryptocurrency regulation and policy in the US.
After taking office, Trump signed an executive order establishing the President’s Working Group on Digital Asset Markets to establish criteria for a national stockpile of digital assets and develop a dollar-backed stablecoin; meanwhile, working groups in both chambers of Congress have focused on developing regulatory frameworks for digital assets.
While key aspects of regulation are still under negotiation, lawmakers and regulators signaled a more collaborative approach to cryptocurrencies under the Trump administration in Q1. The SEC dropped several longstanding cases against crypto exchange facilitators, formed a crypto-focused taskforce led by Commissioner Hester Peirce and repealed SAB 121, allowing banks to hold crypto for their customers without assets to balance liabilities.
Industry leaders also convened at the White House on March 7 for the inaugural Digital Asset Summit, a federal initiative aimed at gathering feedback on proposed regulations for the cryptocurrency sector.
Ahead of the summit, Trump signed an executive order to establish a Bitcoin reserve of around 200,000 Bitcoin (BTC). The US government currently holds 213,246 BTC. Bills that would allow the US government to acquire and hold Bitcoin in reserve have been introduced in both the House of Representatives and the Senate.The executive order also established a separate reserve for altcoins, although some industry analysts have questioned this strategy.
Transform Ventures CEO and Bitcoin Supercycle author Michael Terpin argued against holding anything other than Bitcoin, the only truly decentralized and consistently performing digital asset.
He likened adding other cryptos to adding stocks to traditional reserves.
State-level initiatives to establish Bitcoin reserves in Arizona, Oklahoma, Texas and Utah also advanced alongside similar measures to allow pension fund investments in digital assets in North Carolina and other states.
Volatility, manipulation, hacks create crypto headwinds
The first quarter of the year was marked by market volatility and corrections, with both Bitcoin and altcoins experiencing significant price swings that were not only driven by typical market data, but were also heavily influenced by current events, evolving policies and even speculative social media trends.
Another challenge for the crypto market was opposition to proposed legislation in the US; insider trading and market manipulation concerns also arose, particularly around meme coin launches.
Suspiciously timed trades occurred before Trump’s strategic crypto reserve executive order: a large deposit was made to Hyperliquid, followed by highly leveraged trades on Bitcoin and Ethereum, resulting in profits exceeding US$6.8 million. This led many, including a prominent crypto analyst, to believe it was a case of insider trading.
Analysis by Material Indicators on March 20 also identifies a manipulatory device known as spoofing by one or more whales, which it cites as a reason for Bitcoin’s failure to sustain a rally past US$87,500 in March.
Despite efforts to improve regulation and security, the crypto industry continues to grapple with hacking incidents as well. A major hack of the Bybit exchange on February 23 led to losses of US$195 million, although the firm managed to fully replenish its reserves within 72 hours thanks to a mix of loans and large deposits from other industry players.
Glassnode Insights analysts said the correction following the hack and subsequent US$5.7 billion withdrawal from user wallets pushed Bitcoin’s monthly performance down by 13.6 percent. Altcoins and meme coins suffered even steeper losses, resetting market momentum to April 2024 levels.
2025 Bitcoin price predictions
Moderate Bitcoin growth and price appreciation are expected in mid- to late 2025, tied to stablecoin and DeFi growth.
Bitcoin price performance post-halving.
Chart via IntoTheBlock.
Price targets for Bitcoin this year vary. Network economist Timothy Peterson has predicted that Bitcoin could peak around US$126,000 in the latter half of 2025. A meta-analysis of Polymarket estimates posted by X user Ashwin on March 26 identifies a bull target price of US$138,617 and a bear price of US$59,040.
The potential for a supply shock due to diminishing Bitcoin reserves on exchanges could fuel a rally. Factors like a weakening US dollar and an end quantitative tightening from the US Federal Reserve are seen as positive catalysts. Historical data shows April is often a turning point for the market.
Stablecoins and RWAs are expected to continue their role in the convergence of DeFi with traditional finance. Furthermore, initiatives like the Digital Chamber’s US Blockchain Roadmap, which proposes BitBonds (Bitcoin-backed US Treasuries), could revitalize debt markets and attract global capital.
Key industry figures like Galaxy Digital’s Mike Novogratz and 10T Holdings’ Dan Tapiero, anticipate new crypto companies listing on major exchanges like the NYSE and Nasdaq in the second quarter. This sentiment is supported by reports of initial public offering filings from companies like eToro, Circle, Gemini, Bullish and BitGo.
However, this positive outlook is set against a turbulent economic backdrop, including a possible slowdown in US growth and uncertainty around inflation and trade policies, which could influence sentiment and capital flows.
Speaking virtually at the Digital Asset Summit in New York on March 18, Cathie Wood, CEO of ARK Invest, expressed concerns about a potential recession, citing a significant slowdown in the velocity of money.
“I think what’s happening, though, is that if we do have a recession, declining GDP, that this is going to give the president and the Fed many more degrees of freedom to do what they want in terms of tax cuts and monetary policy,” she said.
However, Wood also said she believes that ‘long-term innovation wins,’ despite the recent market correction, describing crypto assets as a pillar of ARK’s investment approach.
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.