Crypto Assets Market Q1 2025 Review and Outlook

In the first quarter of 2025, the Crypto Assets market experienced a turbulent period. Macroeconomic conditions and policy changes had a significant impact on the market, leading to a decline in risk appetite across most asset classes. Although digital assets performed well in growth-oriented investments, they were not immune to this impact.

At the beginning of the year, the political attitude shifted towards Crypto Assets, driving prices up. However, after Bitcoin and Solana reached all-time highs in January, the market experienced the typical "buy the expectation, sell the fact" phenomenon. The S&P 500 index and Bitcoin both saw a 15-20% correction, while small-cap stocks and high-growth stocks performed even worse.

Market concerns are primarily driven by increased policy uncertainty and the risk of stagflation. The tariff policies implemented by the new government have lowered consumer confidence, corporate profits, and GDP expectations. The establishment of efficiency departments within the government has also raised worries about possible cuts to government spending.

The digital asset industry still faces some unique challenges. Events such as the burst of the Meme coin bubble and a major exchange being hacked have weakened market confidence.

In the first quarter, the median price of tokens fell by over 50%, with almost all tokens experiencing a decline. However, tokens with strong fundamentals performed relatively well, exceeding those without revenue by 8 percentage points.

From a historical perspective, such pullbacks are not uncommon. During the upward trend from 2020 to 2022, Bitcoin experienced significant pullbacks of over 20% multiple times. In the long run, each pullback was followed by a strong rebound.

Market sentiment indicators show that the worst phase of selling may be over. The U.S. economic policy uncertainty index is at its highest level in 40 years, the Crypto Assets fear and greed index is in extreme fear levels, and Bitcoin futures funding rates indicate that there are more short positions than long positions.

At the same time, favorable interest rates and liquidity conditions are beneficial for risk assets. The yield on 10-year U.S. Treasury bonds is trending downward, and global liquidity conditions continue to improve. Historically, the main upward trends in Bitcoin prices often occur during periods of increased liquidity.

Recent macroeconomic events are evolving into a trust crisis for the US dollar. Bitcoin, as a non-sovereign store of value, appears more attractive in this situation.

We are beginning to see signs that digital assets are performing better than stocks and the dollar in the short term. At the same time, many positive industry developments are being overshadowed by market volatility, including favorable policies and improvements in fundamentals.

Blockchain enterprises are generating substantial income, with actual economic value and on-chain application revenue continuing to grow. Metrics such as daily active addresses and stablecoin transfer volumes have also reached new highs. Innovation remains strong in areas such as stablecoins, artificial intelligence, DePIN, and DeFi.

Overall, although the first quarter has been challenging, market sentiment indicators suggest that the most aggressive sell-off may be behind us. As the volatility triggered by tariffs gradually subsides, investors may start to focus on long-term positive factors and strong fundamentals. As a pioneer of growth assets, Crypto Assets may lead the way in rebounding and perform strongly.