Author: Coinbase & glassnode
Compiled by: Felix, PANews
As we enter the second quarter of 2025, the crypto market is experiencing a significant adjustment. Against the backdrop of increasing macroeconomic uncertainty, investor sentiment has turned defensive, with funds flowing into high-market-cap assets like Bitcoin. Although the Altcoin market faces pressure, core infrastructure continues to strengthen, with on-chain fundamentals remaining robust, and institutional interest staying stable through ETF channels and platform development.
This report, jointly produced by Coinbase and glassnode, focuses on market structure, position trends, and key indicators in a complex and rapidly evolving environment. Here are the report highlights:
Crypto Market Pullback Highlights Defensive Positioning
Bitcoin's cycle from 2022 onwards differs from previous trends, with a slower recovery process amid macroeconomic uncertainty
Since the beginning of 2025, investor sentiment has undergone significant changes. Growing concerns about potential US economic recession, fiscal tightening, and global trade friction have triggered risk-averse sentiment in the digital asset market. Excluding BTC, the total crypto market cap is $95 billion, a substantial 41% drop from the $1.6 trillion peak in December 2024, and a 17% decline from the same period last year. Venture capital inflows have retreated to 2017-2018 levels. Both Bitcoin and the COIN50 index have fallen below the 200-day moving average, suggesting the current pullback may continue into mid-2025.
Bitcoin Regains Dominance in Risk-Averse Environment
As investors shift towards high-credibility assets, Bitcoin's dominance rises to 63%, the highest since early 2021
During turbulent periods, capital gravitates towards perceived high-quality assets—a trend from which Bitcoin benefits. Bitcoin currently represents 63% of the total crypto market cap, its highest level since early 2021. Meanwhile, Ethereum's share in the total crypto market cap has reduced over the past six months, while Solana's share has remained stable since early 2024.
Bitcoin's dominance reflects investors' preference for assets with the highest institutional accessibility and macroeconomic correlation. Despite price declines, long-term Bitcoin holders continue to accumulate, as evidenced by reduced liquidity supply and a significant increase in at-loss held Bitcoin, indicating renewed confidence among strategic allocators.
Spot ETFs Remain Crucial to Market Structure
Despite recent fund outflows, Bitcoin and Ethereum ETFs maintain considerable holdings, indicating continued institutional investor interest
ETF fund flows remain a key indicator of institutional investor sentiment. In the first quarter, while Bitcoin and Ethereum spot ETF fund inflows were subdued, they persisted, with total Bitcoin ETF balance approaching $125 billion. Although futures market funding rates have decreased, signaling reduced speculative appetite, spot ETF activity reflects long-term position allocation.
Major brokerages still restrict client Bitcoin ETF investments. If these platforms set a 2% Bitcoin allocation, it would mean ETF net inflows 22 times those of 2024
Notably, investment restrictions by major brokerages suggest a potential demand wave if access limitations are relaxed.
Solana Outearns All Other L1 and L2 Platforms
In the first quarter, Solana surpassed all other blockchains, with its revenue exceeding Bitcoin, Ethereum, and other blockchains combined.
Despite market macroeconomic impacts and volatile discussions around meme coins, Solana's first-quarter revenue still exceeded the total of all other L1 and L2 networks. This revenue highlights the continued user stickiness and demonstrates Solana's ecosystem's capital efficiency and developer activity.
Stablecoins Consolidate Position as Crypto Financial Pillars
Stablecoin supply and on-chain transaction volumes hit historical highs, highlighting their increasingly important role in global digital payments.
As a core component of the crypto financial system, stablecoins continue to attract attention. Adjusted for non-active trading, stablecoin transaction volumes set a historical record last quarter. With continuously decreasing fees and expanding use cases (from remittances to corporate payments), stablecoins are poised to attract more institutional and retail investors in 2025, especially in high-inflation economies.
Conclusion
The report suggests the crypto market may bottom out in the mid-to-late second quarter of 2025, setting the foundation for the third quarter's trend. Overall, the market will likely show a downward trend in the short term, followed by a rebound and new highs in the latter half of the year. However, this perspective becomes invalid if the following factors emerge:
If the Federal Reserve ends quantitative tightening, it would increase global liquidity and support the crypto market. Similarly, if major economies like the EU or China introduce more global fiscal stimulus measures, it could increase M2 money supply and boost available market capital.
More concerning is that further trade uncertainty could prolong market negative sentiment, and global shocks might further reduce liquidity.
Related Reading: Q1 2025 Cryptocurrency Industry Report: DeFi and Non-Fungible Token Ecosystem Trends, CEX and DEX Market Performance
