Original Author: Coinbase & Glassnode
Original Translation: Felix, PANews
As we enter the second quarter of 2025, the crypto market is experiencing a significant adjustment. Against the backdrop of increasing macro 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 since 2022 differs from previous trends, with recovery progressing more slowly amid macro uncertainty
Since the beginning of 2025, investor sentiment has dramatically changed. Concerns about potential US economic recession, fiscal tightening, and global trade friction have triggered risk-off sentiment in digital assets. Excluding BTC, total crypto market cap is $95 billion, a significant 41% drop from the $1.6 trillion peak in December 2024, and 17% down from the same period last year. Venture capital inflows have retreated to 2017-2018 levels. Both Bitcoin and COIN 50 index have fallen below the 200-day moving average, suggesting the current pullback may continue into mid-2025.
Bitcoin Regains Dominance in Risk-Off Environment
As investors shift towards high-credibility assets, Bitcoin dominance rises to 63%, the highest since early 2021
During turbulent periods, capital gravitates towards perceived quality assets—benefiting Bitcoin. Bitcoin currently occupies 63% of total crypto market cap, the highest since early 2021. Meanwhile, Ethereum's market cap share has reduced over the past six months, while Solana's share has remained stable since early 2024.
Bitcoin's dominance reflects investor preference for institutionally accessible and macro-correlated assets. Despite price declines, long-term Bitcoin holders continue accumulating, evidenced by reduced liquidity supply and significantly increased underwater holdings, 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 interest
ETF fund flows remain a key indicator of institutional investor sentiment. In the first quarter, while Bitcoin and Ethereum spot ETF inflows were subdued, they persisted, with Bitcoin ETF total 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 continue restricting client Bitcoin ETF investments. If these platforms set a 2% Bitcoin allocation, it implies ETF net inflows could be 22 times 2024 levels
Notably, investment restrictions from major brokerages suggest a potential demand surge if access limitations are relaxed.
Solana Outearns All Other L1 and L2 Platforms
Solana surpassed all other blockchains in Q1, with revenue exceeding Bitcoin, Ethereum, and other blockchains combined.
Despite macro environment challenges and volatile meme discussions, Solana's Q1 revenue exceeded the total of all other L1 and L2 networks. This revenue highlights sustained user stickiness and indicates Solana's ecosystem maintains strong capital efficiency and developer activity.
Stablecoins Consolidate Their Position as Crypto Financial Pillars
Stablecoin supply and on-chain transaction volume hit historical highs, underscoring their growing importance in global digital payments.
As a core component of the crypto financial system, stablecoins continue to attract attention. Adjusted for non-active transactions, stablecoin transaction volume set a historical record last quarter. With 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 latter half of Q2 2025, setting the foundation for Q3 trends. Overall, the market will likely show a short-term downward trend, followed by a rebound and new highs in the second half. However, this perspective becomes invalid if the following factors emerge:
If the Federal Reserve ends quantitative tightening, it will 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.
