Despite achieving long-awaited regulatory and political milestones, the crypto market posted significant losses in Q1 2025 - marking what asset manager Bitwise calls “the best worst quarter in crypto history.”
According to Bitwise’s April 16 market report, the first quarter delivered a mix of transformative wins and disappointing performance. While the industry welcomed a pro-crypto U.S. president, the launch of a national Bitcoin reserve, and a sharp regulatory pivot by the SEC, digital asset prices fell sharply.
The Bitwise 10 Large Cap Crypto Index dropped 18%, Ethereum plunged 45%, and crypto equities declined by 27%. In total, approximately $650 billion exited the market, bringing total crypto market capitalization down nearly 20% from its January peak of $3.9 trillion.
“Crypto dreamed of these developments for years, and they finally all happened,” said Matt Hougan, Chief Investment Officer at Bitwise. “Yet prices moved in the opposite direction.”
Despite the broad selloff, key indicators suggest strengthening fundamentals beneath the surface. Stablecoins hit record circulation at over $218 billion, up 13.5% quarter-over-quarter, and currently represent roughly 8.6% of the total crypto market cap - second only to Bitcoin. Transaction volumes surged 30%, indicating robust demand for blockchain-based settlement infrastructure.
Tokenized real-world assets (RWAs) were another standout sector, growing 37% to reach new all-time highs. This growth aligns with a broader institutional trend: regulated Bitcoin futures trading volumes and open interest also reached record levels, signaling that traditional finance is increasingly treating crypto as a macroeconomic asset class.
“Search out the areas hitting all-time highs when markets are down. That’s where the next bull market usually begins,” Hougan advised.
The quarter was not without its setbacks. A $1.5 billion exploit on the Bybit exchange raised fresh concerns about security vulnerabilities, while the speculative frenzy surrounding memecoins came to an abrupt halt. The collapse of many of these tokens - often lacking utility or project fundamentals - contributed to broader negative sentiment.
Despite Q1’s price declines, Bitwise sees strong catalysts emerging for a potential Q2 recovery. Central banks worldwide are moving away from monetary tightening, signaling a return to expansionary policies and M2 growth - a historical driver of risk asset performance, including crypto.
In the U.S., the regulatory landscape has turned decisively more crypto-friendly. The SEC has dropped most of its lawsuits against major blockchain firms, and lawmakers are advancing new frameworks for stablecoins and decentralized finance.
Additionally, rising global trade tensions, currency manipulation, and capital controls are pushing international investors to diversify. As a result, Bitcoin is increasingly seen as a geopolitical hedge - liquid, scarce, and insulated from sovereign interference.
“In this environment, Bitcoin - like gold - is being reassessed as a strategic reserve asset,” Bitwise noted.
With fundamental indicators diverging sharply from price action, Q1 2025 may be remembered not for its losses, but for the foundation it laid for the next phase of institutional adoption and global crypto integration.