Crypto Assets Market Q1 2025 Review and Outlook

In early 2025, the Crypto Assets market experienced significant volatility. Although the political stance at the beginning of the year shifted in favor of Crypto Assets, driving prices up, the market subsequently saw a notable correction. After Bitcoin and Solana reached all-time highs in January, the overall market declined, with the S&P 500 and Bitcoin both dropping by 15-20%.

This pullback is mainly attributed to macro factors and issues specific to digital assets. On the macro level, the market is concerned about 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 the Government Efficiency Department (DOGE) has also had an impact on government-related expenditures.

The digital asset industry faces some unique challenges, including the collapse of the meme coin bubble and a major exchange suffering a hacking attack. These events have undermined market confidence. In the first quarter, the median token price fell by more than 50%, with nearly all token prices experiencing declines.

However, such pullbacks are not uncommon in Crypto Assets bull markets. Past experiences have shown that a strong rebound often follows a significant drop. Some market sentiment indicators have reached historical extreme levels, suggesting that the worst phase of sell-off may be over.

At the same time, favorable interest rates and liquidity conditions are beneficial for risk assets. Global liquidity conditions continue to improve, and major economies are implementing or considering stimulus measures. Historically, the main upward trend in Bitcoin prices tends to occur during periods of increased liquidity.

Recent macroeconomic events are evolving into a trust crisis for the US dollar. In this context, Bitcoin's function as a non-sovereign store of value appears more attractive. We are beginning to see signs that digital assets are outperforming stocks and the US dollar in the short term.

Despite market volatility, many positive industry developments are overlooked, including favorable changes in policies and ongoing improvements in fundamentals. Blockchain companies are generating substantial revenue, with user activity and stablecoin usage continuously reaching new highs.

Overall, despite the challenges in the first quarter, the long-term outlook remains positive. As the volatility caused by tariffs gradually subsides, investors may refocus on the long-term benefits and strong fundamentals of digital assets. As a pioneer of growth assets, although Crypto Assets initially experienced a correction, they may also rebound first.