In a crypto market review released on April 16, asset manager Bitwise described Q1 2025 as “the best worst quarter in crypto’s history.” It was a “frustrating” period for the industry, said the firm’s chief investment officer, Matt Hougan.
Q1 has been historically positive with the first pro-crypto US president taking office, the creation of a strategic Bitcoin reserve, the SEC dropping most of its lawsuits, and the end of the Biden-era war on crypto.
“Crypto dreamed of these developments for years, and they finally all happened.”
The Good, The Bad, and The Ugly
Yet markets and sentiment did not reflect the good fortune. The Bitwise 10 Large Cap Crypto Index dropped 18%, crypto equities tumbled 27%, and Ethereum fell an astonishing 45%, he added.
Total market capitalization tanked almost 20% over the three-month period as $650 billion exited the space. Those losses extended into April as markets are currently down 30% from their January all-time high of $3.9 trillion.
However, it was not all bad news. “Search out things that are hitting new all-time highs when prices are down. They are a sign of where the next bull market will come from,” advised Hougan.
Search out things that are hitting new all-time highs when prices are down. They are a sign of where the next bull market will come from. https://t.co/tYnFNlceg2
— Matt Hougan (@Matt_Hougan) April 16, 2025
Stablecoin circulation reached an all-time high of over $218 billion, up 13.5% quarter-over-quarter, while transaction volume also surged 30%, he noted. Current stablecoin market capitalization is $236 billion, which represents around 8.6% of the total crypto market cap and more than any other asset aside from Bitcoin, according to CoinGecko.
Additionally, tokenized real-world assets “went parabolic” in Q1, growing 37% quarter-over-quarter to a new all-time high, he added.
Finally, regulated Bitcoin futures trading volume and open interest also hit all-time highs, suggesting “institutional interest in crypto as a macro trading asset is growing,” he said before suggesting that these trends could lead markets higher.
“As we move into Q2, I would expect these and related areas to lead the market higher.”
On the ugly side was the $1.5 billion Bybit hack and the bursting of the meme coin bubble, which caused the majority of these functionless tokens to collapse.
Key Crypto Tailwinds
Bitwise identified several key tailwinds that could reverse the three-month downtrend. After years of tightening, central banks across the globe are signalling a shift toward monetary easing and M2 expansion. “Historically, these conditions have been favorable for risk assets, particularly for digital assets,” it noted.
Regulatory relief and new frameworks for stablecoins and DeFi in the US could also be a key catalyst.
Finally, trade wars, capital controls, and fiat devaluations are pushing global investors to reassess their portfolios, it noted.
“In this environment, Bitcoin (like gold) is being increasingly viewed as a potential hedge: liquid, scarce, and (most importantly) independent of tariffs, capital controls, and currency manipulation.”
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