At the beginning of 2025, the cryptocurrency market experienced a period of intense volatility. Driven by changes in the political climate, Bitcoin and Solana both hit historic highs in January, but the market later experienced a significant correction due to macro factors and issues within the industry.
From a macro perspective, concerns about increasing policy uncertainty and stagflation risks are intensifying in the market. The tariff policies implemented by the new government have weakened consumer confidence and lowered corporate profit expectations; meanwhile, the establishment of the Department of Government Efficiency (DOGE) has further introduced uncertainty for government employees and related enterprises. The speed and magnitude of these changes far exceed those of previous administrations, raising widespread concerns in the market.
The digital asset industry itself also faces unique challenges. Events such as the bursting of the memecoin bubble and a major exchange being hacked have severely impacted market confidence. In the first quarter, the median price drop of tokens exceeded 50%, with almost all tokens experiencing declines, but tokens with robust fundamentals performed relatively better.
Historically, such pullbacks are not uncommon. In previous bull markets, Bitcoin has seen corrections of over 20% multiple times, and other tokens have even experienced pullbacks of 40%-50%, often followed by a strong rebound after significant declines.
Multiple market sentiment indicators suggest that the most severe phase of selling may have passed. The U.S. economic policy uncertainty index has risen to a 40-year high, the crypto fear and greed index is at an extreme fear level, and Bitcoin futures funding rates show that shorts dominate. These extreme sentiments often indicate that prices may have bottomed out.
At the same time, favorable interest rates and liquidity conditions support risk assets. The yield on 10-year U.S. Treasury bonds continues to decline, and global liquidity conditions are improving. Historical data shows that the main upward trends of Bitcoin often occur during periods of increased liquidity.
From another perspective, the four-year cycle of cryptocurrencies often aligns with major macro events. The year 2025 may be such a pivotal point, as the crisis of trust in the dollar is brewing, and Bitcoin, as a non-sovereign store of value, becomes increasingly attractive in this context.
Currently, early signs of relative strength in digital assets can be observed. Since April, some digital assets have risen while U.S. stocks have shown a downward trend. Although it is still too early to draw conclusions, digital assets may lead in hitting a bottom and rebounding.
It is worth noting that many positive industry dynamics are being overshadowed by market volatility. On the policy front, positive changes such as the establishment of a digital asset working group and the creation of strategic Bitcoin reserves have emerged; on the fundamental side, blockchain companies are seeing substantial revenues, user activity continues to rise, and the foundation of the industry is being solidified.
