As we enter the second quarter of 2025, the crypto market is undergoing significant adjustments. Against a backdrop of increasing macro uncertainty, investor sentiment has turned defensive, with funds flowing towards high-market-cap assets like Bitcoin. Although the altcoin market is under pressure, core infrastructure continues to strengthen, and on-chain fundamentals remain robust. Institutional interest remains stable through ETF channels and platform development.
Bitcoin regains dominance in a risk-averse environment.
As investors turn to high-confidence assets, Bitcoin's dominance has risen to 63%, marking the highest level since early 2021.
During turbulent times, capital tends to shift towards perceived quality assets—Bitcoin benefits from this. Bitcoin currently occupies 63% of the total crypto market cap, the highest level since early 2021. Meanwhile, Ethereum's share of the total cryptocurrency market cap has decreased over the past six months, while Solana's share has remained stable since the beginning of 2024.
Bitcoin's dominance reflects investors' preference for the most accessible assets with high macro correlation. Despite the price decline, long-term Bitcoin holders are still accumulating, and the significant rise in the number of Bitcoins held at a loss alongside reduced liquidity supply confirms that strategic allocators have rekindled their confidence.
Spot ETFs remain crucial to market structure.
Despite recent capital outflows, Bitcoin and Ethereum ETFs still maintain a considerable amount of holdings, indicating sustained interest from institutional investors.
ETF fund flows continue to be a key indicator of institutional investor sentiment. In the first quarter, while inflows into Bitcoin and Ethereum spot ETFs were sluggish, they remained consistent, with total Bitcoin ETF balances nearing $125 billion. Although financing rates in the futures market have declined, indicating a decrease in speculative interest, the activity in spot ETFs reflects long-term position allocation.
Large brokerage firms continue to restrict client investments in Bitcoin ETFs. If these platforms set a 2% allocation to Bitcoin, it would imply that net inflows into ETFs will be 22 times that of 2024.
It is worth noting that investment restrictions from large brokerage firms suggest that if access restrictions are eased, a wave of potential demand will emerge.
The supply of stablecoins and on-chain transaction volume has reached an all-time high, highlighting their increasingly important role in the global digital payment space.
As a core component of the crypto financial system, stablecoins continue to attract attention. After adjustments for inactive trading, stablecoin trading volume reached an all-time high in the last quarter. With fees continually decreasing and use cases expanding (from remittances to corporate payments), stablecoins are expected to attract more institutional and retail investors in 2025, especially in high-inflation economies.
The crypto market may hit bottom in the later part of the second quarter of 2025, laying the groundwork for trends in the third quarter of 2025. Overall, the market is expected to show a volatile trend in the short term, followed by a rebound and new highs in the second half of the year.
If the Federal Reserve ends its quantitative tightening policy, it will increase global liquidity and support the crypto market. Similarly, if the EU or medium-sized major economies introduce more global fiscal stimulus measures, it may increase M2 money supply and boost available capital in the market.
The only concern is that further uncertainty in trade relations could prolong negative sentiment in the market, and global shocks may further reduce liquidity.
Today's fear index is 60, indicating a shift in the market towards greed.
Yesterday, the market saw two rebounds at the 93000 mark, which is a critical level that supported Bitcoin's rise to an all-time high in January this year. Currently, there are increasingly more new buy orders for Bitcoin, with MicroStrategy continuously buying more, and more institutions following suit. Coupled with the entry of state-backed players, this will bring a continuous stream of buying for Bitcoin. The 100,000 mark is within reach, and short-term traders can sell between 95,000-100,000 while waiting for a pullback during a wave of sentiment release to re-enter. Additionally, many data points will be released this week, so take profits when needed. Long-term holders can rest assured, as there is no need to fear riding along with institutions; just calmly wait for the bull market.
