As we enter the second quarter of 2025, the crypto market is undergoing significant adjustments. In the context of increasing overall economic uncertainty, investor sentiment has shifted to a defensive stance, with funds flocking towards high market cap assets like Bitcoin. While the altcoin market faces pressure, the core infrastructure continues to strengthen, on-chain fundamentals remain robust, and institutional interest remains stable through ETF channels and platform development.
This report is jointly produced by Coinbase and Glassnode, focusing on market structure, position trends, and key indicators in a complex and rapidly evolving environment. Here are the highlights of the report:
The crypto market pullback highlights defensive positioning.
Source: Glassnode Bitcoin's cycle in 2022 and beyond differs from past trends, with a slower recovery process amidst overall economic uncertainty.
Since early 2025, investor sentiment has undergone a dramatic change. Concerns over a potential economic recession in the U.S., fiscal tightening, and global trade frictions have intensified, triggering risk-averse sentiment in the digital asset market. Excluding Bitcoin, the total market cap of cryptocurrencies is $950 billion, down significantly by 41% from a high of $1.6 trillion on December 1, 2024, and down 17% year-over-year. Venture capital inflows have also returned to levels seen in 2017-2018. Both Bitcoin and the COIN50 index have fallen below the 200-day moving average, indicating that the current pullback may extend into mid-2025.
Bitcoin regains dominance in a risk-averse environment.
Source: Glassnode As investors shift to high-confidence assets, Bitcoin's dominance rises to 63%, the highest level since early 2021.
During turbulent times, capital shifts towards perceivable quality assets—Bitcoin benefits from this. Bitcoin currently accounts for 63% of the total crypto market cap, the highest level since early 2021. Meanwhile, Ethereum's market share in the total cryptocurrency market cap has decreased over the past six months, while Solana's market share has remained stable since early 2024.
Bitcoin's dominance reflects investor preference for the most institutionally accessible and economically relevant assets. Despite price declines, long-term holders of Bitcoin are still accumulating, with a decrease in liquidity supply and a significant increase in the number of Bitcoin held at a loss indicating that strategic allocators are regaining confidence.
Spot ETFs remain crucial for market structure.
Source: Glassnode Despite recent capital outflows, Bitcoin and Ethereum ETFs still maintain considerable holdings, indicating ongoing interest from institutional investors.
ETF fund flows remain a key indicator for assessing institutional investor sentiment. In the first quarter, while the inflows into Bitcoin and Ethereum spot ETFs were subdued, they continued, with the total balance of Bitcoin ETFs nearing $125 billion. Although the financing rates in the futures market have decreased, indicating weakened speculative interest, the activity in spot ETFs reflects long-term positioning.
Source: Glassnode Major brokerages are still restricting client investments in Bitcoin ETFs. If these platforms set a 2% Bitcoin allocation, it would mean that the net inflow into ETFs would be 22 times that of 2024.
It is noteworthy that the investment restrictions from major brokerages suggest that if access limits are relaxed, there will be a wave of potential demand.
Solana's revenue surpasses all other L1 and L2 platforms.
Source: Glassnode
Solana outperformed all other blockchains in the first quarter, with its revenue exceeding the combined total of Bitcoin, Ethereum, and other blockchains.
Despite the overall economic environment impacting the market and the turbulent negative discussions around meme coins, Solana's revenue in the first quarter still exceeded the total of all other L1 and L2 networks. This revenue highlights the continued stickiness of ecosystem users and indicates that the capital efficiency and developer activity in the Solana ecosystem remain strong.
Stablecoins have solidified their position as pillars of crypto finance.
Source: Glassnode
The supply of stablecoins and on-chain transaction volume have reached all-time highs, highlighting their increasingly important role in the global digital payment industry.
As a core component of the crypto financial system, stablecoins continue to attract attention. After adjusting for inactive trading, stablecoin trading volume reached a historical high last quarter. As costs continue to lower and applications expand (from remittances to corporate payments), stablecoins are expected to attract more institutional and retail investors by 2025, especially in high-inflation economies.
Conclusion
The report suggests that the crypto market may bottom out in the middle to late second quarter of 2025, laying the groundwork for trends in the third quarter of 2025. Overall, the market is expected to show a downward trend in the short term, followed by a rebound and new highs in the second half of the year. However, the above view is invalidated if the following factors occur:
If the Federal Reserve ends its quantitative tightening policy, it will increase global liquidity and support the crypto market. Similarly, if major economies such as the EU or China introduce more global fiscal stimulus measures, it may increase the M2 money supply and raise the capital available in the market.
More concerning is that further uncertainty in the trade situation may prolong negative sentiment in the market, while global shocks may further reduce liquidity.
This article is reproduced with permission from: (PANews)
Original authors: Coinbase & Glassnode
'Bitcoin market share soars above 60%! Institutions: On-chain fundamentals are solid, and a rebound is expected in the third quarter' was originally published by 'Crypto City'.
