It was the best worst quarter in crypto's history. This is Q1 2025 according to the world's biggest crypto index fund manager and also me, you, and everyone else who's held altcoins for the past few months. We got just about every bullish catalyst we could have dreamed of, but prices still fell.
So, what went wrong and why? Well, a new industry report has all the answers and why the case for higher prices this year is alive and well. My name is Guy and you're watching the Coin Bureau.
The report we're breaking down today is titled Q125 market review and it was published by Bitwise, the world's largest crypto index fund manager. At 70 pages, it's light on pros and heavy on charts, graphs, and numbers. All of the commentary is contained in a short executive summary from Bitwise chief investment officer Matt Hogan, who doesn't mince his words.
He describes Q1 as quote the best worst quarter in crypto's history and quote frustrating. No kidding. It was a quarter of good news and torid price action when every bullish catalyst turned into a sell the news event.
Frustrating is definitely the right word. Crypto had all its ducks lined up in a row for another monstable run in Q1, just like last year. Remember sailing to the moon on the back of the spot Bitcoin ETF launches?
Those were the days. Well, this time around, we didn't just have one big catalyst. We had a surreal paradigm shift that turned years worth of crypto headwinds in the US into gale force tailwinds.
Record-breaking lobbying from big crypto paid off handsomely in the US elections, filling Washington with more crypto bros than you can shake a stick at. All of a sudden, the regulatory nightmare of the 2020s was replaced with an agenda to make our bags great again. President Trump quickly made good on his pledges to create a strategic Bitcoin reserve and surprised many with an additional digital asset stockpile for made in the USA altcoins.
At least 23 US states introduce bills to establish Bitcoin reserves, authorize the use of public funds for crypto investments, or create regulatory frameworks for digital assets. And so far, bills have passed through legislative committees in 18 states. Most notable is North Carolina, where lawmakers have proposed allowing up to 10% of public funds to be invested in Bitcoin ETFs and other cryptocurrencies.
Meanwhile, the SEC's war on crypto was immediately cancelled and Gary Gendler hight tailed it back to MIT. Ownerous anti-crypto guidance and enforcement actions were rescinded and lawsuits against Ripple, Coinbase, UniS swap, Binance, and many others started dropping like flies. The agency even established a dedicated crypto task force to resolve the regulatory pain points that had been allowed to fester under previous SEC leadership.
SAB 121, the notorious SEC rule that had prevented US banks from custodying crypto assets, was scrapped. The federal government admitted that the US crypto industry had for years been shut out of the banking system in the long denied Operation Chokepoint 2. 0.
The Financial Standards Board simplified its accounting rules, making it easier for corporations to report their crypto holdings, a process that had previously been notoriously difficult. And meanwhile, outside of the US, the UAE carried the team in Q1 thanks to an Abu Dhabi sovereign wealth fund buying $461 million worth of shares of spot Bitcoin ETFs. And more companies started to follow the micro strategy playbook, notably including GameStop, who raised $1.
5 billion to buy BTC, but also Japan's Metanet, whose treasury now holds around $430 million worth of BTC at the time of making this video. So we saw week after week of bonkers bullish catalysts in Q1, but unfortunately none of them actually catalyzed enough buying pressure to break the downtrend that started in January. This made the last few months a textbook episode of max pain.
We had everything going for us, but the markets failed to read the room and went in the wrong direction. People who fomoed into altcoins during their euphoria of Q4 or early January were punished severely. Likewise, most who tried buying the dip in late January, February, or March will have DCAD their portfolios all the way to rock bottom.
Hodlers learned the hard way that an asset whose price has collapsed by 50% can still fall by another 99% because, well, maths is fun like that. Now, Bitwise charts the quarterly performance of 10 major cryptos and finds XRP is the only one to end Q1 in the green, albeit by a hair with a return of 0. 32%.
Every other crypto listed from Bitcoin to Polka Dot, Cardano, Salana, and so on fared considerably worse. Bitcoin took a 12% haircut. Salana fell by 35%.
Avalanche tumbled 48% and Suie was down 45%. Oh, and these are the cryptos that got off lightly. Outside of the top 10, it was altcoin Armageddon.
You can pick just about any chart you want and find a tragedy unfolding in Q1. Igen fell from $4 to 77. Virtual fell from $461 to 47.
AI16Z fell from $2. 34 to below 13. Popcat fell from 92 to 15.
Melania fell from $7. 34 to 38. You get the picture.
And then there's ETH, king of the altcoins. Now, on average, Q1 is the best quarter for ETH returns with a historical average of 77%. But this time, something went horribly wrong.
Those of us who stuck holding ETH suffered some kind of ritual humiliation in Q1. The top altcoin was rejected twice in December from the final boss resistance at $4,000 and slowly bled all the way back down to below $1,500. ETH finished Q1 with a quarterly return of -45%.
And it didn't help that Ethereum provided the escape route for the biggest theft in human history during February's Bybit hack. Hackers allegedly working for North Korea's Lazarus Group made off with $1. 5 billion in crypto, mostly ETH, from a Bybit cold wallet before converting it into BTC.
Now, to be clear, this hack was in no way Ethereum's fault. The blockchain functioned as it was supposed to and was not compromised in any way. Calls for a hard fork to effectively erase the hack from history did not get very far as nobody wanted a repeat of the 2016 DAO hack that gave us Ethereum Classic and Ethereum.
As the hackers sold off their loot, ETH slid significantly. But frankly, if you're on the daily time frame, you might struggle to point to when the hack even happened. because in the context of Q1, it was just another leg on ETH's sad descent back down to from whence it came.
And taking a look at Ethereum itself, both daily active addresses and revenue were lower in Q1 than in any quarter since 2020. Now, considering that this was an exceptionally bad quarter for altcoins, that's not too shocking until you see Salana's revenue. During the very same exceptionally bad quarter, Salana's revenue stayed flat while Ethereum's tanked.
As far as we can tell, this made Q1 of 2025 the first quarter in history when Salana generated more revenue than Ethereum. Probably nothing. The good news for ETH holders is that Ethereum still dominates the average developer count among major blockchains.
Admittedly, the number of Ethereum devs appears to have fallen by 30% or more since 2022, but there's still more numerous than all other major blockchain developers put together. Needless to say, this is a big gap that won't be closed overnight. the Coin Bureau deals page.
It won't make you stronger, but it will make you better at crypto. Now, thankfully, not every page of Bitwise's report reads like a eulogy. The authors go in search of silver linings and highlight stable coins, tokenized real world assets or RWAs, and BTC futures as winners of Q1.
So, let's take a closer look. In the executive summary, chief investment officer Matt Hogan identifies stable coins among quote parts of the crypto market that are experiencing raging bull markets. He's not wrong, as in Q1, the combined market cap of Sable Coins reached a new all-time high of $218 billion, up 13.
5% quarter over quarter, with transaction volume also jumping 30%. This is amazing news for stable coins, which only go from strength to strength with every crypto bull and bare market. As long as people are buying or selling crypto, there will be demand for stable coins.
But there's the thing. A secular bull run in stable coins is tantamount to a bare market for everything else because it suggests that people are selling their crypto for stables. To put this into context, we need to take a look at stable coin dominance.
Now, for reference, dominance charts tell us what proportion of the total crypto market cap is made up of particular assets. You've probably heard of Bitcoin dominance, which tells us about the relative strength of BTC versus everything else. When it rises, it suggests investors are ditching altcoins for BTC.
And the opposite is also true. It follows that USDT dominance rising is a bearish sign and USDT dominance falling is indicative of bull markets. So, for example, in Q1 of 2024, USDT dominance fell by almost 42% over a 49-day period, during which the market cap of others, meaning all altcoins outside of the top 10, rallied by 110%.
Predictably, a bare market for stable coins was a bull run for the rest of the market. Now, unfortunately, we had the exact opposite happen this year. Over a 49-day period in Q1 2025, USDT dominance rose more than 66% while the altcoin market tanked by 45%.
Good news for Tether, maybe not so much for everyone else. But like I said, whether people are selling or buying, there's always demand for stable coins. In Q4, crypto moonmed and stable coin transaction volumes recorded a new quarterly high of almost $5 trillion.
Then in Q1 this year, we crashed and the same thing happened with stable coin transactions easily breaking past $6 trillion. Notably, USDC transaction volumes roughly quadrupled since Q3 of 2024 as regulations more favorable to Circle than Tether were introduced in the EU and elsewhere. And speaking of volume, last year more money was transacted via stable coins than via Visa, which is just nuts.
Nothing to see here, folks, just crypto flipping tradi. Anyway, we're pretty confident that this trend will continue because stable coins have ample bullish catalysts on the horizon. Bitcoin expects the US Congress to approve a new regulatory framework for stable coins by this July, creating a clear and compliant path for stable coins at scale.
If this does indeed happen, there should be nothing stopping big banks, fintech companies, and startups launching and supporting stable coins. This would be a great leap forward for mainstream stable coin adoption and a new source of liquidity flowing from tradi into crypto assets. And if you saw our recent video about how stable coins might factor into America's debt crisis, you'll know that it's very much in the US government's interest to have stable coins growing.
The US needs a continuous source of demand for its Treasury bonds, which just so happen to be the main assets used to back fully collateralized dollar stable coins like USDT and USDC. Demand for stable coins has made stable coin issuers among the biggest holders of US treasuries, which is saying something because all of the other biggest holders are central banks. Circle and Tether collectively own more US debt than Germany, Mexico, South Africa, and Saudi Arabia, and appear poised to flip Norway soon, too.
Meanwhile, CME Bitcoin and Ethereum futures in the US had their biggest ever quarters in Q4 and Q1. Both BTC and ETH doubled their total volume and average open interest since Q1 of 2024. Quarterly average volume reached around $830 billion for BTC and around $150 billion for ETH, whereas average open interest hit almost $16 billion for BTC and around $2.
2 billion for ETH. The bulk of the increase took place in Q3 to Q4 of last year, suggesting that institutional interest in trading crypto futures exploded around Donald Trump's election win. And one of the other success stories from Q1 was tokenized realworld assets whose growth has been accelerating nonstop since 2022.
The value of RWAS is now approaching $20 billion and rising very quickly. And of this amount around $4. 5 billion is US treasuries tokenized onchain by the likes of BlackRock, Franklin Templeton and Onondo Finance.
Parabola is the only way I can describe what's happening to tokenized RWAS at the moment. It took around a year for their combined market cap to increase from $8 billion to 12 billion from mid 2023 to mid 2024. But to go from $12 billion to almost $20 billion took only three quarters.
Memecoin scandals aside, institutional adoption is the biggest story in crypto this cycle. And as tokenized RWAs are the quintessential Tradfi crypto crossover, it's no surprise to see them experiencing explosive growth. And we've no reason to think that this trend will slow down anytime soon.
But perhaps the most bullish catalyst for crypto in 2025 is the rising global money supply. Years of monetary tightening are set to unwind as central banks around the world signal a shift to monetary easing and expansion of the global money supply which is often referred to as M2. Now this is historically very good news for risk assets and especially BTC which is famously correlated with M2.
Large increases in the latter tend to coincide with BTC mooning. And guess what? M2 is increasing rather quickly, suggesting BTC may be about to play catch-up.
With any luck, this has already started because the market looks like it's at a turning point with BTC decisively breaking out of its Q1 downtrend after tumbling to $74,500 in the first week of April. Price put in a double bottom as Trump paused his Liberation Day tariffs. A steady recovery thereafter turned into a monster monthly candle back up to almost $95,000 after Walmart and Target told Trump that their shelves would soon be empty if he didn't back down from his China tariffs.
And he agreed in principle to reduce them substantially. The road ahead, meanwhile, is paved with bullish catalysts from global liquidity increasing to favorable US stable coin legislation to what Bitwise calls quote the long tale of regulatory clarity. Now, these are all unambiguously bullish developments for crypto.
But it will take more than a single quarter to see the material effect they'll have on the markets and the crypto industry. One quarter of poor price action doesn't stop good news from being good news. And this is why the constant sell the news events of Q1 have not changed the fundamentally bullish outlook.
Now there is one more catalyst that Bitwise expects to give BTC a boost this year and that is geopolitical chaos. The report's authors described this as follows. Quote, geopolitical chaos, trade wars, capital controls and fiat devaluations are pushing global investors to reassess their portfolios 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. Falling faith in institutions opens the door for Bitcoin as a global asset.
We tend to agree, and this is the long game we're all playing with Bitcoin. Its unique properties have enabled it to outperform during periods of macro uncertainty and geopolitical tension. But this begs the question, why didn't that happen in Q1?
We just witnessed geopolitical chaos, trade wars, and falling faith in institutions, prompting global investors to bid gold up 20% and give BTC a 12% haircut instead. But let's be patient. Q1 felt like a horrible time for crypto because altcoins got destroyed.
Bitcoin on the other hand did not get destroyed and a single slightly red quarter does not invalidate the thesis described by Bitwise. Q1 may have been full of bullish announcements and headlines, but it will take time before these developments turn into material change for the crypto industry and our backs. Now, if gold continues to outperform BTC over the next three quarters, we might have something to be worried about.
But until then, we'll remember Q1 as a retracement in a still intact high timeframe BTC uptrend. And where there is hope for Bitcoin, there's hope for altcoins. But just remember that we're not in 2021 anymore.
Buying and selling the right altcoins at the right time has never been more difficult. Although large caps should mostly recover from the Q1 carnage, many smaller altcoins may not because there isn't enough demand or liquidity for Bitcoin's rising tide to lift all boats anymore. So, as always, be careful out there and try not to lose all your money longing into resistance.
Greener days are still to come, though, so while you're waiting, why not watch this video to find out whether Trump is going to fire Jerome Powell and rev up the money printer himself. Okay, that's all from me for now. As always, thank you for watching and I'll see you next time.
This is Guy.
