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hight tailed it back to MIT ownerous anti-crypto guidance and enforcement actions were rescinded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
