Q1 2025 Crypto Assets Market Review

Industry Overview

At the beginning of 2025, the Crypto Assets market is facing a complex situation of optimism and uncertainty coexisting. Although the industry has expectations for a shift in the Federal Reserve's monetary policy, a second outbreak of AI technological revolution, and friendly regulations promised by the new government, by the end of the first quarter, the market exhibits characteristics of severe macro fluctuations and relatively low micro innovation.

The global economic situation has become a core factor driving the market. The Federal Reserve is struggling to balance between inflation and recession risks. The unexpected expectations of a recession-related interest rate cut in March briefly boosted market sentiment, but failed to offset liquidity concerns arising from adjustments in U.S. stock valuations. The new government is promoting Bitcoin as a national reserve and a strategic reserve for digital assets, implementing relevant legislation that brings benefits to the industry. However, the dual presence of policy dividends and regulatory easing has also intensified market debates over the costs of transformation.

After Bitcoin broke the historic high of $100,000 in January, it experienced a 30% correction, showing that the market is taking profits from the "halving trend." Altcoins performed generally flat, but innovative areas such as RWA and user entry are still continuously developing. Notably, major trading platforms are accelerating their layout in the decentralized ecosystem, promoting seamless user access to DeFi and other application scenarios through on-chain liquidity aggregation and account abstraction technology, and for the first time allowing users to trade DEX assets directly on the platform. This new model of integration between centralization and decentralization may become the key to the next round of growth.

Macroeconomic Environment and Impact

In the first quarter of 2025, the macroeconomic situation in the United States has a profound impact on the Crypto Assets market. Since the approval of the BTC spot ETF, the correlation between the Crypto Assets market and the U.S. stock market has further strengthened, with the Nasdaq's performance largely determining the direction of the Crypto Assets market. Although Bitcoin was once regarded as "digital gold," it is now closer to the characteristics of risk assets, significantly affected by market liquidity.

The core of the macroeconomy lies in the balance between inflation and economic growth. If inflation is too high or the economy is overheating, the Federal Reserve may delay interest rate cuts, which would be detrimental to the capital markets; conversely, if the economy is too weak, it may trigger recession risks, which would also harm market confidence. Therefore, the macroeconomy needs to find a balance between strength and weakness to create a favorable environment for the capital markets.

The new government significantly reduced the number of personnel in government agencies, directly leading to an increase in the unemployment rate. At the same time, the new tariff policy has driven up the prices of affected goods and the costs of related services, exacerbating inflationary pressures and increasing the risk of economic recession.

These policies have increased market uncertainty, leading to intensified fluctuations in the capital markets. Considering the gains brought by the previous election rally and the potential short-term risks of a correction, some investment institutions have reduced their investment plans in the first quarter, shifting their focus to other business areas. However, there are also views that these policies may be aimed at increasing international negotiation leverage or forcing the Federal Reserve to quickly lower interest rates to alleviate debt pressure and stimulate economic growth. Therefore, there remains an optimistic outlook for the long-term prospects of the Crypto Assets market.

In the first quarter, the Crypto Assets market was sensitive to economic data. The overall strong data in January kept the market relatively stable; February's inflation exceeded expectations, leading to a sharp decline in interest rate cut expectations and triggering a significant drop; March's data improvement led to a brief rebound, but the core PCE exceeding expectations again caused a pullback. Moving forward, the trend of the Crypto Assets market will still heavily depend on macro data and Federal Reserve policies, and investors need to closely monitor changes in inflation and employment data.

The New Government's Crypto Assets Policy and Its Impact

In March 2025, the new government signed an executive order to establish a strategic Bitcoin reserve, funded mainly by about 200,000 confiscated Bitcoins. This move aims to elevate Bitcoin to a "sovereign reserve asset," enhancing its legitimacy and liquidity. Although Bitcoin's price rose in the short term, it subsequently fell back due to the reserve relying solely on confiscated assets. In the long term, this action may encourage other countries to follow suit, promoting Bitcoin as an international reserve asset.

In terms of regulation, the new government is pushing for a change of the SEC chairman, establishing a Crypto Assets working group, clarifying token classification standards, and terminating lawsuits against certain companies. The regulatory environment has significantly loosened, with institutional investors accelerating their entry and traditional financial institutions being allowed to carry out crypto custody services. In the short term, policy dividends may accelerate innovation and capital inflows; in the long term, one must be alert to systemic risks and the complexity of global regulatory games.

In terms of stablecoins, the new government has established a federal regulatory framework that allows issuing institutions to access the Federal Reserve payment system, while explicitly prohibiting the issuance of central bank digital currencies. This promotes the application of stablecoins in cross-border payments and expands the internationalization path of the US dollar.

The new government's tariff policy requires trade partners to align their tariffs with those of the United States and imposes additional tariffs on countries that implement a value-added tax system. This has led to an increase in global tariff barriers, resulting in higher trade costs and a potential reduction in the scale of international trade. The United States is facing import-driven inflationary pressures, with expectations for interest rate cuts being postponed. The tariff policy also forces companies to relocate production to other countries, affecting the layout of global supply chains.

Since its launch, the DeFi project supported by the new government has had multiple impacts on the industry. The project is seen as a policy "barometer", and its asset allocation and partnerships are interpreted as a "presidential selected portfolio", attracting investors to follow suit. The US dollar stablecoin introduced by the project emphasizes compliance and institutional-grade custody, which may affect the market share of existing stablecoins. In the long run, the operation of the project provides a compliance model for the industry, but it may also lead to market bubbles due to regulatory arbitrage.

The Connectivity and Integration of CEX and DEX

Exchanges and Web3 wallets have served as important gateways to the Crypto Assets world, with clear boundaries in the past. As we enter 2025, the number of users on major exchanges has significantly increased, while the daily active users on-chain account for only about 10% of those on the exchanges.

Since 2023, exchanges have begun to venture into the Web3 wallet market. Some exchange wallets attract users with excellent product experiences, but essentially they still have not broken through the usage barriers of traditional Web3 wallets. Other exchanges have launched Web3 wallets closely linked to trading accounts, supporting rapid interoperability between on-site assets and on-chain assets, and have collaborated with DEXs within the ecosystem to launch IDO activities aimed at ordinary users.

At the same time, native encryption projects have also made breakthroughs in the wallet field. A certain project launched a product that integrates wallet and trading platform functions, solving the challenges of multi-chain asset management and trading, gaining market recognition.

The integration of CEX and DEX marks a transition in the cryptocurrency market from "opposition and division" to "collaborative symbiosis." This transformation brings new challenges in regulation, security, and governance while enhancing efficiency and inclusiveness. In the future, participants who can better balance the efficiency of centralization with the advantages of decentralization may dominate the development direction of the next generation of financial infrastructure.