Bitcoin Faces Worst Q1 Drop Since 2020, But Analysts Predict Possible Rebound in Q2

Bitcoin has experienced its most significant drop in the first quarter of 2025 since the 2020 pandemic-induced market crash. The cryptocurrency, which began the year with an all-time high of $109,225 on January 20, 2025, has since plummeted to recent lows near $76,700 in March 2025. This dramatic decline has been driven by a combination of macroeconomic uncertainty, institutional activity, geopolitical tensions, and market sentiment. However, despite these challenges, analysts remain optimistic about a potential rebound in the second quarter of 2025.



The primary factors contributing to Bitcoin's significant drop in Q1 2025 include macroeconomic uncertainty, institutional activity, geopolitical tensions, and market sentiment. Specifically, on February 25, 2025, Bitcoin’s price plunged below $86,000, marking a 20% drop from its peak and officially entering a technical bear market. This drop was largely driven by mass liquidations in the crypto market, totaling $1.6 billion in 24 hours. Market sentiment turned extremely bearish, with investors moving away from risky assets due to fears of a global economic slowdown. Analysts at Cointelegraph and QCP Capital noted that institutional demand was starting to slow, raising concerns about Bitcoin’s long-term trajectory. Additionally, on February 28, 2025, hackers stole $1.4 billion from one of the major CEXs, which shook investor confidence, leading to another wave of selling and Bitcoin’s price dropping to $83,500.

In comparison, the drop in 2020 was primarily driven by the COVID-19 pandemic, which caused widespread economic uncertainty and a global market sell-off. The pandemic led to a significant decrease in demand for riskier assets, including Bitcoin, as investors sought safer havens. The drop in 2020 was also characterized by a lack of institutional support and regulatory clarity, which contributed to the market's volatility. In contrast, the drop in Q1 2025 is more influenced by geopolitical tensions, institutional activity, and market sentiment, with the hack of a major CEX adding to the market's instability.

Despite these challenges, analysts remain optimistic about a potential rebound in the second quarter of 2025. The current macroeconomic conditions and geopolitical events significantly influence the potential rebound of Bitcoin in Q2 2025. Several key factors and historical precedents support this prediction:

1. Favorable Macro-Environment: The favorable macro-environment leaves little room for doubt that Bitcoin is headed for new highs by the end of Q1 2025. This is supported by the statement from Swyftx lead analyst Pav Hundal, who said, "The air is getting very thin for bears right now. We expect Bitcoin to hit fresh highs by the end of the quarter." This optimistic outlook is driven by the pro-crypto macro environment, which signals new all-time highs are likely by the end of March 2025.

2. Volatility Levels: The Bitcoin market has returned to the volatility levels last seen in November 2024, around the US election. Following Trump’s victory, Bitcoin surged in a month-long rally, surpassing its $73,679 all-time high and reaching the psychological $100,000 level by Dec. 5, 2024. This historical precedent shows that significant geopolitical events, such as elections, can drive substantial price movements in Bitcoin.

3. Institutional Activity: Institutional investors have been accumulating Bitcoin, believing it to be a long-term store of value. For example, MicroStrategy, sovereign wealth funds, and hedge funds continued to accumulate Bitcoin, which supports the idea that institutional demand can drive price increases. This is further validated by the fact that Bitcoin's active supply increased nearly 70% in the last quarter of 2024, with over 1.8M BTC entering into active circulation as long-term holders saw $100K as a critical price level for profit-taking.

4. Geopolitical Events: Geopolitical events, such as the US election results and the potential creation of a U.S. crypto reserve, have had a significant impact on Bitcoin's price. For instance, on March 2, 2025, Bitcoin briefly surged to $93,000 following an announcement from President Trump regarding a potential U.S. crypto reserve. This shows that geopolitical events can create short-term rallies and support the potential for a rebound in Q2 2025.

5. Historical Cycles: Bitcoin's performance is roughly in sync with the historical four-year cycles. As a result, we are optimistic about its prospects for the next six to twelve months. In this paper, we examine the cyclical dynamics that should continue to shape bitcoin’s long-term market performance. For example, the price of bitcoin as of November 13, 2024, was 1.33x higher compared to its last cycle high at $67,589 on November 8, 2021. This historical precedent supports the idea that Bitcoin's price could increase 15.4x to ~$243,000 during the next year (880 days after the cycle low in November 2021).



In conclusion, the current macroeconomic conditions and geopolitical events, supported by historical precedents, suggest a strong potential for Bitcoin to rebound in Q2 2025. The favorable macro-environment, volatility levels, institutional activity, and geopolitical events all contribute to this optimistic outlook. While the first quarter of 2025 has been challenging for Bitcoin, the second quarter could see a significant rebound, driven by a combination of favorable macroeconomic conditions, institutional activity, and geopolitical events.