Bitcoin Ends Q1 2025 With 11% Decline Amid Policy Uncertainty

Bitcoin concluded the first quarter of 2025 with an 11% decline, marking the worst quarter in nearly a decade. The quarter began with a surge to a record high of $109,590 in January, but the rapid ascent was quickly halted by a wave of selling triggered by positive news. Expectations of crypto-friendly policies under the re-elected Trump administration faded as no clear legal changes materialized. From its peak, Bitcoin plummeted to a low of $77,041, a nearly 29% drop, and has since fluctuated within the $78,000 to $88,000 range.

Despite the overall market decline, Bitcoin's relative strength remains robust. Its market dominance has risen to over 61%, even as the total cryptocurrency market capitalization has decreased significantly. This shift indicates that capital is flowing from riskier altcoins to Bitcoin amid increasing macroeconomic uncertainty. Ethereum, Solana, and other altcoins have seen declines of 35-50% from their cycle peaks, reinforcing Bitcoin's role as a digital store of value.

As the second quarter begins, price volatility will continue to be influenced by macroeconomic signals, particularly Federal Reserve policies and ETF flows. While selling pressure has eased, liquidity remains tight, suggesting that a significant catalyst is needed for a major breakout. Several bright spots in the U.S. economy include a narrowing trade deficit and increased spending on durable goods. However, these positives are overshadowed by more serious structural issues. Inflation is accelerating faster than expected, partly driven by rising import costs due to new tariffs. Core inflation rose 0.4% in February—the largest monthly increase in over a year—and consumer expectations indicate that high inflation will persist.

Meanwhile, economic growth is slowing. Real income has stagnated when excluding government support, and spending on services—the economy's main driver—has begun to contract. Consumer confidence is waning, with the Conference Board index falling to its lowest level in two years and more Americans predicting rising unemployment. These trends reflect growing household caution, evident in the rising personal savings rate.

Trade policy remains a contentious issue. New tariffs and expectations of further measures in April and May are causing businesses and consumers to adjust their behavior: they are stockpiling purchases, delaying investments, or cutting hiring. Although the February trade deficit narrowed, this followed a strong increase in imports in January, complicating GDP forecasts. As a result, first-quarter growth is expected to slow significantly.

Despite these challenges, the cryptocurrency industry continues to benefit from increasing legal clarity, with growing political support and interest from major institutions. The Securities and Exchange Commission has officially dropped lawsuits against Kraken, Consensys, and Cumberland DRW—three major players in the industry. This marks a significant shift from the SEC's previous heavy-handed approach to a more cooperative regulatory method. It also signals a commitment to building clear and constructive rules for the industry.

Reinforcing this direction, the SEC's Crypto Task Force announced it will host four roundtable discussions between April and June 2025. These meetings will focus on key issues such as crypto trading regulations, digital asset registration, tokenization, and the future of decentralized finance (DeFi). The events are open to the public and demonstrate the SEC's desire to create an open and transparent dialogue to shape crypto policy.

In parallel, Trump Media & Technology Group announced a strategic partnership with Crypto.com to launch a series of crypto-focused ETFs. This move represents TMTG's entry into the financial products sector, aiming to capitalize on the growing demand for digital asset investment vehicles. Although the project awaits regulatory approval, it has the potential to significantly boost the visibility of both TMTG and Crypto.com in traditional financial circles.

While the first quarter was lackluster, the crypto market holds several positive signals. Whether the second quarter will bring a breakthrough remains to be seen.