Crypto Market Cap Drops 18.6% in Q1 2025 Amid Recession Fears

The crypto market experienced a significant downturn in the first quarter of 2025, with the overall market capitalization falling by 18.6%. This decline resulted in a loss of $633.5 billion, according to the latest quarterly report from CoinGecko. The report highlights that despite a bullish start to the year in January, macroeconomic factors, particularly recession fears, have heavily impacted market sentiment over the past two months.

Investor activity also decreased, with daily trading volumes dropping by 27.3% quarter-on-quarter from the end of 2024. Spot trading volume on centralized exchanges fell by 16.3%, which was partially attributed to the Bybit hack. The report also noted that markets hit a local high around the inauguration of the new administration, which fueled a brief frenzy in Solana meme coin activity. However, this quickly slumped, and the LIBRA scandal further dampened market sentiment.

Bitcoin, the largest cryptocurrency by market capitalization, increased its dominance in Q1 2025, accounting for 59.1% of the total crypto market cap. This is the highest share it has held since 2021, symbolizing its relative stability compared to other altcoins. However, Bitcoin also fell by 11.8% and was outperformed by gold and US Treasury bonds. Ethereum's entire 2024 gains vanished in Q1 2025, and multichain DeFi TVL fell by 27.5%.

Despite some positive developments, such as Solana dominating the DEX trade and Bitcoin ETFs seeing $1 billion in fresh inflows, these were accompanied by significant caveats. Solana's TVL declined by over one-fifth, and total AUM for Bitcoin ETFs fell by nearly $9 billion due to price drops. The report reflects that recession fears are gripping the crypto market, leading to a bearish outlook for the first quarter of 2025.