Crypto Market Plummets 21% But Analysts See 2025 Recovery Amid US Bitcoin Reserve
1min read The cryptocurrency market has experienced a significant 21% drop in its total market capitalization, falling from a record high of $3.73 trillion to $2.89 trillion. Despite this decline, analysts remain optimistic about the market's future trajectory, predicting a potential recovery and new all-time highs in the second quarter of 2025. This optimism is driven by several factors, including the establishment of a Strategic Bitcoin Reserve by the US government, which is seen as a major turning point for crypto adoption.
The creation of this reserve is expected to reduce the likelihood of a federal ban on Bitcoin and could encourage other nations to follow suit. Institutional investors are likely to take Bitcoin more seriously, and market watchers anticipate significant price movements as liquidity dynamics and government involvement evolve. The establishment of the reserve is also expected to push other nations to consider establishing their own Bitcoin reserves, further legitimizing Bitcoin in the eyes of institutional investors.
Analysts suggest that the Global Liquidity Index (GLI) could be a key factor in the market’s resurgence. The GLI measures the ease of financing in global financial markets and provides insight into global financial conditions. Historically, a rise in the GLI has been associated with increased investor access to capital, which in turn fuels demand for risk-on assets like cryptocurrencies. Mark Quant, a crypto markets researcher, pointed to a strong 0.77 correlation between the GLI and total crypto market capitalization, with a 74-day offset, indicating that liquidity expansions tend to precede bullish trends in the crypto market.
Based on this historical relationship, Quant suggested that the market could move sideways for the next month before beginning an upward trajectory in early April. This could potentially push the total market capitalization beyond $4 trillion. The relationship between liquidity and crypto prices aligns with previous research, such as the work of macroeconomist Lyn Alden, who found that Bitcoin historically followed global liquidity trends approximately 83% of the time over a 12-month period. Compared to other asset classes like the S&P 500, gold, and global equity indices, Bitcoin demonstrated the highest correlation with global liquidity conditions.
During the recent market decline, analysts closely monitored key support levels to determine whether a bottom is in. Dom, a market analyst, pointed out that the total market cap is currently testing significant support at its 20 
