Crypto Assets Market Analysis and Outlook

In 2025, a series of events in the Crypto Assets field and the macro environment had a significant impact on the market. Large macro forces dominated market trends, leading to a continued decline in risk appetite across most industries and asset classes. Although digital assets performed well in growth-oriented investments, they were not immune to this influence.

At the beginning of the year, the political attitude towards Crypto Assets turned positive, driving the prices of Crypto Assets up from the election in November last year to January this year. However, after Bitcoin and Solana reached all-time highs in January, the inauguration of the new president became a typical "buy the rumor, sell the news" event. The S&P 500 index and Bitcoin both fell by 15-20% (Bitcoin has since recovered somewhat). Internally, high-growth and small-cap stocks performed worse, with the second-largest token Ethereum declining by 47%. This pullback is mainly attributed to macro factors and some issues unique to digital assets.

From a macro perspective, the market is concerned about increasing policy uncertainty and the risk of stagflation. The tariff policies implemented by the new government have already affected consumer confidence, corporate profits, and GDP expectations. The establishment of the Department of Government Efficiency (DOGE) has also had a significant impact on the mindset of government employees and related enterprises. The market is uneasy about these rapid and substantial policy changes, reacting by selling off and adopting more defensive positions.

In addition, the optimistic sentiment surrounding AI hardware demand has been hit, leading to a significant decline in AI-related stocks and tokens. The digital asset industry also faces challenges such as the burst of the meme coin bubble and a hacking incident affecting a trading platform.

In terms of price performance, the median price of tokens in the first quarter fell by more than 50%, with almost all tokens experiencing a decline this year. However, tokens with robust fundamentals performed relatively better, surpassing those without revenue by 8 percentage points. Historical experience shows that such significant corrections are not uncommon in bull markets and are usually followed by a strong rebound.

Market sentiment indicators suggest that some of the worst sell-off phases may have passed. The U.S. economic policy uncertainty index is at its highest level in 40 years, the Crypto Assets fear and greed index is in the extreme fear zone, Bitcoin futures funding rates show more short positions than long positions, and the American Individual Investors Association survey indicates that investors are extremely pessimistic. These extreme sentiments often signal that prices may rebound from the bottom.

At the same time, favorable interest rates and liquidity conditions are beneficial for risk assets. The yield on 10-year U.S. Treasury bonds is on a downward trend, and global liquidity conditions continue to improve. Historically, the major upward trends in Bitcoin prices often occur during periods of increased liquidity.

From another perspective, significant macroeconomic events occur approximately every four years, which coincidentally support the bull market of Bitcoin. Currently, the crisis of trust in the US dollar is evolving, and the appeal of Bitcoin as a non-sovereign store of value may increase.

Recently, digital assets have started to show relatively strong signs. Despite experiencing a tough first quarter, many positive industry developments have been overlooked, such as favorable policies and improvements in fundamentals. Blockchain companies have generated considerable revenue, user activity continues to hit new highs, and stablecoin and on-chain transfer volumes have also reached historic peaks.

Overall, despite the current challenges in the market, sentiment indicators suggest that the most aggressive sell-off may have passed. As the volatility triggered by tariffs gradually subsides, investors may begin to focus on long-term positive factors and strong fundamentals. As a pioneer of growth assets, while Crypto Assets experienced a pullback first, they may also be the first to rebound and rebound the fastest.