The global cryptocurrency market faced a sharp downturn in the first quarter of 2025, losing a staggering $633.5 billion in market capitalization.
According to CoinGecko’s Q1 2025 report, this represents an 18.6% decline from the previous quarter, reflecting the growing caution among investors in response to recession fears and global economic instability.
Daily trading activity followed suit, plunging by 27.3% quarter-on-quarter to an average of $146 billion. For context, trading volume in the fourth quarter of 2024 had stood at $200.7 billion. Centralized exchanges were not spared either, with their volume sliding by 16% as traders pulled back amidst broader market anxiety.
January Optimism Quickly Fizzles
January began somewhat optimistically, with enthusiasm sparked by global political events, including the U.S. inauguration. However, the momentum quickly faded. Lingering concerns about a potential economic downturn and the aftermath of security breaches—such as the Bybit exchange hack—shook investor confidence, reducing activity and falling asset prices.
Bitcoin (BTC) maintained its top spot in market capitalization, accounting for 59.1% of the total crypto market. Yet, BTC’s value dropped by 11.8% in Q1, underperforming compared to traditional safe-haven assets like gold, which gained 18%, and U.S. Treasury bonds.
Ethereum (ETH), the second-largest cryptocurrency, lost ground as well. Its market dominance shrank by 3.9 percentage points to 7.9%—the lowest since 2019. In contrast, XRP and BNB held their positions, showing resilience during the crypto downturn.
Stablecoins Provide a Buffer
Despite the broader market slump, stablecoins offered some stability. Tether (USDT) saw a modest increase in market share, rising to 5.2%, while USD Coin (USDC) regained its position as the seventh-largest crypto asset, overtaking Dogecoin (DOGE).
This shift underscores investor preference for lower-volatility assets during turbulent times.
DeFi Sector Also Takes a Hit
The decentralized finance (DeFi) ecosystem was not immune to the Q1 sell-off. Total value locked (TVL) across multichain platforms dropped by 27.5%, falling from $177.4 billion at the end of 2024 to $128.6 billion by March 2025. The fall in DeFi TVL was largely driven by the depreciation of altcoins and a drop in user activity.
Ethereum’s dominance in DeFi TVL also slipped, decreasing from 63.5% to 56.6%. Meanwhile, Solana and Base witnessed notable drawdowns in value locked but slightly improved their overall DeFi market shares.
A bright spot was the entry of Berachain—a new blockchain that debuted on February 6 and quickly attracted attention. By the end of the quarter, Berachain had amassed $5.2 billion in TVL, largely driven by its “Boyco” pre-deposit vaults, which alone pulled in around $2.3 billion.
Solana Leads DEX Activity in Early Q1
Solana made significant strides in decentralized exchange (DEX) trading, dominating with a 39.6% market share in Q1. January, in particular, saw Solana capture 52% of on-chain trading volume among the top 12 chains, thanks to the memecoin frenzy led by $TRUMP.
However, this dominance was short-lived. By March, Ethereum regained leadership in DEX volume with a 30.1% market share, as Solana’s dropped to 23.4%. New contenders like Sonic and Berachain disrupted the leaderboard, temporarily overtaking established chains such as Optimism and Polygon.
Broader Market Context
Beyond crypto, traditional financial markets also faced turbulence in Q1 2025. Gold emerged as the best-performing asset, climbing 18%. In contrast, the NASDAQ fell by 10.3%, while the S&P 500 slipped 4.4%, mirroring Bitcoin’s poor performance and signaling broader risk aversion.
Currency markets saw the Japanese Yen rise by 5.2% and the Euro gain 4.5% against the U.S. Dollar, as the Bank of Japan’s decision to raise interest rates helped unwind carry trades. Meanwhile, the U.S. Dollar Index (DXY) weakened by 4.6% due to trade policy uncertainties and global geopolitical tensions.
