The cryptocurrency market recently concluded one of its weakest first-quarter performances in years, despite significant developments within the industry. However, several emerging catalysts could set the stage for a more promising second quarter.
Why Q1 2025 Fell Short of Historical Trends
“Frustrating. That’s the best word to describe the past quarter,” stated Matt Hougan, Chief Investment Officer at Bitwise, in a recent market report. He referred to Q1 2025 as “one of the worst quarters in crypto history.”
Bitcoin (BTC) and Ethereum (ETH), the two largest cryptocurrencies by market capitalization, saw declines of 11.82% and 45.41%, respectively, during the quarter. This performance is particularly surprising given that, historically, the first quarter has been strong for both assets. Since 2013, Q1 has been Bitcoin’s second-best quarter on average, with gains of 51.2%, while for Ethereum, it has been the best, with average returns of 77.4%, according to Coinglass data.
Four Factors That Could Boost Crypto in Q2
Several fundamental and macroeconomic factors may align to support a potential recovery and growth in cryptocurrency prices during the second quarter of 2025.
1. Expansion in Global Money Supply
After years of monetary tightening, central banks around the world are signaling a shift toward monetary easing and M2 expansion. Historically, such conditions have been favorable for risk assets, particularly digital currencies.
Pav Hundal, lead analyst at Australian crypto exchange Swyftx, echoed this sentiment in February, noting that global easing measures have traditionally served as a reliable leading indicator for cryptocurrency performance. More recently, on April 14, analyst Colin Talks Crypto highlighted that global M2 money supply has maintained all-time highs for three consecutive days.
Economist Lyn Alden reinforced this perspective in a September research piece, noting that Bitcoin’s price movement has an 83% correlation with the direction of global M2 supply.
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2. Regulatory Clarity in the United States
The approval of clear regulatory frameworks in the U.S. may serve as another bullish factor for the crypto market. Hougan pointed out that the “long tail of regulatory clarity” is something few are discussing, and its effects are only beginning to be felt.
Clearer regulations can reduce uncertainty, encourage institutional participation, and foster broader adoption of digital assets.
3. Growth in Stablecoin Adoption
The increased adoption and asset backing of stablecoins also signal positive momentum for the broader crypto market. In Q1, assets under management in stablecoins surged to an all-time high of over $218 billion.
Hougan emphasized that growing stablecoin usage benefits adjacent sectors, including decentralized finance (DeFi) and other crypto applications, contributing to overall ecosystem growth.
4. Macroeconomic and Geopolitical Repricing
Geopolitical instability, particularly influenced by U.S. economic policies under President Donald Trump—including the implementation of new tariffs—has prompted global investors to reassess their portfolios. Such conditions often lead to increased interest in non-traditional stores of value, including cryptocurrencies.
Market Outlook and Predictions
Despite the sluggish start to the year, several analysts remain optimistic about the medium-term prospects for Bitcoin and other major cryptocurrencies.
Matt Hougan recently reaffirmed his prediction that Bitcoin could surge by approximately 138% from its current price level, potentially reaching $200,000 by the end of the year. Similarly, Coinbase noted in a recent market commentary that although investor sentiment has been subdued, a reset could occur quickly. The exchange remains constructive about the potential for upside in the second half of 2025.
Frequently Asked Questions
Why did crypto perform poorly in Q1 2025?
Q1 is historically a strong quarter for crypto, but this year saw declines due to regulatory uncertainty, macroeconomic pressures, and tempered institutional inflows. Both Bitcoin and Ethereum finished significantly lower than their historical Q1 averages.
What is global M2 supply and why does it matter for crypto?
Global M2 refers to the broad money supply, including cash, checking deposits, and easily convertible near-money. An expanding M2 supply often leads to increased liquidity, which can drive investment into risk assets like cryptocurrencies.
How might U.S. regulations affect crypto prices?
Clear and favorable regulations can reduce uncertainty, attract institutional investors, and improve market confidence—potentially leading to price appreciation. Conversely, harsh regulations may suppress prices in the short term.
What role do stablecoins play in the crypto market?
Stablecoins serve as a bridge between traditional finance and digital assets, enabling easier trading, lending, and transfers. Growth in stablecoin adoption often indicates increasing overall activity and trust in the crypto ecosystem.
Is now a good time to invest in cryptocurrency?
Market timing is always challenging. While some analysts are optimistic about the medium-term outlook, investors should conduct their own research, assess their risk tolerance, and consider dollar-cost averaging as a strategy to mitigate volatility.
Could geopolitical issues actually help crypto markets?
Yes, in some cases. Geopolitical tension or monetary instability can increase demand for decentralized and borderless assets like Bitcoin, which are often seen as hedges against traditional market risks.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.