The first quarter of 2025 was a reality check for digital assets. The year began with optimism, fueled by the election of a custody US president and expectations for a friendly regulatory environment, but macroeconomic challenges quickly came to dominate the narrative. Bitcoin briefly reached a new all-time high of $109,356 before closing the quarter, the second-largest quarter decline since the second quarter of 2022.
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Beneath the surface, more fundamental changes are taking place. The gap between Bitcoin and other markets continues to widen, driven primarily by institutional action. As outlined in our latest digital assets quarterly report, institutions play an increasingly critical role in shaping capital flows, preferring liquid and regulated large assets. This shift is driving the digital asset market into a more structured, benchmark-driven strategy.
One of the clearest signs of this reorganization comes from Bitcoin’s domination, with Bitcoin’s total market capitalization expressed as a percentage of the market capitalization combined with all cryptocurrencies. This figure rose to 62.2% in the first quarter, the highest level since February 2021. This increase in particular occurred despite a 26.9% decline in Bitcoin’s total market capitalization from its peak in January. This week’s latest chart highlights this trend, showing how capital has rotated from speculative assets to Bitcoin as macro volatility and geopolitical uncertainty increase.
The Coindesk 20 Index (CD20) has emerged as a useful lens for tracking this institutional shift. The index fell 23.2% in the first quarter, but significantly outperformed most major digital assets. XRP was the only CD20 ingredient to announce a positive return, up 0.4% in the quarter, due to the firing of the SEC lawsuit against RIPPLE and strong growth in RLUSD Stablecoin. RLUSD’s market capitalization skyrocketed 323% in the first quarter to $245 million, but cumulative trading volume exceeded $10 billion in just three months.
In contrast, ether was reduced by 45.3%. Amid the ongoing migration of user activity, most key assets have suffered a decline in performance amidst the transition of 2S into layers and the lack of positive catalysts. The US Spot ETH ETF saw net flow of $228 million in the first quarter compared to the net inflow of Bitcoin ETFs of over $1 billion. The ETH/BTC ratio fell to 0.022, the lowest level since May 2020, and this cycle strengthened the change in relative advantage.
The story continues