The first quarter of 2025 was a reality check for digital assets. While the year began with optimism fueled by the election of a pro-crypto U.S. president and expectations of a friendlier regulatory environment, macroeconomic challenges quickly came to dominate the narrative. Bitcoin briefly reached a new all-time high of $109,356 before ending the quarter down 11.6%, its second-largest quarterly decline since Q2 2022. Altcoins fared worse, with indices more heavily weighted toward smaller-cap tokens such as the CoinDesk Memecoin Index (CDMEME) and the CoinDesk 80 (CD80) declining by 55.2% and 46.4%, respectively.
You’re reading Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.
Beneath the surface, a more fundamental shift is playing out. The gap between bitcoin and the rest of the market continues to widen, driven in large part by institutional behavior. As outlined in our latest Digital Assets Quarterly Report, institutions are playing an increasingly decisive role in shaping capital flows, preferring liquid and regulated large-cap assets. This shift is pushing the digital asset market toward more structured, benchmark-driven strategies.
One of the clearest signs of this realignment comes from bitcoin dominance, which expresses bitcoin’s total market capitalization as a percentage of the market capitalization for all cryptocurrencies combined. This figure rose to 62.2% in Q1, its highest level since February 2021. Notably, this increase occurred despite a 26.9% drop in bitcoin’s total market capitalization from its January peak. Our latest chart of the week highlights this trend, showing how capital rotated out of speculative assets and into bitcoin as macro volatility and geopolitical uncertainty mounted.
The CoinDesk 20 Index (CD20) has emerged as a useful lens for tracking this institutional shift. While the index fell 23.2% in Q1, it significantly outperformed most major digital assets. XRP was the only CD20 constituent to post a positive return, rising 0.4% in the quarter, driven by the dismissal of the SEC’s case against Ripple, as well as strong growth in its RLUSD stablecoin. RLUSD’s market cap surged 323% in Q1 to reach $245 million, while cumulative trading volumes exceeded $10 billion in just over three months.
By contrast, ether fell 45.3% — underperforming most major assets amid continued migration of user activity to Layer 2s and a lack of positive catalysts. U.S. spot ETH ETFs saw net outflows of $228 million in Q1, compared to net inflows of over $1 billion for bitcoin ETFs. The ETH/BTC ratio declined to 0.022, its lowest level since May 2020, reinforcing the shift in relative dominance this cycle.