Source: Joshua de Vos, Jacob Joseph
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.
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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.
Bitcoin’s broader role as a macro asset also continued to gain traction. In addition to strong ETF flows, public companies added nearly 100,000 BTC to their holdings in Q1, representing a 34.7% increase. This brought the total held by such companies to 689,059 BTC — equivalent to more than $56.4 billion at current prices. The launch of the U.S. Strategic Bitcoin Reserve, along with the introduction of a broader Digital Asset Stockpile by the Treasury, further underscored bitcoin’s growing legitimacy within U.S. policy.
Looking to Q2, the tone in markets has improved following the recent pause in new tariff measures. Risk assets responded favorably, and altcoin ETF optimism remains high. Nearly 40 spot ETF applications for altcoins were submitted in Q1 alone, led by those for Solana and XRP, which each had eight filings. Other assets applying for spot ETFs included Litecoin, Dogecoin and Polkadot. With Solana futures now live on the CME, the precedent for institutional-grade altcoin exposure continues to build.
The first quarter offered a reminder that digital assets are no longer moving in isolation. As macro conditions evolve and policy shifts begin to reshape the regulatory environment, capital is consolidating into assets with deeper liquidity, stronger narratives and institutional relevance. Bitcoin’s rising dominance, shifting ETF flows and the fragmentation of altcoin performance all point to a market recalibrating around structural factors rather than sentiment alone.
For a deeper dive into these dynamics, including full index performance and constituent insights, you can access the full Digital Assets Quarterly Report here.
