Q2 Market Insight: Bitcoin regains its dominance in a safe-haven environment, ETFs remain vital to market structure

Author:Coinbase & Glassnode

Compiled by: Felix, PANews

As we enter the second quarter of 2025, the crypto market is undergoing major adjustments. Against the backdrop of intensifying macro uncertainty, investor sentiment has turned defensive, and funds have flocked to high-market-cap assets such as Bitcoin. Although the altcoin market is under pressure, the core infrastructure continues to strengthen, and the fundamentals on the chain are still strong. Through ETF channels and platform development, institutional interest remains stable.

This report, co-produced by Coinbase and Glassnode, focuses on market structure, position trends, and key indicators in complex and rapidly evolving environments. The following are the highlights of the report:

Crypto market callback highlights defensive positioning

 _Bitcoin_ ’s _2022_ _and beyond is different from previous trends. Against the backdrop of macro uncertainty, the recovery process is slower_

Investor sentiment has changed dramatically since the beginning of 2025. Concerns about potential U.S. recession, fiscal tightening and global trade frictions have sparked risk aversion in the digital asset market. After excluding BTC, the total market value of cryptocurrencies was US$950 billion, a sharp drop of 41% from the high of US$1.6 trillion in December 2024 and 17% from the same period last year. Venture capital inflows fell back to the level from 2017 to 2018. Both the Bitcoin and COIN50 index fell below the 200-day moving average. This suggests that the current callback may continue into mid-2025.

Bitcoin regains its dominance in a safe-haven environment

 _Bitcoin dominance rose to_ _63%_ _,_ _the highest level since early_ _2021_ as investors turn to high-credit assets

During turbulent times, capital will turn to perceived quality assets—Bitcoin benefits from it. Bitcoin currently accounts for 63% of the total market capitalization of crypto, the highest level since the beginning of 2021. Meanwhile, Ethereum's share of the total cryptocurrency market capitalization has shrunk in the past six months, while Solana's share has remained stable since the beginning of 2024.

Bitcoin’s dominance reflects investors’ preference for assets with the highest institutional accessibility and macro-correlation. Despite the price drop, long-term Bitcoin holders are still increasing, as evidenced by the decrease in liquidity supply and the sharp rise in the number of Bitcoin held in losses, indicating that strategic allocators have rekindled confidence.

Spot ETFs are still crucial to market structure

 _Despite recent capital outflows, Bitcoin and Ethereum_ _ETFs_ _have maintained considerable holdings, indicating that institutional investors \' interest continues_

ETF capital flows remain a key indicator for measuring institutional investor sentiment. In the first quarter, although the inflow of Bitcoin and Ethereum spot ETFs was sluggish, it continued, with the total balance of Bitcoin ETFs approaching US$125 billion. Even though financing rates in the futures market have declined, indicating a weaker speculative intention, the activity of spot ETFs reflects long-term position allocation.

 _Large brokerages are still restricting their customers \' investment in Bitcoin_ _ETFs_ _. If these platforms set_ a _2%_ _Bitcoin configuration ratio, it means that_ the net _ETF_ _inflow will be_ _22_ _times that_ _of_ _2024_

It is worth noting that investment restrictions in large brokerages suggest that if access restrictions are relaxed, a potential wave of demand will appear.

Solana revenue exceeds all other L1 and L2

platforms

Solana surpassed all other blockchains in the first quarter, with revenue exceeding the sum of Bitcoin, Ethereum and other blockchains combined.

Despite the macro-environmental shocks and the negative discussions surrounding memecoin are also volatile, Solana's revenue in the first quarter exceeded all other L1 and L2 networks combined. This revenue highlights the continued stickiness of ecological users and shows that the capital efficiency and developer activity of the Solana ecosystem are still strong.

Stablecoin consolidates its position as a pillar of crypto finance

The supply of stablecoins and on-chain transaction volume hit record highs, highlighting its increasingly important role in the global digital payment field.

As the core component of the crypto financial system, stablecoins continue to attract attention. After adjustment for inactive trading, stablecoin trading volume hit an all-time high in the last quarter. As fees continue to drop and use cases continue to expand (from remittances to corporate payments), stablecoins are expected to attract more institutional and retail investors in 2025, especially in high-inflation economies.

Conclusion

The report believes that the crypto market may bottom out in the mid-to-late period of the second quarter of 2025, laying the foundation for the third quarter of 2025. Overall, the market will show a downward trend in the short term, then rebound in the second half of the year and hit a new high. However, if the following factors occur, the above viewpoint is invalid:

If the Fed ends its quantitative tightening policy, it will increase global liquidity and support crypto markets. Similarly, if major economies such as the EU or China introduce more global fiscal stimulus, it may increase the M2 money supply and drive up the available capital in the market.

What is even more worrying is that further uncertainty in the trade situation may prolong negative sentiment in the market, and global shocks may further reduce liquidity.

Related readings: Cryptocurrency Industry Report in the First Quarter of 2025: DeFi and NFT ecological trends, CEX and DEX market performance