Market update Q1 2025
We ended our previous quarterly update with optimism about Trump’s inauguration on January 20th, driven by his pro-crypto agenda to position the United States as the “crypto capital of the world” and its potential impact on asset prices. While Trump followed through on his promises, the anticipated price surge proved to be a pipe dream. In fact, the first quarter of 2025 turned out to be the worst Q1 in the industry’s history in terms of price action.
It is safe to say that Trump’s Inauguration Day on January 20th was met with high expectations from the digital asset sector. During his campaign, Trump embraced crypto as a central part of his economic vision. This pro-crypto stance—marked by a clear contrast with the Democrats—sparked market enthusiasm from day one. Investor momentum heading into inauguration week was evident across the market, with broad-based gains and a risk-on sentiment in Q4 leading up to the event. Expectations focused mainly on the executive orders typically signed by new presidents immediately after taking office. The digital asset industry’s main hope was that Trump would issue an executive order to establish a “Strategic Bitcoin Reserve,” allowing the U.S. government to gradually add Bitcoin to its gold and foreign currency reserves.
However, most of the high hopes for a serious approach to the digital asset industry were dashed on January 17th—three days before the official inauguration—when Donald Trump tweeted that he had launched his own official memecoin, $TRUMP, on the Solana network. The launch triggered a speculation frenzy, unprecedented even by crypto standards. The memecoin went live on Friday night (New York time) and reached a peak market capitalization of $72 billion by Sunday. In this sharp move upward, $TRUMP drained liquidity from other digital assets, as traders sold positions elsewhere to chase further gains. This led to significant losses across most altcoins, with only Bitcoin and Solana managing to hold their ground.
Ethereum’s Performance over the past 5 first Quarters
Image 1. Chart shows cumulative percentage returns of Ethereum (ETH) during Q1 of each year from 2020 to 2025.
Returns are calculated from January 1st of each respective year, representing the performance over the first 90 consecutive trading days. ETH has been one of the worst performing altcoins in Q1.
DeepSeek R1: AI breakthrough triggers a sharp market reversal
While the altcoin markets were still recovering from the launch of Trump’s memecoin, another external shock was just around the corner. On January 20th—the day of Trump’s inauguration—Chinese firm DeepSeek unveiled DeepSeek R1, an open-source “reasoning” AI model that surprised experts with its sophistication and cost-efficiency. The model, competitive with leading U.S. systems but developed at a fraction of the cost, sparked a rapid reassessment of Western AI dominance. Some in Silicon Valley called it AI’s “Sputnik moment,” a wake-up call that revived concerns about strategic tech displacement. By January 27th, the shock had spread through global equity markets, leading to downward valuation revisions. Tech-heavy indices led the sell-off, with companies like NVIDIA dropping nearly 17% in a single day—wiping out around $600 billion in market value—as investors rotated out of high-growth risk assets. Though not directly tied to crypto, the DeepSeek R1 release disrupted the broader macro environment, subjecting digital assets to the same de-risking pressures that hit equities.
Trump’s economic policy causing market volatility
February and March unfolded as another period of turbulence, with President Donald Trump’s economic policies—rooted in his "America First" vision—casting a long shadow over global markets. The pre-inauguration market optimism quickly gave way to a sharp risk-off retreat as Trump’s primary economic lever—tariffs—began reshaping investor sentiment in early February.
Trump’s second-term agenda centers on a vision of a “Golden Age” of American economic strength, built around three core goals: reindustrializing the nation, improving the U.S. trade position, and securing lower yields to manage the growing national debt. His main instrument in pursuing this vision has been aggressive tariffs—starting with 25% on Mexico and Canada, and 10% on China as of February 3rd. These measures aim to bring manufacturing back to the U.S., reduce dependence on foreign supply chains, and reassert economic sovereignty. The broader goal is not only to reduce trade deficits but also to reinforce the dollar’s role as the world’s reserve currency.
While tariffs are central to Trump’s fiscal strategy, they inherently carry the risk of fueling inflation and slowing global economic growth—pressuring the Federal Reserve to keep interest rates elevated. The early pro-growth narrative quickly gave way to concerns over retaliatory trade actions, disrupted supply chains, and a possible disconnect between fiscal ambitions and monetary policy. By late Q1 and into early April, global markets experienced intense volatility. On April 3rd, Trump announced a new round of tariffs on additional countries, surprising markets due to the insane height of tariffs imposed. Volatility in traditional markets spiked to levels not seen since the COVID crash in 2020 and the Global Financial Crisis in 2008. The U.S. stock market fell more than 20% within weeks. Crypto was not spared: Bitcoin dropped below $74,000—down 33% from its January peak—while many altcoins suffered way steeper declines.
S&P 500 Performance under Trump ‘17 vs. ‘25 Presidency
Image 2. Chart compares the performance of the S&P 500 ETF ($SPY) during the first 70 days of Trump’s first term (Trump 1.0) and his current second term (Trump 2.0).
Returns are shown as cumulative daily percentage changes since each respective inauguration.
Trump’s Second Act: A Crypto-first Administration
Although digital asset prices experienced steep declines, the first quarter of 2025 marked a historic turning point in U.S. digital asset policy. Within weeks of taking office, the Trump administration began dismantling the regulatory barriers that had defined the previous administration’s approach to crypto. The SEC softened its stance significantly, dropping high-profile lawsuits—including those against Coinbase and Ripple—and disbanding its crypto enforcement unit in favor of a more collaborative task force focused on rulemaking. For investors, this signaled a meaningful reduction in legal uncertainty and a policy shift from confrontation to integration.
On March 6th, President Trump signed an executive order establishing the Strategic Bitcoin Reserve (SBR), marking the first formal step toward positioning Bitcoin as a sovereign reserve asset. The reserve will consist of approximately 200,000 BTC already in federal custody from prior forfeitures, valued at over $17 billion. Initial market reaction was strong, driven by speculation that the government might begin actively purchasing Bitcoin. However, a later clarification that all holdings would come from seized assets, with future acquisitions to be "budget neutral," tempered the rally.
The following day, the administration reaffirmed its broader crypto agenda at the first-ever White House Digital Asset Summit on March 7th, where President Trump and senior officials met with industry leaders to outline regulatory priorities and long-term plans for U.S. leadership in the digital asset space. The message was clear: the United States aims to lead, not restrict, crypto innovation. At the same time, bipartisan stablecoin legislation gained momentum in Congress, with the goal of creating a clear federal framework for dollar-backed stablecoins to operate with legitimacy and global competitiveness.
Looking ahead
As of today (April 15th), global markets are experiencing record levels of volatility driven by Trump’s economic policies, making it difficult to look far ahead. It will likely take several months for the dust to settle, at which point the full impact of the geopolitical and economic shifts may become clearer. The sharp sell-off in digital assets during Q1 may cloud the outlook, but despite the broad risk-off environment, the United States has seen the most constructive digital asset regulatory developments in the industry’s history. All lawsuits against crypto companies initiated under the Biden administration have been dropped, and favorable regulations on stablecoins and custody are expected soon. While this quarter marked the worst Q1 on record for digital asset price performance, the regulatory environment for institutional adoption has never looked more promising.