Crypto market eyes $1.4 trillion rebound with four key drivers

The cryptocurrency market entered 2025 with heightened volatility, as Bitcoin (CRYPTO:BTC) and Ether (CRYPTO:ETH) both posted notable declines in the first quarter, defying their usual strong performance during this period.

Bitcoin dropped by 11.82% and Ether fell by 45.41%, marking a sharp contrast to historical trends where Q1 typically delivers gains for both assets.

“Frustrating. That’s the best word to describe the past quarter,” describing Q1 as the “best worst quarter in crypto’s history,” according to Bitwise chief investment officer Matt Hougan.

The downturn followed a period of significant gains in late 2024 and was intensified by a mix of global economic uncertainty, declining institutional interest, and tighter financial conditions.

The market’s value has contracted by about $1.4 trillion since early 2025, with experts attributing the slide to a “sell-the-news” reaction after pro-crypto policies were introduced in the U.S.

A major factor behind the extended correction is the reduction in institutional demand, as large investors scaled back their exposure to digital assets, leading to increased volatility and weaker price stability.

Macroeconomic trends, including inflation, interest rate hikes, and geopolitical tensions, have also weighed on investor sentiment.

Despite the challenging environment, analysts have identified four potential catalysts that could help the market recover in the second quarter.

First, a shift toward monetary easing by central banks and an expansion in global money supply could provide a more favorable backdrop for risk assets like cryptocurrencies.

“Historically, these conditions have been favorable for risk assets, particularly for digital assets,” Hougan noted.  

Second, regulatory clarity in the U.S. and other major markets may restore confidence.

Hougan described a “clean sweep of pro-regulations” as a long-term positive for the industry.

Third, the rise in stablecoin assets under management, which reached an all-time high of over $218 million in Q1, could signal growing adoption and increased liquidity for crypto markets.

“Growing stablecoin adoption will benefit adjacent sectors, including DeFi and other crypto applications,” Hougan said.

Finally, ongoing geopolitical uncertainty and portfolio reassessment by global investors may drive renewed interest in digital assets as a hedge.

“I still think that’s in play,” stated Hougan, reiterating his view that Bitcoin could surge by 138% to reach $200,000 by year-end.

Analysts suggest that a combination of monetary easing, regulatory progress, stablecoin growth, and shifting investor sentiment could set the stage for a rebound, though persistent economic pressures may delay a full recovery.