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Gm Semilore,
Welcome to the second quarter of 2025. Today we wrap up the key trends that unfolded in the first quarter of the year, focusing on the bright spots amid the market volatility. We dive into stablecoins, showcasing some of the eye-popping numbers the space has been achieving and providing an outlook and analysis for what may come next.
Network Fees - Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
Bitcoin fees dropped by 57% to their lowest since Q1 2023. Speculative activity surrounding runes and ordinals seem a distant memory at this point, but the market appears less focused on fees for BTC value accrual than it is for other crypto-assets
Quarterly fees on Ethereum declined to their lowest since 2020. As the gas limit was increased in February, and a large portion of transactions moved to L2s, Ethereum Mainnet has been less congested and cheaper to use than it has in years. While this may be beneficial for the average user looking to use the blockchain, it also means less revenue being generated by the network and distributed to ETH stakers
Exchanges Netflows - The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
Bitcoin recorded $1.6B worth of net outflows in Q1, much less than the $7.9B recorded in Q4 2024, potentially reflecting the lower aggregate demand
Similarly, ETH saw $1.9B in outflows over the quarter, but slightly less in comparison to the $2.5B withdrawn over the course of the previous three month period
Q1 2025 Onchain - Stablecoins Expand by $30B While Markets Collapse
Crypto Markets Take a Beating - Large cap crypto-assets dropped double-digits across the board as macro headwinds spoiled positive regulatory catalysts
BTC dropped "only" 15% compared to ETH losing nearly half of its value throughout the last three months
The correlation between crypto and stocks climbed as macro expectations quickly shifted from "golden era" optimism to tariff-led doom and gloom
Despite the price action, there were several positive news for crypto likely to benefit over the long-term, such as the creation of a Bitcoin strategic reserve (though without clarity on how/if it will be buying more BTC), the SEC dropping lawsuits against multiple crypto exchanges and protocols, and enabling banks to hold crypto by repealing SAB 121
Regardless of these positive developments, it became clear that the market likely got ahead of itself in late 2024, making it fragile to anything other than excellent news. Thus, as the macro picture got increasingly risk-off, crypto followed downwards.
One silver lining for crypto in Q1 has been the growth in stablecoins, which continue hitting new highs.
$220B in Circulation - The aggregate value of stablecoins surpassed $200B for the first time ever in Q1
Tether remains the leader in the space, rising to over $140B in market cap, nearly doubling since it's early 2022 highs
USDC has gained some market share in Q1, going from 20% to 27% of the market, as Circle gathers momentum going into its recently announced IPO
DeFi stablecoins such as Ethena's USDe have struggled to keep up with their centralized counterparts as yields decayed in Q1
Newer centralized stablecoins such as PayPal's PYUSD and Ripple's RLUSD recorded a market cap growth of $250M and $220M, respectively, as the stablecoin race heats up amongst financial institutions
Record Activity Levels - The number of people using stablecoins daily keeps growing
The number of unique addresses using stablecoins on Ethereum Mainnet surpassed 200,000 for the first time in late March
Over $3T in stablecoin transactions took place just in Ethereum L1 throughout Q1 2025
As federal stablecoin legislation starts to take shape, it's clear that the space has proven to be crypto's first applications to reach product-market fit at a large scale
20M Transactions per Week - Tether is currently recording this number of transactions between its top 7 chains
Tether has become one of the most profitable companies in the world, making over $13B in profits in 2024 with less than 100 employees
Tether was the seventh largest buyer of treasuries in 2024, surpassing nation-states like Canada and Norway
The entity behind USDT used part of its Q1 profits to acquire 8,888 BTC, making them one of the largest Bitcoin holders with a total of 100k BTC
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Adjacent to stablecoins, so-called real world assets (RWAs) were also a bright spot for crypto in Q1. Most of the RWA space consists of tokenized treasuries passing back the yield to its holders, in contrast with most stablecoins which keep the yield to themselves.
$10B Milestone for RWAs - The aggregate amount of capital supplied to RWA protocols reached 11 figures for the first time
Blackrock has taken the lead in this space with nearly $2B in it's BUIDL product tokenizing T-Bills
Unsurprisingly, Blackrock's CEO Larry Fink has been a major bull for RWAs aiming to tokenize $110T in stocks and targeting $1T in stablecoin supply
Beyond T-Bills, it is becoming increasingly likely for stocks to be the next mayor driver for RWAs with Coinbase looking to tokenize COIN stock and have it universally available on the Base L2
Overall, stablecoins and RWAs have shined by expanding access to dollars (and yield) to an underserved market. While price action leads many to doubt the potential of crypto, stablecoins in particular serve as a reminder of the value the space is adding to millions of holders across the globe. Regulatory tides are in stablecoins' favor to continue growing as they are an increasingly legitimate product becoming easier to use.
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