jakiro
Source: Grayscale; Compilation: Baishui, bitchain vision
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Cryptocurrency valuations fell in February 2025, synchronizing with rising macro risks and falling tech stock prices.A major cryptocurrency exchange has been hit by hackers and a decrease in Meme trading activity, which may also have had an impact on the market.
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Meanwhile, the regulatory environment in the U.S. crypto industry continues to improve: The U.S. Securities and Exchange Commission (SEC) has terminated or suspended several enforcement actions initiated by the former leadership, while a group of cross-party senators have proposed new stablecoin legislation.In addition, breaking news over the weekend showed that President Trump also highlighted a proposed crypto strategic reserve plan.
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Changes in the macroeconomic outlook may continue to bring volatility to the crypto market in the short term.However, given the improvement in industry fundamentals, the decline in token valuations may create an attractive entry opportunity for long-term investors.
The cryptocurrency market in February 2025 showed a sharp contrast, with a decline in valuation, but most fundamental news is good.Despite short-term setbacks, improvements in fundamentals should lay a solid foundation for technological development and user adoption.
Our market cap-weighted crypto industry price index fell 22% in February 2025.After risk adjustment (i.e., taking into account the volatility of each asset), the crypto market performed in the month comparable to the declines in the cyclical and technology-oriented stock market sectors (Figure 1).Bitcoin performed slightly better than the entire crypto market, down 18%, although its risk-adjusted returns are lower than the overall crypto market (reflecting the generally lower volatility of Bitcoin).Concerns about the outlook for U.S. economic growth has led to lower Treasury yields and strong bond price returns, with non-U.S. stock markets performing well.
Figure 1: Cryptocurrency valuations fall as technology stocks fall�
The Securities and Exchange Commission (SEC), led by acting chairman Uyeda, has begun to change the way it regulates the industry after the Trump administration issued an executive order on cryptocurrencies in January this year.First, the agency terminated or suspended investigations into several cryptocurrency institutions, including Coinbase, Binance, OpenSea, Uniswap, Consensys and Robinhood.Second, the SEC abandoned its appeal against a controversial “dealer rules” lawsuit.If the rule is implemented, various decentralized finance (DeFi) protocols will be subject to traditional securities regulation.Third, the agency announced the establishment of a network and emerging technology department to replace the original crypto assets and network department.
Meanwhile, a group of senators from both parties proposed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).The legislation builds on related efforts of the previous Congress to provide a comprehensive regulatory framework for the issuance of stablecoins in the United States.Its key terms include the definition of the concept of “allowable payment stablecoin issuer” and stipulate that stablecoins must be supported by U.S. Treasury bonds, insurance deposits or closely related financial instruments at least 1:1.
According to Allium, stablecoins currently process more than 100 million transactions per month, with a total transaction volume of approximately US$600 billion (see chart 2; the data has been adjusted, excluding high-frequency trading and robot trading).
Figure 2: Growth of stablecoin trading�
The continuous improvement of the cryptocurrency market structure may be driving institutional investors to increase their participation.Hundreds of institutional investors have entered the cryptocurrency sector by holding stakes in venture capital funds and hedge funds.For example, the recently released fourth-quarter 13F document shows that the Abu Dhabi government’s sovereign wealth fund, Mubadala Investment Company, invested in the U.S.-listed Bitcoin-Translated Open-End Index Fund (ETP).Similarly, the Financial Times reported in February that some foundations and university endowments in the U.S. have begun investing in Bitcoin or are considering allocating funds to the crypto asset class.In our opinion, cryptocurrencies may become a suitable investment allocation option for investors such as sovereign wealth funds and endowments that manage diversified portfolios and have a longer investment period.
Although the cryptocurrency industry is benefiting from increasing regulatory clarity and institutional acceptance,The industry has also encountered some setbacks recently.On top of that, on February 21, ByBit, the second largest exchange in cryptocurrency by volume, lost about $1.5 billion in Ethereum and similar assets in a hacking attack believed to be carried out by North Korea’s “Lazarus Group”.The hacking incident is the largest in cryptocurrency history based on the total amount of lost funds, highlighting the need to continue to strengthen cybersecurity.Meanwhile, no user funds were lost in the incident, and observers generally praised the exchange’s efforts in crisis response.By the end of February, ByBit’s spot trading volume had roughly returned to normal.While cybercrime in the cryptocurrency space remains a major issue, the value of the dollar lost by hackers has declined over time relative to the size of the cryptocurrency market.
on the other hand,The booming Solana ecosystem has cooled down recently as Meme coin activity cools down.Prior to last month, Meme coin activity brought a lot of transaction volume and fee income to the Solana blockchain, and even attracted the participation of President Trump and the First Lady.However, the launch of Meme coins related to Argentina President Javier Milei and related disclosures about the misconduct of certain Meme coins promoters seem to trigger a shift in market sentiment.
Since then, the valuation of popular Meme coins has dropped by 15% to 35%, and the volume of leading Solana decentralized exchanges (DEXs) like Raydium has also declined (see chart 3).Meme coins can be considered digital collectibles, and we think they will most likely always be a fixed component of the cryptocurrency market.However, the recent boom of extremely high new issuances and transaction volumes of Meme coins on Solana may have ended.Still, Solana is a leading blockchain in other key areas, including the Decentralized Physical Infrastructure (DePIN) project.And in our opinion, the decline in Meme currency trading activity will not fundamentally affect the long-term investment logic of the blockchain native token SOL.
Figure 3: Memecoin transactions on Solana have slowed�
We expectCryptocurrency markets will quickly get rid of the impact of ByBit hacking and recent trends in meme coins.but,Macro-market conditions may still be a factor in market volatility in the coming months.The Trump administration has begun implementing its economic policy agenda, which includes cutting immigration numbers, raising tariffs and reducing government spending.While many voters may support these policies—they are at the heart of Trump’s presidential campaign—most economists expect these policies to have adverse effects on economic growth in the near term.In addition, the stock market may still be adapting to the release of DeepSeek’s open source large language model and its potential impact on AI-related capital expenditures.Given the current relatively high stock valuation and increasing macro risks, we can foresee that investors will reduce their risk for a period of time, and the volatility of the stock market will also intensify.Although cryptocurrency markets and stock markets are not completely related – this makes cryptocurrency a good portfolio diversification tool –We expect large fluctuations in the stock market to affect cryptocurrencies to a certain extent.
However, given the steady improvement of fundamentals, we do not believe that cryptocurrency valuations will experience any sustained weakness.The prospects for the crypto asset class are bright, thanks to improved market structure and clear regulation, rising adoption of stablecoins and other technologies, breakthroughs in the development of decentralized artificial intelligence, and the growing demand for Bitcoin as a reliable monetary asset.
therefore,For many investors who are under-allocated in the crypto asset class (i.e. investors who have very low allocation ratios or have no allocations at all), a lower valuation may be an opportunity to increase allocation and participate in potential uptrends.
