In the first two weeks of March, prices of crypto assets such as bitcoin, ether and solana (SOL) fell sharply despite what seemed like good news: a more favorable regulatory environment and an executive order paving the way for the creation of a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile, the latter possibly including ether, SOL as well as other crypto coins (Figure 1). Part of the decline could be due to disappointment that the proposed national strategic reserve involves only crypto assets forfeited as part of law enforcement actions rather than any outright purchases.But crypto’s struggles to surpass record highs appear to go further than recent news events. Ether and SOL prices appear to key off of bitcoin, with both showing a very high correlation to the most venerable of the crypto assets (Figure 2). Take bitcoin for example. On April 20 last year, bitcoin underwent its latest quadrennial halving, with the new supply of coins dropping to approximately 165,000 per year from a previous level of just over 330,000 per year (Figure 3). In the past, quadrennial halvings tended to precede tremendous rallies, with bitcoin prices rising anywhere from a few hundred percent to many thousand percent in the 12 months after new supply is further restricted (Figure 4). This time around, bitcoin prices have continued to gain (+30% since April 20, 2024, as of this writing), but the rally has been comparatively modest (Figure 4). This could be because the market has done a better job of anticipating the impact of the halving, with bitcoin having risen in 2023 and early 2024.
In fact, when one looks at the long-term price chart in logs, it’s apparent that bitcoin prices’ upward momentum has slowed over time. Part of the reason may be that crypto markets are maturing. Another reason may be that the user network is no longer growing as quickly as in the past. If one looks at the number of transactions per day, the exponential growth took place mainly in the early days of bitcoin before becoming more linear and then more cyclical. Following the approval of spot bitcoin ETFs in 2024, there was a modest pick up in daily trading volumes on the bitcoin blockchain, but that appears to have faded in recent months. For much of 2024, the number of transactions per day on the bitcoin blockchain ranged from 400,000 to 800,000. Thus far in 2025, the range has dropped to 300,000-500,000 per day (Figure 6). Futures volumes have remained robust.
