Outlook for the Crypto Market in the Second Half of 2025: Opportunities Amid Policy Range-Bound and Global Turmoil

1. Summary

In the first half of 2025, the global macro environment continues to show a high degree of uncertainty. The Federal Reserve has repeatedly paused interest rate cuts, reflecting that monetary policy has entered a wait-and-see range-bound phase. At the same time, escalating geopolitical conflicts further fracture the global risk appetite structure. This report evaluates the opportunities and risks in the second half of the crypto market from five dimensions: interest rate policy, US dollar credit, geopolitical issues, regulatory trends, and global liquidity, using on-chain data and financial models. It also proposes three core strategy recommendations, covering Bitcoin, stablecoin ecosystems, and DeFi derivatives.

II. Review of the Global Macroeconomic Environment

In the first half of 2025, the global macroeconomic landscape continues to exhibit multiple characteristics of uncertainty. Weak growth, sticky inflation, unclear monetary policy prospects, and tense geopolitical situations intertwine, leading to a significant contraction in global risk appetite. The dominant logic of macroeconomics and monetary policy has gradually evolved from "inflation control" to "signal game" and "expectation management."

Regarding the Federal Reserve's policy path, the market reached a consensus on "three rate cuts within the year" at the beginning of 2025. However, after the March FOMC meeting, the Federal Reserve emphasized that "inflation is far from the target" and warned that the labor market remains tight. The CPI in April and May exceeded expectations and rebounded year-on-year, while the core PCE year-on-year growth rate remained above 3%, reflecting that "sticky inflation" has not faded as anticipated.

At the June meeting, the Federal Reserve once again "paused interest rate cuts" and lowered its expectations for the number of rate cuts for the year. Powell hinted that they have entered a "data-dependent + wait-and-see" phase, marking a shift in monetary policy from "directional" guidance to "timing" management, significantly increasing the uncertainty of the policy path.

At the same time, the "division" between fiscal policy and monetary policy has intensified. The Trump administration has accelerated the implementation of the "strong dollar + strong border" strategy, with the Treasury Department announcing various financial measures to "optimize the debt structure," including promoting compliance legislation for dollar stablecoins. These measures are clearly decoupled from the Federal Reserve's direction of "maintaining high interest rates to suppress inflation," making market expectation management more complex.

The ongoing escalation of geopolitical tensions has also had a substantial impact on market sentiment. Events such as Ukraine's destruction of Russian strategic bombers and attacks on oil facilities in the Middle East have caused oil prices to soar, with safe-haven funds flowing heavily into gold and short-term U.S. Treasury markets. Meanwhile, there is a clear trend of "de-emerging marketization" in global capital flows.

Three, Reconstruction of the Dollar System and the Evolution of the Role of Cryptocurrencies

Since 2020, the dollar system has been undergoing a profound structural reconstruction. This reconstruction stems from the instability of the global monetary order and a crisis of institutional trust, which deeply affects the market position, regulatory logic, and asset role of encryption currencies.

From an internal structural perspective, the US dollar credit system faces "the erosion of the logic of monetary policy anchoring". Over the past decade, the Federal Reserve, as an independent inflation target manager, has had a clear and predictable policy logic. However, in 2025, this logic is gradually being eroded by the "strong fiscal-weak central bank" combination. The Trump administration reshaped the "fiscal priority" strategy, leveraging the global dominance of the dollar to export domestic inflation in reverse, indirectly prompting the Federal Reserve to adjust its policy path in line with the fiscal cycle.

The Ministry of Finance strengthens the shaping of the internationalization path of the US dollar, proposing a "compliance stablecoin strategic framework" to support the global spillover of US dollar assets through on-chain issuance in the Web3 network. This reflects the intention of the US dollar's "financial state apparatus" evolving into a "technological platform state," aiming to shape the "distributed currency expansion capability" of the digital dollar.

However, this strategy has also raised concerns in the market about the "disappearance of the boundary between fiat currencies and crypto assets." As the dominance of the US dollar stablecoin in crypto trading continues to rise, its essence has gradually evolved into a "digital representation of the US dollar" rather than a "crypto-native asset." This change in liquidity structure signifies that the US dollar credit system has partially "devoured" the crypto market, and the US dollar stablecoin has become a new source of systemic risk in the crypto world.

From the perspective of external challenges, the dollar system is facing ongoing tests from multilateral currency mechanisms. Countries such as China, Russia, Iran, and Brazil are accelerating the promotion of local currency settlements, bilateral clearing agreements, and the construction of commodity-linked digital asset networks, aiming to weaken the monopoly status of the dollar in global settlements.

In this pattern, the role of Bitcoin is shifting from "decentralized payment tool" to "sovereignty-resistant anti-inflation asset" and "liquidity channel under institutional gaps." In the first half of 2025, Bitcoin is being used extensively in some countries with unstable currencies to hedge against local currency depreciation and capital controls.

The role of Ethereum is also undergoing a transformation, with its underlying functions gradually evolving from an "smart contract platform" to an "institutional access platform". An increasing number of RWA assets are being issued on-chain, and the deployment of government/enterprise-level stablecoins is incorporating Ethereum into a compliant framework.

Overall, the dollar system is regaining dominance in the digital asset market through technological spillover, institutional integration, and regulatory penetration, with the aim of making encryption assets an embedded component of the "digital dollar world." Bitcoin, Ethereum, stablecoins, and RWA assets will be reclassified, revalued, and re-regulated, ultimately forming a "broad dollar system 2.0" anchored by the dollar and characterized by on-chain settlement.

4. On-chain Data Insights: New Changes in Capital Structure and User Behavior

In the first half of 2025, on-chain data presents a complex picture of "structural sedimentation and marginal recovery interwoven."

The proportion of long-term holders (LTH) on the Bitcoin chain has once again reached a historical high, with over 70% of Bitcoin remaining unmoved on-chain for more than 12 months. This not only indicates that the confidence of long-term investors has not been shaken, but also represents a continuous contraction of the circulating supply. The decline in on-chain transaction frequency and the persistent drop in the Coin Days Destroyed metric confirm the trend of market behavior shifting from "high-frequency speculation" to "long-term allocation."

The stablecoin market has emerged from a clear bottom recovery cycle. The market cap of USDC has returned to a growth channel, reaching 62 billion USD by June. New stablecoins such as USDP issued by Paxos and USDe from Ethena have recorded significant growth. The increase in on-chain activity proves that stablecoins are returning to their essence as "payment and circulation tools" among on-chain users.

The DeFi ecosystem presents a subtle situation of "active repair but risk-neutral". Decentralized derivatives and perpetual contract protocols exhibit activity levels far exceeding other sub-sectors, but capital utilization rates are low, and there is no systemic leverage buildup. This reflects that while market participants frequently test the waters, the overall stance remains strategically cautious.

Overall, the on-chain data in the first half of 2025 reveals that the crypto market is in a complex intersection of "chip reconstruction - expectation compression - marginal heat repair." The funding structure is shifting from being dominated by hot money to a composite structure based on structural accumulation and short-term trading on the surface, with user behavior being pulled back and forth between short-term speculation and long-term allocation.

V. Analysis and Strategy Recommendations for the Crypto Market Trends in the Second Half of the Year

Looking ahead to the second half of 2025, the crypto market will enter a critical turning point of macro and structural resonance. The core variable is the dynamic game between multidimensional macro paths, institutional certainty, and on-chain structural reconstruction.

From a macro policy perspective, the path of Federal Reserve interest rates and the marginal changes in US dollar liquidity will continue to be a global determining force. As the US labor market marginally loosens, corporate investment willingness declines, and deflationary signs emerge, the probability of the Fed entering a "symbolic rate cut" or even "preventive rate cut" phase is increasing. Once the rate cuts begin, the market may see a scenario similar to the "first pump logic assets, then diffuse thematic rotation" seen after Q3 2020.

However, the uncertainty brought about by the global political cycle will continue to overshadow the asset pricing logic. The U.S. presidential election, the redistribution of power in the European Parliament, the trend of financial decoupling between Russia and the West, and the new round of trade games between China and the United States may all cause temporary disturbances to investors' risk appetite and capital flows.

From the perspective of market structure, the crypto market is entering the mid-to-late stage of "ETF fund dominance, stable on-chain structure, and slowing theme rotation." Bitcoin spot ETFs have become the dominant incremental force, and their net inflow pace almost directly determines the BTC price trend. The on-chain structure is gradually stabilizing, with the distribution of chips under LTH dominance de-liquidating, stablecoin activity recovering, and the DeFi ecosystem continuing to expand under low leverage conditions, all indicating that the market is forming a more resilient intrinsic operating system.

Tactical operation suggestions:

1. Bitcoin remains the most certain mainline asset, suitable for a dual-track layout through ETFs and cold wallets.

2. Ethereum has game-theoretic elasticity, but it is important to be cautious of the Alpha loss caused by a weakening of the innovation drive in on-chain applications. It is recommended to pay attention to the sub-sectors that combine "liquidity + new narratives" within its ecosystem.

3. Solana, TON and other "high-speed public chains" have some room for valuation correction, but participation positions and pace should be strictly controlled.

4. Allocate a certain percentage of positions to strategically capture the secondary rotation potential of Meme-type assets, but ensure that the allocation does not exceed 10% of the total market value of the portfolio.

5. Build a "defensive bull market framework", focusing on indicators such as changes in Federal Reserve policy paths, ETF fund flows, and the circulation and activity of stablecoins on the chain as "leading signals" for the market's phase shift.

6. Conclusion

The year 2025 will see the crypto market entering a new cycle dominated by institutional games and guided by liquidity reconstruction. It is recommended that investors adopt a core strategy of "seeking structural opportunities within defense," seizing the new Alpha path brought about by the reconstruction of U.S. monetary tools and the recovery of the U.S.-China capital arbitrage chain. Patience will be the most powerful strategy this year, and understanding the system is the true skill to navigate through cycles.