What Influenced Bitcoin and Cryptocurrency in 2025?

Cryptocurrency markets are often driven by various narratives. Factors such as political events, regulatory news, institutional adoption, and cyclical expectations play significant roles during periods of volatility.

While these narratives shape market sentiment and positioning, in the past year, the sustainability of prices has become more reliant on measurable capital flows, liquidity conditions, and on-chain activity rather than just media headlines.

Key insights:

• Following the US election, Bitcoin’s 56% surge correlated with a notable increase in futures open interest; however, weak spot market support curtailed the rally’s duration.

• BTC experienced growth during sustained spot ETF inflows but stagnated when those inflows slowed or became negative, indicating demand sensitivity from ETFs rather than a safety net.

• A 50% decline in stablecoin exchange inflows diminished available purchasing power, making rallying narratives precarious.

Narrative-driven rallies are rapid but short-lived

Narratives function as accelerants rather than primary catalysts. Political changes that favor cryptocurrency, particularly in leadership, have sparked rapid price adjustments for Bitcoin in 2024, with the US election cycle illustrating this trend effectively.

Between March and October 2024, Bitcoin (BTC) fluctuated between $50,000 and $74,000 despite ongoing positive headlines. This pattern changed in Q4 when expectations of a potential election win by US President Donald Trump were factored in. In the week before the November 4 election results, Bitcoin retraced approximately 8% as traders de-risked. However, following the election outcome, BTC surged by 56% over the next 42 days, exceeding $100,000.

This upward move coincided with a significant increase in futures positioning, with open interest nearly doubling in Q4 after staying capped for most of the year. Nevertheless, the momentum was short-lived.

Despite reaching new peaks, Bitcoin found it difficult to maintain its upward momentum. A lack of accelerating spot demand alongside leverage left the market vulnerable once positions became overcrowded. The lesson is not that narratives lack importance, but rather that they mainly affect positioning rather than actual capital commitment.

Spot ETF inflows demonstrate strong demand

Spot Bitcoin ETFs emerged as one of the few scenarios where narrative and data aligned. US spot ETFs recorded approximately $35 billion in net inflows in 2024, followed by around $22 billion in 2025.

Bitcoin’s price movements closely mirrored these inflows. In Q1 2024, over $13 billion in inflows coincided with Bitcoin’s climb from $42,000 to $73,000. Afterward, as inflows slowed, Bitcoin entered an extended consolidation that lasted until October. This relationship resurfaced in late 2024, where nearly $22 billion in inflows from October to January accompanied a rise from $70,000 to $102,000.

Conversely, during downtrends, ETF inflows occasionally turned negative, indicating they were not seen as a safety net. This suggests that while spot ETFs were significant due to their ability to convert narratives into measurable demand, this was only effective when inflows remained strong. When inflows diminished, so too did the momentum in prices.

Liquidity remains a key factor

Liquidity, particularly in terms of available capital, is among the most straightforward determinants of price behavior. Stablecoin exchange inflows served as an indicator of available purchasing power.

As stablecoin inflows increase, markets can effectively absorb supply and maintain trends, similar to what was observed in Q4 2024 to Q1 2025. When inflows decreased, the resilience of rallies weakened. A recent drop in stablecoin inflows of around 50% indicated diminished purchasing capabilities.

In environments with lower liquidity, narrative-driven rallies are prone to dissipate quickly. While narratives or positioning can still induce price movements, a lack of incremental capital hinders breakouts and increases the likelihood of corrections.

Related: Did Bitcoin’s 4-year cycle break, and is the bull market really over?

The challenges faced by bullish narratives in sustaining prices in 2025 can also be elucidated by larger allocation trends and on-chain supply dynamics. Cointelegraph highlighted that the Bitcoin-to-gold ratio decreased from around 40 ounces per BTC in December 2024 to approximately 20 ounces by Q4 2025, illustrating a move toward defensive assets in response to higher real yields of 1.8% in Q2, which underscored gold’s detachment from traditional yield correlations.

Concurrently, on-chain metrics revealed ongoing distribution patterns. Glassnode data showed long-term holders realized over $1 billion in profits daily on a seven-day average in July, marking one of the largest profit-taking periods on record.

Increased real yields, correlations with equities, and sustained selling from long-term holders raised Bitcoin’s opportunity cost and restricted its price growth during H2 2025.

The events of the past year emphasized one critical point: while narratives influence prices, liquidity governs markets. Headlines create urgency and fluctuation, yet sustainable trends depend on capital, improved macroeconomic conditions, and demand led by spot transactions.

Related: The Bitcoin-to-gold ratio fell 50% in 2025: Here’s why

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