Bitcoin Steadies as ETF Flows Reverse and Altcoins Reprice
Cryptocurrency markets have experienced some recovery this week as investor liquidity is slowly returning after the holidays.
Bitcoin (BTC) hit a weekly high of $94,458 on Monday, before falling to $90,937 at the time of writing on Friday.
US spot Bitcoin Exchange-Traded Fund (ETF) demand has seen a sharp turnaround after $1.1 billion inflows in the first two trading days of the new year. ETFs recorded three consecutive days of outflows, according to data from Farside Investors.
In the broader cryptocurrency space, the privacy-preserving token Zcash (ZEC) has become a threat to the future after the main company behind the protocol, the electric coin company, Bootstrap, decided to separate from the non-profit that supports its development.
In the year 2025 is the year of the “replacement” of the crypto bear market for institutional capital
The sharp drop in altcoins over the past year may reflect a broader assessment that blockchain networks can attract long-term capital as institutional investors slowly begin to enter the market over several years, analysts said.
2025 turns out to be a bear market for the broader cryptocurrency market, excluding Bitcoin. Decentralized finance (DeFi) tokens fell 67%, while cryptocurrencies related to smart contract blockchains spent a negative average return of 66%, according to Jamie Coutts, chief crypto analyst at Real Vision.
Last year's poor performance was “underpricing” of leading crypto projects as institutional capital sought to gain greater exposure, Coutts wrote in a Wednesday X post.
“High-quality (network adoption, fundamentally sound) replacement protocols/L1s just as institutional capital begins a multi-year onboarding,” he said.
Coutts is the latest analyst to highlight the continued value of how cryptocurrencies are valued as maturing digital asset investors seek exposure not only to altcoins in general, but to protocols powering tokens through organic usage and revenue.
Looking at last year, Solana was the leading blockchain in payments with $585 million in revenue, followed by Tron with $576 million in revenue, according to crypto intelligence platform Nansen.
According to Nansen research analyst Nikolai Sondergaard, institutional and large investors tend to gravitate towards the five leading cryptocurrencies.
“Solana ETFs are still seeing inflows, but the same cannot be said to be fully onchain. ETH, on the other hand, has seen some players spin off from BTC,” the analyst told Cointelegraph.
Many expect the big players to rally as liquidity returns, and that seems accurate based on on-chain and off-chain data.
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Zcash Backer Bootstrap Says Split Due To Controversy Over Nonprofit Zcash
Bootstrap, which backs privacy-focused cryptocurrency Zcash, says a recent management dispute that led to the departure of key board members at the charity stemmed from legal restrictions nonprofits face when seeking investment.
The comments follow the decision of Electric Coin, the main development team behind Zcash, to separate from Bootstrap and form a new company. ECC cited concerns over what it described as “malicious management practices,” Cointelegraph reported Thursday.
In its official response, Bootstrap said board members discussed Zash, a self-guarding crypto wallet built for private Zcash transactions, to “privatize foreign investments and alternative structures.”
The Board discussed that while we are working with legal counsel to privatize Zcash, it is consistent with Zcash's long-term mission and does not jeopardize the broader Zcash community.
Zcash was developed by ECC and launched on mobile platforms in early 2024. The source code reflects Zcash's open source model where no one party owns or controls the protocol.
Bootstrap's primary dispute arises from its fiduciary and legal obligations as a non-profit organization registered under Section 501(c)(3) of the US Internal Revenue Code.
The proposed deal could introduce “new vulnerabilities to politically motivated attacks on Zcash,” including possible lawsuits from donors leading to settlement of transactions, which Zcash “returns to ECC,” the statement said.
Bootstrap added that these things “put the entire Zcash ecosystem at risk” and that such transactions should be done “carefully” to ensure that these assets “serve the public good” and are not “seized for private gain”.
The Zcash code is public and open source, and no single company or entity owns the protocol.
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Fake MetaMask 2FA security checks trick users into sharing recovery phrases.
Crypto investors are being targeted by a new phishing campaign impersonating MetaMask and tricking users into handing over their wallet passphrases, according to blockchain security firm SlowMist.
The attackers are impersonating a two-factor authentication (2FA) security authentication flow that redirects users to fraudulent domains with false security warnings asking for the user's genealogy.
When a user shares a wallet recovery phrase, funds from the wallet are stolen, SlowMist chief security officer 23pds warned in Monday's X post.
This new wave of scams serves to remind users that decentralized wallet protocols never ask for their secret recovery phrase, allowing anyone to control their wallet.
The phishing email redirects users to fake domains impersonating MetaMask, prompting them to enable 2FA for a short period of time, potentially losing access to key wallet features.
The final stage of the scamming process requires users to enter a 12-word seed phrase to complete a “security setup”.
Crypto phishing scams involve hackers sharing phishing links with victims to steal sensitive information such as crypto wallet private keys.
Phishing scams have long been an issue in the cryptocurrency space, but the declining number of incidents shows that investors are getting wise to this threat.
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Aave's founder is big on the future of the DeFi lending giant.
Aave founder and CEO Stani Kulekov outlined the protocol's broader strategic vision following a controversial management vote that rejected a proposal to transfer control of Aave's product assets and intellectual property to a decentralized autonomous organization (DAO).
The failed vote sparked renewed debate within the Ave community over the protocol's long-term direction and governance structure, an issue Kulekov addressed.
In a post published Friday on Aave's governance forum, Kulekov argued that the protocol should evolve beyond its core decentralized finance (DeFi) lending business to pursue opportunities in real-world assets (RWAs), institutional lending and consumer-facing financial products.
He described the community as “at a crossroads,” and pointed out that the future direction of DeFi's growth will not be without a broader market expansion.
Significantly, Kulechov Aave Labs plans to distribute non-protocol revenues to Aave (AAVE) tokenholders, which could expand how the token holds value beyond management involvement. He added that Ave Labs plans to propose a new governance proposal to address intellectual property ownership and brand-related rights, following community pushback from a previous initiative.
Kulekov's post seems to be aimed at moving society away from short-term management disputes and toward a more coordinated long-term strategy. Highlighting RWAs in particular, he described the sector as having a potential of $500 trillion in global financial assets.
Ave is one of the biggest DeFi protocols, with a total valuation of more than $45 billion in October, according to industry data.
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PerpDx will almost triple by 2025 as onchain derivatives mature.
Permanent decentralized exchanges are closing in on 2025, reaching a total of $12.09 trillion, up from $4.1 trillion at the beginning of the year.
Of this lifetime total, $7.9 trillion will be generated by 2025, according to Defilama data. This focus shows how fast onchain derivatives will scale in 2025.
In December alone, perpetual trading volume reached $1 trillion, picking up momentum from October, when monthly volume hit $1 trillion for the first time.
The increase reflects a significant acceleration in the use of onchain derivatives over the past 12 months.
Perpetual DEXs began to emerge around 2021, with dYdX and Perpetual Protocol widely considered among the first platforms to offer decentralized perpetual futures onchain.
By 2023, the growth of the sector has increased rapidly, the emergence of hyperliquids has brought about a significant change.
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Overview of the DeFi market
According to data from Cointelegraph Markets Pro and TradingView, most of the 100 largest cryptocurrencies by market capitalization ended the week in the green.
The RENDER token was the biggest gainer last week, up 56%, followed by Internet of Things (IoT) provider JasmyCoin (JASMY), up more than 52% last week.
Thanks for reading this week's roundup of the most impactful DeFi developments. Join us next Friday for more stories, insights and lessons about this dynamic and evolving space.
