Reflexivity Research: January 2025 in Review

Before diving into January in review, be sure to check out a few recently released reports from our research team:

• Dinero Q4 2024 Update
• Maple Finance Overview
• Sonic Airdrop Overview
• Near Q4 2024 Update
• MCQ Markets Q4 2024 Update
• Hedera Q4 2024 Update
• 0G Foundation Conducts Node Sale
• Hemi Overview
• Avalanche Q4 2024 Overview

Market Trends

Bitcoin and Ethereum Price Movements

The cryptocurrency market began 2025 on a cautiously optimistic note. Bitcoin opened the month around $93,000 and climbed roughly 10% in January, reaching a new all-time high near $109,000 around mid-month before settling back to approximately $102,000 by the end of January. This upward movement was supported by growing anticipation of crypto-friendly policies from the incoming U.S. administration and continued institutional interest.

In contrast, Ethereum had a relatively flat month: it started January near $3,350 and went down to about $3,300, a modest 1% decline. Ethereum’s slight dip came as its on-chain activity and demand cooled slightly from the previous month’s elevated levels. Overall, large-cap crypto assets showed resilience, with moderate gains for Bitcoin and minor declines for Ether, even as broader financial markets digested mixed economic signals and central bank actions.

ETF Flows and Market Conditions

Bitcoin ETFs

January data showed strong investor demand for Bitcoin exposure via ETFs). Blackrock’s Bitcoin ETF recorded net inflows of approximately $6,332.8 million, while FBTC added $1,789 million. In contrast, Grayscale’s GBTC experienced net outflows of about -$840.1 million. Overall net flows for January amounted to an impressive ~$8.86 billion.

Ethereum ETFs

In comparison to Bitcoin, Ethereum-focused ETFs posted mixed results. Blackrock’s attracted inflows of around $1,066.2 million , yet other major products registered net outflows: -$552 million in one case and -$291.5 million in another. Despite this, net gains for Ethereum ETFs were recorded at ~$1.7 billion for the month of January.

Memecoin Speculation and Volatility

Mid-January witnessed a surge in memecoin speculation. The most prominent event was the launch of a political meme-themed token “Trump”, which debuted in the lead-up to the U.S. presidential inauguration. This token quickly skyrocketed by several hundred percent in value within days of its release.

Daily trading volumes for the token reached levels in the tens of billions of dollars on decentralized exchanges, and at one point its market capitalization briefly placed it among the top 20 cryptocurrencies. However, this frenzy was short-lived. Within days, Melania coin was launched, and the competition between the two coins triggered a sharp pullback in Trump’s price. By month’s end, the Trump coin had retraced much of its gains. This episode led to broader market volatility as some investors rotated out of other assets into the hype and then back again. It also underscored how quickly speculative manias can form and dissipate.

Notably, the memecoin trading craze provided a real-world stress test for certain blockchain networks. For example, Solana – the platform on which these meme tokens launched – handled record-high transaction volumes and activity without major outages, an encouraging sign of improved network scalability. Phantom revealed in a post on X that it was handling eight million transaction requests per minute. It also noted that, in a 24-hour window, users swapped more than $1.25 billion in volume and conducted 10 million transactions.

Regulatory Developments

U.S. Executive Order and Policy Shifts

In the United States, January 2025 brought significant policy moves that pointed toward a more defined regulatory framework for digital assets. Following the presidential inauguration, the new administration issued an executive order titled “Strengthening American Leadership in Digital Financial Technology.” This order established a high-level working group tasked with developing a comprehensive federal regulatory framework for cryptocurrencies and blockchain technology. It also initiated a review of existing crypto-related regulations, directing agencies to identify rules that may be outdated or in need of clarification. Notably, the executive order included a directive to explore the feasibility of a strategic national cryptocurrency reserve (a so-called “digital asset stockpile”), indicating that the government is examining ways to directly engage with crypto assets. The order additionally put a halt to federal efforts on a U.S. central bank digital currency (CBDC), signaling a pause on government-led digital currency projects in favor of focusing on the private crypto sector. While some industry observers had hoped for more immediate actions (such as actually creating a national crypto reserve), the overall response to the executive mandate was positive. Market participants and crypto businesses welcomed the clear signal that the U.S. aims to support innovation in digital finance through thoughtful regulation rather than outright bans. The commitment to regulatory clarity and leadership in this space set an optimistic tone, reducing some of the uncertainty that had previously weighed on the industry.

Regulatory Enforcement and Legal Actions

Beyond the executive order, U.S. regulators and courts made additional noteworthy moves in January. The SEC announced the formation of a dedicated Crypto Assets Task Force, indicating a drive to both clarify rules and crack down on misconduct in the crypto markets. In a related policy shift, the SEC formally rescinded a controversial accounting guideline (known as SAB 121) that had required companies to treat customers’ crypto holdings as liabilities on their balance sheets. Removing this requirement lowers a barrier for banks and custodians to offer crypto services, as it alleviates an onerous accounting burden, potentially enabling more traditional financial institutions to enter the crypto custody and trading space. The legal system also yielded outcomes with implications for regulation. In one case, a U.S. federal court of appeals criticized the SEC’s earlier refusal to even consider new rules for digital assets, calling the agency’s denial of a prominent crypto firm’s rulemaking petition “arbitrary and capricious.” This court opinion adds pressure on regulators to update and clarify crypto regulations. In another case, a U.S. District Court set aside a prior decision that had upheld sanctions on a decentralized mixer protocol, questioning whether such enforcement actions had overreached. These developments suggested that the judiciary is increasingly scrutinizing regulatory actions and ensuring that agencies remain within their authority when addressing crypto-related issues.

Leadership Changes and Outlook

Personnel changes in key regulatory and advisory positions further signaled a shifting stance toward a more crypto-engaged government. Several individuals viewed as open to or knowledgeable about digital assets were appointed or nominated to influential roles. These included a new Treasury Secretary who has expressed interest in fintech innovation, interim chairs at the SEC and CFTC with industry experience, and lawmakers known for advocating crypto-friendly policies taking leadership of congressional subcommittees on digital assets. At the same time, some officials considered less friendly to crypto departed or announced their impending departures. For instance, the previous SEC Chair and other senior regulators who had taken a hardline approach to crypto enforcement were stepping down. This turnover in personnel is expected to pave the way for a more constructive regulatory dialogue between the industry and policymakers. However, not all regulatory news was positive for the sector. The Internal Revenue Service finalized new tax reporting rules under the Infrastructure Investment and Jobs Act’s “broker” provision that explicitly bring cryptocurrency transactions – including those facilitated by decentralized exchanges and DeFi platforms – into the scope of broker reporting requirements. The rule would oblige crypto platforms and even certain protocol developers to report user transactions to the tax authorities, similar to stock brokers, beginning in 2027. This development raised concerns about privacy and the feasibility of compliance, especially for decentralized entities. Industry groups and some lawmakers have already indicated they may seek to challenge or amend this rule before it takes effect, arguing that it could unintentionally stifle innovation or drive certain activities offshore. Nonetheless, the IRS’s move demonstrates that authorities are intent on applying existing financial regulations to crypto where possible, even as broader regulatory frameworks are still being ironed out.

Global Policy Trends

Internationally, regulatory attitudes in January 2025 continued to evolve toward greater oversight coupled with cautious openness. In Europe, the implementation of the Markets in Crypto-Assets (MiCA) regulation was underway, with regulators preparing guidance for how exchanges and crypto service providers should comply with these new comprehensive rules. This European regulatory rollout aims to standardize crypto oversight across EU member states, covering everything from stablecoin issuance to exchange licensing, and is being closely watched as a potential model for other regions. Meanwhile, several Asian jurisdictions maintained a proactive stance on crypto regulation: for example, Hong Kong and Singapore moved forward with licensing regimes for exchanges and clarity around token offerings, seeking to balance innovation with investor protection. Some countries continued to restrict certain crypto activities (such as unlicensed trading or mining) due to concerns over capital flight and financial stability, but outright bans were generally absent from major economies’ agendas this month. Instead, there was a notable global trend of engaging with the crypto industry to draft rules of the road. Even developing economies showed interest in blockchain technology for improving financial services.

In summary, by the end of January, the worldwide policy landscape for cryptocurrency was gradually tilting toward clearer regulations and official recognition of digital assets, though the exact approaches varied by jurisdiction. This convergence toward more defined policy is expected to reduce regulatory arbitrage and uncertainty over time, providing a more stable environment for industry growth.

Technological Advancements

Blockchain Upgrades and Network Improvements

The first month of 2025 saw continued progress in the technical developments of major blockchain platforms. Ethereum developers in particular made strides toward the network’s next upgrades. Core developers set a target for March 2025 to implement the anticipated “Pectra” upgrade, a protocol improvement aimed at enhancing Ethereum’s scalability and efficiency. In the interim, Ethereum’s community focused on scaling solutions: Layer-2 networks (such as rollups) grew in usage, and leading Layer-2 project teams pledged to collaborate on standards for better interoperability and performance. Even Ethereum’s base layer saw discussions of increasing capacity, with a substantial portion of validators signaling support for raising the block gas limit to allow more transactions per block.

The Ethereum Foundation itself underwent organizational changes to support these technical goals. Co-founder Vitalik Buterin announced a leadership refresh within the Foundation to increase technical expertise and improve communication with the broader ecosystem. This management update is intended to accelerate development and address community needs more effectively. Additionally, the Foundation began putting more of its treasury to work in the ecosystem – for example, deploying a portion of its ETH holdings into decentralized finance protocols and exploring options to stake a large amount of its Ether – reflecting confidence in the network’s maturation.

Outside of Ethereum, other projects also delivered noteworthy technical updates. Protocols across the industry are in various stages of upgrading their consensus mechanisms, improving smart contract security, and boosting throughput. For instance, Cardano and Tezos developers rolled out incremental improvements via scheduled hard forks with little fanfare, and Bitcoin’s developer community continued to refine Lightning Network and sidechain technologies to enhance transaction speed and privacy for BTC users.

Innovation and Emerging Technologies

Alongside formal upgrades, the crypto industry saw a range of innovative technology initiatives emerge and gain traction in January. One highlight was the release of new tools for custom “app-chain” deployment: the Starknet project, for example, introduced its SN Stack, enabling developers to launch application-specific layer-2 blockchains secured by Ethereum. This approach allows bespoke blockchain environments that inherit security from Ethereum while tailoring functionality for particular use cases, indicating a trend towards modular and scalable blockchain designs.

Hyperliquid Sees Continued Growth

Hyperliquid’s decentralised exchange reported all-time high trading volumes in January. On 19 January alone, it processed over $21 billion in 24-hour volume, representing nearly two-thirds of the entire perpetual futures market that day.

New Highs

This milestone was quickly overtaken on 21 January when the platform surpassed $22 billion in daily volume. Open interest around the same time stood at roughly $4.7 billion, while protocol fees reached around $9.5 million in a single day. The jump in activity reflected both elevated market volatility and a surge in trading for Trump-themed memecoins.

New Product Launches

Meme Coin Perpetuals

Early in the month, Hyperliquid launched perpetual futures contracts for two politically themed memecoins: Official Trump (TRUMP) and Official Melania Meme (MELANIA). These listings tapped into soaring interest in Trump-related tokens and demonstrated Hyperliquid’s ability to introduce novel markets on its high-performance Layer-1 network.

Native Staking

Hyperliquid also expanded its ecosystem by introducing a native HYPE token staking feature, which had debuted in late December 2024. By early January, participants had staked more than 320 million HYPE tokens, worth approximately $9 billion, across 16 validators..

Partnerships

Router Protocol Integration

In a push towards cross-chain connectivity, Hyperliquid formed a strategic partnership with Router Protocol. Thanks to the Router Nitro bridge, users can now deposit assets from over 30 blockchains directly into Hyperliquid without routing through Arbitrum or other intermediaries. In conjunction with this integration, Hyperliquid listed Router’s $ROUTE token on its exchange, and fees from Router-based deposits are used to buy back $ROUTE, an approach designed to spur trading activity.

Wormhole Testnet

Hyperliquid’s cross-chain capabilities also received a boost when the Wormhole interoperability protocol launched a testnet compatible with EVM. This development is expected to draw more projects and developers to Hyperliquid by simplifying connections between various blockchains and digital assets.

Ethena Labs Announced 2025 Roadmap: “Convergence”

Another major update came from Ethena Labs which unveiled its 2025 roadmap, dubbed “Convergence,” aimed at bringing together DeFi, CeFi, and traditional finance under a single framework. Below are the core initiatives:

iUSDe Launch

Ethena is set to roll out iUSDe, a TradFi-compatible offshoot of its synthetic stablecoin sUSDe, enabling institutional investors to earn crypto-based returns. Incorporating token-level transfer restrictions, iUSDe meets regulatory requirements and can slot into fixed-income portfolios. By late January 2025, Ethena intends to finalise collaborations with asset managers, private credit funds, and other financial institutions.

Telegram Integration

The company is building a payments and savings service within the Telegram app, harnessing sUSDe to provide a streamlined neobank experience. This setup will let users send, spend, and save sUSDe via Telegram, with Apple Pay support to ensure quick switching between savings and mobile transactions.

Ethereal Trading Platform & Derive Protocol

Two forthcoming services will expand Ethena’s trading ecosystem. Ethereal is a spot and perpetual futures exchange exclusively settled in sUSDe, with Ethena itself supplying liquidity and hedging. Meanwhile, Derive is designed for on-chain options and structured products, employing sUSDe as the main collateral currency. Both platforms aim to serve both everyday and institutional traders.

Growth and Milestones

Ethena’s synthetic dollar, USDe, has become the third-largest USD-pegged asset in crypto, reaching nearly $6 billion in 2024. During that period, Ethena generated $100 million in revenue and, by December, achieved a run-rate annualised revenue of $1.2 billion.

This upward trajectory underpins the roadmap’s ambition to integrate digital assets with traditional finance models.

Security and Hacks

Major Security Breaches in January

Several security incidents occurred in January 2025, though the overall scale of losses was smaller than during some of the more notorious months of previous years. In total, roughly $70–75 million in crypto assets was stolen across various hacks and exploits during January. The most significant breaches tended to involve centralized services. In one high-profile case, a major centralized exchange suffered a hack that resulted in tens of millions of dollars worth of digital assets being drained from its wallets. (This attack, which took place at a platform based in Asia, was the largest single theft of the month and prompted the exchange to temporarily suspend withdrawals as a precaution.) Other notable incidents included compromises of centralized lending platforms and custodial wallets, reinforcing the ongoing risks faced by custodians of digital funds. While any security breach is cause for concern, it is worth noting that January’s losses represented a marked decrease of nearly 40% compared to the same period a year earlier, suggesting that industry-wide security practices may be improving. Many crypto firms have been investing in stronger safeguards such as multi-signature protections, hardware security modules, and rigorous smart contract audits, which may be contributing to this downward trend in successful attacks.

DeFi Exploits vs. CeFi Risks

The pattern of attacks in January highlighted a contrast between decentralized finance and centralized finance in terms of security vulnerabilities.DeFi platforms saw only a handful of notable exploits during the month, and those that did occur were relatively contained in impact. For instance, a few DeFi protocol hacks relating to smart contract bugs each resulted in losses in the low-single-digit millions of dollars, and in some cases the affected projects were able to mitigate damage by pausing contracts or working with white-hat hackers. No widespread DeFi protocol failures or multi-hundred-million dollar rug pulls were recorded in the month, which was a respite from some of the larger exploits seen in prior years. By contrast, centralized platforms were the target of the majority of stolen funds in January. Hackers continue to find attractive targets in exchanges and other custodians where large pools of user funds are stored in one place. These CeFi breaches can lead to significantly higher loss per incident, as exemplified by the exchange hack mentioned above. The differing risk profiles illustrate a key security trade-off: while DeFi applications can be vulnerable to coding errors and are not immune to hacks, their decentralized nature means there is no single honeypot holding massive reserves – losses, when they happen, are often spread out or limited by protocol design. CeFi institutions, on the other hand, offer convenience and simplicity for users, but at the cost of creating centralized points of failure that, if penetrated, can result in outsized losses. Industry experts in January continued to debate the best approaches to security, emphasizing the need for rigorous code audits for DeFi and robust operational security for exchanges. The takeaway from the month’s security incidents is that the crypto ecosystem is gradually getting better at defense, but

Conclusion

January 2025 showcased a steadily maturing market that increasingly balances innovation with regulatory oversight. Major assets such as Bitcoin and Ethereum held firm on the back of steady ETF inflows and measured optimism surrounding U.S. policy changes. Regulatory developments in both the United States and abroad indicated a move toward more structured governance and deeper institutional participation, though debates about reporting obligations and other measures continued. Technological advances progressed at a measured pace, with Ethereum’s planned “Pectra” upgrade and the successful performance of Layer-1 and Layer-2 networks under heavy loads illustrating the sector’s focus on scalability. Security incidents remained a concern but were generally more contained than in past periods, suggesting incremental improvements in custodial safeguards and DeFi contract auditing. Meanwhile, projects like Hyperliquid and Ethena Labs outlined concrete plans to align DeFi, CeFi, and traditional finance through expanded product offerings and cross-chain integrations. Taken together, the month’s developments highlighted an industry evolving beyond speculation alone, laying firmer groundwork for sustainable growth, wider adoption, and ongoing technological progress.

Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.