The recent trends in Bitcoin and Ethereum have shown a significant decline in retail adoption, indicated by a decrease in network activity. This raises concerns about the possibility of a deeper corrective cycle in the second quarter of the year.
Analysis of the data reveals that since the post-2020 bull cycle of Bitcoin, there has been a slowdown in the growth of unique wallets and active addresses, especially among wallets holding balances exceeding $1. This trend aligns with the adoption curve model, suggesting that institutional accumulation has led to BTC being consolidated into fewer high-value wallets. Consequently, the distribution among retail participants has decreased.
Similarly, Ethereum has experienced a decline in adoption rates in 2025, reflecting the growing dominance of institutional investors. This shift towards institutional dominance has made on-chain metrics less reliable for assessing retail adoption in the future.
The impact of this structural shift on the market could be significant. Institutional wallets now have a greater influence on liquidity cycles, as evidenced by Bitcoin’s sharp retracement to $77k in February following sustained BTC ETF outflows. The outflows from institutional wallets have coincided with macroeconomic factors, such as Trump’s tariff policies, adding to the volatility in the crypto market.
As we enter the second quarter, uncertainties remain regarding market reactions. The failure of Bitcoin and Ethereum to replicate their Q1 rally raises concerns about the potential for a bearish cycle in Q2.
Recent developments in the market have seen Bitcoin reclaim $88k as BTC ETFs returned to net inflows. Ethereum also briefly retested $2k, but its prolonged consolidation and subdued institutional inflows suggest underlying weakness. If Bitcoin faces resistance and retraces, Ethereum’s price could be vulnerable to a deeper corrective phase.
The weak fundamentals and selective accumulation by high-value wallets could pose challenges for both Bitcoin and Ethereum’s Q2 rally. Historically, BTC’s strength in Q1 has led to an altcoin surge, but this cycle’s divergence in price action is attributed to heightened macroeconomic volatility. If institutional capital fails to offset this volatility in the upcoming quarter, both Bitcoin and Ethereum may face distribution pressure and delay a full-scale trend continuation.