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No love for crypto in February
After a strong start to the year, February proved to be one of the worst months for crypto assets since 2022. The Nasdaq Crypto IndexTM (NCITM) fell over 21%, as macroeconomic concerns collided with the industry’s largest exchange hack and a sentiment that the Trump administration wasn’t moving fast enough on its digital asset initiatives.
In his Notes from the CIO, Samir Kerbage covers whether last month’s poor performance is a sign that the current bull market is fading, a topic he also covered in a webinar with Nasdaq. To help investors better understand the new environment in Washington, DC, our Research Team put together a deck on the improving regulatory landscape, which can be found here,
As always, we are greatly appreciative of your trust in us and are here to answer any questions you may have.
-Your Partners at Hashdex
Market Review
After a positive month, February was marked by the largest hack in the history of the crypto market. However, price action was largely impacted by the trade war initiated by the Trump administration, which increased tariffs on imports from China, Mexico, and Canada. The escalation of trade tensions raised concerns about the impact on global economic growth, increasing risk aversion and putting pressure on more volatile assets, such as crypto assets. This adverse macro environment led to widespread declines until February 21, when the hack of the Bybit exchange further accelerated the market sell-off.
The Nasdaq Crypto Index™ (NCI™) posted a return of -21.58% for the period. Nearly half of this decline occurred after the announcement of tariffs on Mexico, Canada, and China, which led to a consistent market downturn until February 21. Following this period, the Bybit hack announcement intensified the sell-off, resulting in an additional -12% drop. The cyberattack, attributed to a North Korean group, led to a loss of $1.4 billion. The news caused panic in the market, triggering an immediate 5% drop in Bitcoin’s price. During the same period, the S&P 500 and Nasdaq 100 indices recorded negative returns of -1.30% and -2.69%, respectively, reflecting uncertainty regarding the implementation of new policies by the Trump administration.
Among the assets in the NCI™, declines were significant. The worst performer was LINK, which saw a -40.57% drop in February. Only one asset managed to stay in positive territory: LTC, which ended the month nearly flat, with a slight gain of 0.13%. BTC and ETH also experienced sharp declines of -17.28% and -33.30%, respectively. Sector indices suffered even more than the NCI™, a predictable trend during periods of high volatility due to the presence of lower-market-cap assets. The Digital Culture Index recorded the worst performance among its peers, dropping -39.55%, followed by the Decentralized Finance Index (DeFi) and the Smart Contract Platforms Index, which fell -35.94% and -34.36%, respectively. The Vinter Hashdex Risk Parity Momentum Index also followed the negative trend, recording a -28.78% loss.
February’s setback does not change our conviction that 2025 remains a promising year. The NCI™ has returned to negative territory for the year, with a cumulative loss of -13.89% in 2025 so far, but the overall outlook remains unchanged. The Bybit hack was a significant event, but the way the exchange handled the crisis also stood out, setting a new standard for crisis management in the sector. On the political front, the debate over crypto regulation in the U.S. remains ongoing. Despite short-term volatility, our long-term outlook remains positive.
Top Stories
Bybit suffered the largest crypto hack in history
A hacker stole $1.4 billion from Bybit, after accessing an Ethereum cold wallet and exploiting the exchange’s flawed security practices. Bybit claims to have filled the gap in its ETH reserves after the incident. Despite the events, market impact was relatively minor compared to past events, which suggests a growing market maturity when it comes to short-term shocks.
Citi, State Street to pursue digital asset custody
The banks are reportedly planning to launch digital asset custody businesses, another example of how the regulatory shift in the US has the potential to accelerate the adoption of digital assets by the traditional finance world.
Polymarket’s new milestone
Polymarket reached 450,000 monthly active traders, as the platform has diversified its betting pools into sports-related prediction markets. With a substantial trading volume of $1.6 billion in January alone, we may be witnessing the birth of a key user-driven application.
Dogecoin has outperformed other major cryptoassets over the past decade, while also exhibiting a low correlation to crypto and traditional assets. This creates a compelling argument for a portfolio allocation. We tested a Bitcoin-enhanced growth portfolio, which is a traditional 60/40 infused with 3% Bitcoin, and we introduced a modest 1% DOGE allocation. Since most prospective investors likely already hold Bitcoin, this offers a lens into how the two assets can complement each other.
Despite the small portfolio allocation, every approach delivered stronger returns. The benchmark returned 7.25% annually, while DOGE-enhanced portfolios reached as high as 8.95%. Sharpe ratios improved in almost all tests, indicating better risk-adjusted returns. Volatility did slightly tick up, but drawdowns remained largely contained. Even with no rebalancing, the max drawdown only deepened by a few percentage points, underscoring that even a 1% DOGE allocation adds meaningful punch without destabilizing the broader portfolio.
Rebalancing remains essential to capturing upside effectively. Without it, returns can plateau while risk quietly compounds. Monthly or weekly rebalancing offered the best balance, maximizing returns while keeping volatility and drawdowns in check, especially during periods of broader market stress, as we’ve recently seen. Given Dogecoin’s momentum-driven nature, a more strategic approach linked to broader crypto market cycles may offer even greater optimization beyond routine rebalancing.
With the right structure, a 1% allocation to Dogecoin isn’t reckless—it’s rewarding.
Bear Case
Despite strong fundamentals and a rich cultural legacy, Dogecoin’s recent rally, fueled by post-election memecoin mania, may have front-run its true cycle potential. As attention shifts to newer narratives, DOGE risks being seen as ’yesterday’s play,’ potentially underperforming even in a rising market. Still, that wouldn’t signal a flaw in its model, just a pause in a fast-rotating cycle.
Assuming a continued 10% compounded annual growth rate (CAGR) from its 2021 peak of $0.73, DOGE would be projected to land around $0.38 by 2025—still more than 2x from today’s levels but modest relative to past cycles. More notably, this would mark the first time Dogecoin fails to reach a new all-time high in a full market cycle.
Neutral Case
Dogecoin may not dominate headlines like it did at its peak, but it still holds cultural relevance and widespread recognition. In a scenario where the total crypto market cap peaks at $5 trillion this cycle and DOGE maintains a solid, albeit slightly reduced, market share of 3% instead of its previous 4%, this would result in a market capitalization of approximately $150 billion for DOGE.
At that valuation, DOGE would trade near $1 per coin, a ~5.5x gain from current levels around $0.185. This neutral case assumes Dogecoin retains its stature as the leading memecoin, despite increased competition, with stable adoption and renewed retail interest, but without the same euphoria of the last cycle.
Bull Case
If we take DOGE’s bottom price of $0.007 just before the last bull run began and fast-forward two years to the bottom of the current cycle at $0.0585, that move reflects a CAGR of 189%. If DOGE were to mirror this explosive growth, DOGE would reach approximately $1.42.
In this scenario, Dogecoin benefits from renewed memecoin mania, increasing real-world adoption, and stronger interest fueled by regulatory clarity and potential integration with major platforms like Elon Musk’s X. A full return of retail enthusiasm and broad cultural momentum could reestablish DOGE as the breakout asset of the cycle, potentially even doubling its all-time high.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
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