According to ChainCatcher, Coinbase recently released a cryptocurrency market outlook, highlighting five areas to watch in 2025:
1. Stablecoins are just getting started.
Stablecoins have become the killer application of cryptocurrency. As of December 1, 2024, the market capitalization of stablecoins grew by 48% to a historic high of $193 billion, with some analysts predicting that this figure could rise to $3 trillion within the next five years. Year-to-date stablecoin trading volume has exceeded $27 trillion, an increase of about three times year-on-year. As stablecoins continue to soar, we will soon see that their first and primary use case will be global capital flows and commerce, rather than trading.
2. RWA tokenization is expected to achieve significant growth.
According to data from rwa.xyz, as of December 1, tokenized RWA has grown by over 60%, reaching $13.5 billion (excluding stablecoins), with significant progress expected in tokenization in 2024. Companies are attempting to use tokenized assets as collateral for other financial transactions, such as those involving derivatives, which can streamline operations and reduce risk. Additionally, the RWA trend is moving beyond assets like U.S. Treasuries and money market funds, gaining attention in private credit, commodities, corporate bonds, real estate, and insurance.
We believe that the cumulative effects of continued investment and technological improvements in 2025 should lay the foundation for tokenization to become a cornerstone of the current cryptocurrency market cycle. Ultimately, we believe tokenization can simplify the entire portfolio construction and investment process by bringing it on-chain, although this may still take a few years.
3. Crypto ETFs have forever changed the supply and demand dynamics of cryptocurrency.
After the record success of the U.S. spot Bitcoin ETF, the entire cryptocurrency market has changed. Almost every type of institutional investor (including endowments, pension funds, hedge funds, investment advisors, and family offices) now holds cryptocurrency ETFs. With the institutional adoption rate continually rising, we believe these holders will provide a stable source of long-term demand for this asset class.
Looking ahead, the industry is focused on the potential approval of spot ETFs for tokens like XRP, SOL, LTC, and HBAR in the U.S., but we believe meaningful institutional demand in the short term may be limited to a small number of assets. We are more interested in what might happen if the SEC removes the authorization for creating and redeeming ETF shares in cash rather than physical assets or allows these products to be incorporated into staking. These changes could enhance ETF holders' potential returns, making ETFs more attractive to investors.
4. The revival of DeFi will propel it into a new era.
DeFi faced some shocks in the previous cycle, but a more sustainable and resilient ecosystem has emerged. The total value locked (TVL) in lending protocols has reached an all-time high, while the market share of DEX trading (relative to CEX) has peaked. Additionally, changes in the regulatory landscape in the U.S. and the adoption of on-chain verification could provide a clear path for traditional institutional investors to participate in DeFi. All of this suggests that DeFi may expand its influence in the near future.
5. Regulation will ultimately shift from headwinds to tailwinds.
For years, the U.S. has suffered from regulatory ambiguity and inconsistency, but the tide has turned; the U.S. Congress will soon witness the most crypto-friendly Congress in history. Both the House and Senate support cryptocurrency, which means that U.S. regulation will bolster cryptocurrency performance in 2025.
Cryptocurrency has become an election issue, highlighting the urgency for policymakers to keep pace with the changing demands of this influential voting group. We believe the likelihood of achieving new legislative milestones is high. Specifically, we expect the U.S. to establish a comprehensive regulatory framework, implement sound stablecoin legislation, and end the era of enforcement-based regulation. The U.S. is not the only jurisdiction preparing to make regulatory progress. Many G20 countries and major financial centers are developing rules to accommodate digital assets, which will help create a more favorable environment for innovation and growth. In summary, these initiatives can open doors for more individuals and institutions, giving them the confidence to participate in the crypto economy.
As the regulatory and technological landscape evolves, it is expected that the crypto ecosystem will grow significantly, as broader adoption will drive the industry closer to realizing its full potential. Breakthroughs and advancements in 2025 are likely to determine the long-term trajectory of the crypto industry for decades to come. This will be a pivotal year.
