As the regulatory and technological landscape evolves, broader adoption of cryptocurrencies will drive the industry closer to realizing its full potential, and significant changes are expected in the crypto ecosystem. Breakthroughs and advancements in 2025 are likely to determine the long-term trajectory of the crypto industry for decades to come. Next year will be a pivotal year.
Stablecoins are just getting started.
As of December 1, the market capitalization of stablecoins grew by 48% in 2024, reaching a new all-time high of $193 billion, and some analysts predict this number may grow to $3 trillion within the next five years. Year-to-date, the transaction volume of stablecoins has exceeded $27 trillion, approximately three times that of the same period in 2023. Stablecoins provide a proven role in facilitating faster and cheaper payments globally for a wide range of users, from micro businesses to the world's largest companies. As the market capitalization and transaction volume of stablecoins continue to soar, we are rapidly approaching a day when the primary and main use case for stablecoins will be global capital flows and commerce, rather than trading.
The tokenization of real-world assets is expected to see significant growth.
According to rwa.xyz, as of December 1, the tokenization of Real World Assets (RWA) continued to make significant progress in 2024, with the size of tokenized assets, excluding stablecoins, growing by over 60% to reach $13.5 billion. Companies are experimenting with using tokenized assets as collateral for other financial transactions, such as derivatives trading, which could simplify operations and reduce risk.
Additionally, the RWA trend is expanding beyond assets like U.S. Treasuries and money market funds, gaining traction in private credit, commodities, corporate bonds, real estate, and insurance.
Despite facing unique challenges, the cumulative effect of ongoing investment and technological advancements by 2025 should lay the groundwork for tokenization to become a cornerstone of the current crypto market cycle. Ultimately, tokenization could streamline the construction and investment process for entire portfolios, although this may still take a few more years.
ETFs have permanently changed the supply and demand dynamics of the crypto market.
After the record-breaking success of the Bitcoin spot ETF in the U.S., the entire crypto market has transformed. Almost every type of institutional investor—including endowments, pension funds, hedge funds, investment advisors, and family offices—now holds crypto ETFs. With the continued increase in institutional adoption rates, these holders will provide a long-term stable source of demand for this asset class.
Looking ahead, the industry's focus is on tokens like XRP, SOL, LTC, and HBAR, which may receive approval for spot ETFs in the U.S.
Conversely, what is more interesting is what would happen if the U.S. Securities and Exchange Commission (SEC) were to lift its requirement that ETF share creation and redemption must occur in cash rather than in-kind, or if it allowed these products to incorporate staking functionalities. These changes could enhance the potential returns for ETF holders, help narrow the bid-ask spread, and improve the consistency between share prices and net asset values (NAV), making ETFs more attractive to investors.
Centralized finance will drive cryptocurrencies into a new era.
Decentralized finance (DeFi) faced some setbacks in the last cycle, but a more sustainable and resilient ecosystem has emerged. Total Value Locked (TVL) reached a historic high, and the trading volume of decentralized exchanges (DEXs) has also reached unprecedented levels compared to centralized exchanges (CEXs). Innovative user applications, such as Decentralized Physical Infrastructure Networks (DePIN) and prediction markets, are leveraging DeFi to create novel experiences. Furthermore, changes in the regulatory environment in the U.S. and the adoption of on-chain verification 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.
Regulation will ultimately shift from headwinds to tailwinds.
After years of unclear and inconsistent regulatory struggles, the situation has shifted; the U.S. is about to welcome the most crypto-friendly Congress. Bipartisan majorities in the House and Senate supporting cryptocurrencies mean that regulation in the U.S. in 2025 will become a catalyst for crypto performance.
The emergence of cryptocurrencies as one of the election issues highlights the urgent need for policymakers to keep pace with the evolving demands of this influential voting bloc, and the likelihood of the U.S. achieving new legislative milestones is high. Specifically, investors are expected to see the establishment of a comprehensive regulatory framework in the U.S., the introduction of sound stablecoin legislation, and the end of regulation by enforcement. Moreover, the U.S. is not the only jurisdiction likely to make regulatory progress. Many G20 countries and major financial centers are developing rules to adapt to digital assets, which should help create a more favorable environment for innovation and growth. Overall, these initiatives could open the door for more individuals and institutions to confidently participate in the crypto economy.