With the development of the regulatory and technological environment, next year will be a crucial year for the cryptocurrency industry.
As the regulatory and technological environment evolves, broader adoption of cryptocurrencies will drive the industry closer to reaching its full potential, with significant changes 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 key year.
Stablecoins are just getting started.
As of December 1, 2024, the market capitalization of stablecoins has increased by 48%, reaching a new historic high of $193 billion, and some analysts predict this number could grow to $3 trillion within the next five years. Year-to-date, the total trading volume of stablecoins has exceeded $27 trillion, about three times that of the same period in 2023. Stablecoins have validated their role in providing faster and cheaper payments globally for a wide range of users, from micro-enterprises to the world's largest companies. As the market capitalization and trading volume of stablecoins continue to soar, we are rapidly approaching a day when the primary and main use case of stablecoins will be global capital movement and commerce, rather than trading.
The tokenization of real-world assets is expected to see significant growth.
According to data from rwa.xyz, as of December 1, the tokenization of real-world assets (RWA) continues to make significant progress in 2024, with the scale of tokenized assets, excluding stablecoins, growing by over 60% to $13.5 billion. Companies are attempting to use tokenized assets as collateral for other financial transactions, such as derivatives trading, which could simplify operations and reduce risk.
Moreover, 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 effects of sustained investment and technological advancements in 2025 should lay the foundation for tokenization to become the cornerstone of the current crypto market cycle. Ultimately, tokenization can simplify the process of building and investing in an entire portfolio, although this may still take a few years.
ETFs have permanently changed the supply and demand dynamics of the crypto market.
After the record success of the spot Bitcoin ETF in the U.S., the entire crypto market has undergone a transformation. 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, 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 be approved for the issuance of 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 remove its rule that ETF share creation and redemption must occur in cash rather than physical form, or allow these products to incorporate staking features. These changes could enhance potential returns for ETF holders, help narrow bid-ask spreads, and improve consistency between share prices and net asset values (NAV), making ETFs more attractive to investors.
Centralized finance will drive cryptocurrency 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) has reached an all-time high, and trading volume on decentralized exchanges (DEXs) has also reached unprecedented levels compared to centralized exchanges (CEXs). Innovative user applications, such as decentralized physical infrastructure (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 indicates that DeFi may expand its influence in the near future.
Regulation will ultimately shift from a headwind to a tailwind.
After years of ambiguous and inconsistent regulatory struggles, the situation has changed, and 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 act as a boost for crypto performance.
The emergence of cryptocurrency as one of the election issues highlights the urgent need for policymakers to align with the evolving demands of this influential voting bloc, making it highly likely for the U.S. to achieve new legislative milestones. Specifically, investors expect to see the establishment of a comprehensive regulatory framework in the U.S., the introduction of sound stablecoin legislation, and the end of the era of regulation through enforcement. Moreover, the U.S. is not the only jurisdiction likely to make progress in regulation. Many G20 countries and major financial centers are formulating rules to accommodate digital assets, which should help create a more favorable environment for innovation and growth. Overall, these initiatives can open the door for more individuals and institutions to confidently engage in the crypto economy.