Cryptocurrencies are poised to continue their momentum after nearly doubling their total market cap in 2024, but their wider adoption in 2025 will depend on how effective the crypto-friendly Trump administration is in creating a clearer regulatory path for crypto to flourish.
“This year [2024] has been a strong year for cryptocurrencies, with a 90% or greater increase in total market cap,” Citi Research noted in its 2025 outlook. “Markets are bullish on the regulatory front given the crypto-friendly views of the incoming US administration and its staff.”
The massive gains in 2024 were driven by the launch of spot Bitcoin and Ethereum ETFs, which attracted a combined $36.4 billion and $2.4 billion in net inflows through December 19, respectively. These inflows were the most significant driver of cryptocurrency returns, Citi said, and it expects the trend to continue into 2025.
But the outlook is far from clear. While the incoming administration of President-elect Donald Trump is widely seen as pro-cryptocurrency, the potential for meaningful regulatory reform remains uncertain.
“The ‘Trump push’ from a regulatory perspective is not necessarily a deregulatory story,” said CityCity. “Some market participants believe the incoming administration may seek to replace more regulators who it sees as having skeptical records on cryptocurrencies, and promote those whose views are more in line with his administration’s.”
Trump has signaled his willingness to move away from the current administration’s “anti-cryptocurrency crusade,” which he has criticized for stifling innovation. His proposed policies include a shift from enforcement-focused regulation to a more legislative approach, with the goal of reducing uncertainty for both investors and issuers.
In a sign that the winds of change are stirring, Trump has nominated crypto-friendly Paul Atkins to replace SEC Chairman Gary Gensler, who is set to step down on January 20.
Citi said the regulatory environment has an impact on crypto adoption, pointing to several other metrics including trading/flows, on-chain metrics and total value locked in DeFi as key metrics to watch.
Citi said the regulatory framework would be an important determinant of its adoption, noting that increased transparency in regulation could put other cryptocurrencies on the radar of investors.
“One potential consequence of a change in the regulatory regime is that cryptocurrencies could mean much more than just Bitcoin,” Citi added.
However, Citibank warns that macroeconomic factors could disrupt this optimistic narrative, with policy uncertainty threatening to spark volatility in risky assets.
“The macroeconomic outlook (BMAm) may become less favorable over the remainder of [2025] given increased U.S. policy uncertainty and anticipated equity volatility.”