Author: Paul Veradittkit, Managing Partner at Pantera Capital, Coindesk; Translated by: Tao Zhu, Golden Finance
Every year, bulls and bears use short-term case studies to predict whether cryptocurrencies will face an apocalypse or experience exponential growth. Each year, neither of these narratives holds true.
Some notable events this year: Ethereum's Dencun upgrade; elections, crypto ETFs, Wyoming's DUNA, the wBTC controversy, Robinhood's Wells notice, Hyperliquid's nearly $2 billion airdrop, Bitcoin reaching $100,000, and SEC Chairman Gary Gensler's resignation announcement in January.
2024 is a year without significant shocks to the market. Though it did not bring explosive growth in new capital, it proved that an increasing number of companies in the crypto ecosystem are sustainable. Bitcoin is valued at $1.9 trillion, while all other cryptocurrencies are valued at $1.6 trillion. The market cap of all cryptocurrencies has doubled since the beginning of the year.
The diversification of cryptocurrencies enhances their ability to withstand shocks. Payment, DeFi, gaming, ZK, infrastructure, consumer, etc., are all burgeoning sectors. Now, every country has its own financing ecosystem, its own markets, its own incentives, and its own bottlenecks.
This year, at Pantera, we invested in companies addressing specific issues within these ecosystems. Crypto gaming companies face challenges in adopting Web3 data analytics tools, so we invested in the game analytics platform Helika. Due to the fragmentation of AI stacks, Web3 AI products often face adoption challenges, so Sahara AI aims to create an integrated platform that allows permissionless contributions while maintaining a seamless user experience akin to Web2.
The intent infrastructure is chaotic and order flow is dispersed, so Everclear standardizes processes by connecting all stakeholders. The integration of zkVM is complex, so Nexus uses a modular approach to meet customers needing only part of the super-scalable layer. Building consumer applications faces the challenge of attracting users, so we made the largest investment ever in TON, which directly owns 950 million monthly active users on Telegram.
We enter 2025 driven by possible regulatory clarity, sustained mainstream interest, and rising cryptocurrency prices. Even after experiencing this summer's slump, crypto users enter the new year with strong optimism (or 'greed').
2024 Prediction Review:
Before we delve into the 2025 predictions, let's review how I predicted 2024. I will rate myself, with 1 being the least accurate and 5 being the most accurate.
The resurgence of Bitcoin and 'DeFi Summer 2.0'. Accuracy: 4/5
Tokenized social experiences for new consumer use cases. Accuracy: 2/5
The rise of TradFi-DeFi 'bridges' such as stablecoins and mirror assets. Accuracy: 5/5
The intersection of modular blockchains and zero-knowledge proofs. Accuracy: 4/5
More compute-intensive applications move on-chain, such as AI and DePIN. Accuracy: 2/5
The 'central radiation' model integrating public blockchain ecosystems and application chains. Accuracy: 2/5
2025 Predictions
This year, I received assistance from Pantera team investors. I categorized my predictions into two categories: upward trends and new ideas.
Upward Trends:
By the end of the year, RWA (excluding stablecoins) will account for 30% of on-chain TVL (currently at 15%)
This year, on-chain RWA grew by over 60% to reach $13.7 billion. About 70% of RWA is private credit, with the remainder mostly Treasury bills and commodities. The inflow of funds into these categories is accelerating, and more complex RWAs may be introduced by 2025.
Firstly, private credit is accelerating due to improvements in infrastructure. This figure almost speaks for itself; by 2024, asset values will increase by nearly $4 billion. As more companies enter this space, using private credit as a means to transfer funds into cryptocurrencies is becoming increasingly easier.
Secondly, there are Treasury bills and off-chain commodities worth trillions of dollars. On-chain Treasury bills are only valued at $2.67 billion, and their ability to generate yield (unlike stablecoins, which allow issuers to earn interest) makes them a more attractive alternative than stablecoins. Blackrock's BUIDL T-Bill fund only has $500 million on-chain, while it holds hundreds of billions of off-chain government notes. With DeFi infrastructure having fully embraced stablecoins and Treasury bill RWAs (integrating them into DeFi pools, lending markets, and Perps), the friction in adopting them has significantly decreased. The same applies to commodities.
Finally, the current scope of RWA is limited to these basic products. The infrastructure for creating and maintaining RWA protocols has been greatly simplified, and operators have a better understanding of the risks and appropriate mitigations presented by on-chain operations. Dedicated companies manage wallets, minting mechanisms, witch sensing, new crypto banks, etc., which means that introducing stocks, ETFs, bonds, and other more complex financial products on-chain may ultimately be possible and feasible. These trends will only accelerate the use of RWA until 2025.
Bitcoin-Fi
Last year, my predictions for Bitcoin finance were strong, but they did not reach 1-2% of all Bitcoin TVL. This year, driven by Bitcoin native financial protocols (like Babylon) that do not require bridging, high returns, high Bitcoin prices, and increased demand for more BTC assets (rune, ordinal, BRC20), 1% of Bitcoin will participate in Bitcoin-Fi.
Fintech becomes the gateway to cryptocurrency
TON, Venmo, Paypal, and WhatsApp have witnessed the growth of cryptocurrency due to their neutrality. They serve as gateways for users to interact with cryptocurrencies without pushing specific applications or protocols; in fact, they can act as simplified entry points to cryptocurrency. They attract different users; TON has the existing 950 million Telegram users, Venmo and Paypal have 500 million payment users each, and WhatsApp has 2.95 billion monthly active users.
Felix operates on WhatsApp, allowing instant transfers through messages, enabling digital transfers and cash withdrawals at partner locations like 7-11. Behind the scenes, they use stablecoins and Name on Stellar. Users can now buy cryptocurrencies on Metamask using Venmo, Stripe acquired Bridge (a stablecoin company), and Robinhood acquired Bitstamp (a cryptocurrency exchange).
Whether intentionally or due to their ability to support third-party applications, every fintech will become a gateway to cryptocurrency. Fintech will become increasingly popular and may rival smaller centralized exchanges in terms of crypto assets.
Unichain becomes the volume leader in L2 trading
Uniswap's TVL is nearing $6.5 billion, with 500,000 to 800,000 transactions daily and daily trading volumes of $1 to $4 billion. Arbitrum has a daily trading volume of about $1.4 billion (with Uniswap accounting for a third), while Base has a daily trading volume of about $1.5 billion (with Uniswap accounting for a quarter).
If Unichain only captures half of Uniswap's trading volume, it will easily surpass the largest L2, becoming the volume-leading L2.
NFTs revive, but in a specific application manner
NFTs are a tool in cryptocurrency, not a means to an end. NFTs are used as utilities in on-chain games, AI (ownership of trading models), identity, and consumer applications.
Blackbird is a restaurant rewards application that integrates NFTs into its customer identification platform connecting Web3 to dining. By integrating an open, liquid, and identifiable blockchain with restaurants, they can provide consumer behavior data to restaurants and easily create/manage subscriptions, memberships, and discounts for customers.
Sofamon created web3 bitmoji (i.e., NFT), called wearable devices, unlocking the financial layer of the emoji market. They recognize the growing relevance of on-chain intellectual property and are willing to collaborate with top KOLs and Korean pop stars to combat digital counterfeiting. Story Protocol recently raised $80 million at a valuation of $2.25 billion, with the broader goal of tokenizing global intellectual property, making originality central to creative exploration and creators. IWC (Swiss luxury watch brand) has member NFTs that grant access to exclusive community and event usage.
NFTs can be integrated into ID transactions, transfers, ownership, and memberships, but they can also be used to represent and assess assets, leading to monetary growth and potentially speculative growth. This flexibility brings power to NFTs. Use cases will only increase.
Restart
By 2025, restaking protocols like Eigenlayer, Symbiotic, and Karak will eventually launch their mainnet, which will pay operators AVS and reduce fees.
As more networks use it, restaking will attract power. If a protocol uses infrastructure supported by a specific restaking protocol, it gains value from that connection, even if it is not direct. It is through this power that a protocol may lose relevance but still maintain a large valuation. We believe restaking is still a multi-billion dollar market as more applications become application chains leveraging restaking protocols or other protocols built on restaking protocols.
New Ideas:
zkTLS brings off-chain data on-chain
zkTLS uses zero-knowledge proofs to validate the integrity of data from the Web2 world. This new technology has not been fully implemented yet, but (hopefully) when it is fully deployed this year, it will bring new types of data.
For instance, zkTLS can be used to prove to other sites that data comes from a specific site. Currently, there is no way to do this. The technology leverages advances in TEE and MPC and can be further improved to allow certain data to remain confidential.
This is a new idea, but we predict that companies will intensify efforts to start building this idea and integrating it into on-chain services, such as verifiable oracles for non-financial data or data oracles with crypto protection.
Regulatory support
The regulatory environment in the U.S. seems to be taking a positive stance towards cryptocurrencies for the first time. 278 pro-crypto House candidates were elected, while 122 anti-crypto candidates were elected. Anti-crypto SEC Chairman Gary Gensler announced his resignation in January. Reports suggest Trump will nominate Paul Atkins to lead the SEC. He served as an SEC commissioner from 2002 to 2008, vocally supportive of the crypto industry and served as an advisor to the Digital Chamber, an organization dedicated to promoting cryptocurrency acceptance. Trump also appointed tech investor, former Yammer CEO, and PayPal COO David Sacks to lead the new role of 'AI and Crypto Czar.' Trump's statement says, '[David Sacks] will create a legal framework to provide the clarity the crypto industry has long sought.'
We hope that the SEC's lawsuit can conclude, leading to a clear definition of cryptocurrencies as a specific asset class and considerations regarding taxation.
