December 23, 2024
Coinbase recently released a report outlining its predictions for the cryptocurrency market in 2025. The report focuses on key areas such as stablecoins, tokenization, ETFs, DeFi, and regulatory developments.
Reports from other industry players also indicate positive expectations for the cryptocurrency market in 2025.
Favorable regulatory environment will drive market growth
The first major prediction highlights that regulatory changes will benefit the cryptocurrency market as a whole. Coinbase refers to the upcoming US Congress as “the most pro-crypto US Congress…ever.” Among the possible developments, the creation of a strategic reserve for Bitcoin could become a reality.
It is worth noting that the pro-cryptocurrency movements are not limited to the United States; regions such as Europe, the G20, the United Kingdom, the United Arab Emirates, Hong Kong, and Singapore are actively developing regulations to support digital assets.
Binance CEO Richard Teng also expects regulatory changes in the US to act as a catalyst for growth in 2025, with other countries likely to follow suit.
Coinbase highlights the importance of Bitcoin and Ethereum ETFs in attracting new capital. The data also reveals that net inflows have reached $30.7 billion since their launch.
The report also suggests that exchange-traded funds linked to assets like XRP, SOL, LTC, and HBAR could gain approval, although their benefits could be short-lived.
Coinbase expects the SEC to approve staking in ETFs or eliminate the requirement that ETF shares be created and redeemed for cash, potentially expanding the ETF market. SEC Commissioner Hester Peirce has hinted that these developments could happen “earlier.”
Global adoption of stablecoins
Coinbase sees a very optimistic scenario for stablecoin adoption. With a market cap of over $190 billion, stablecoins currently make up 0.9% of the US M2 money supply.
The report expects stablecoins to grow to account for 14% of the US’s $21 trillion M2 money supply, driven by their speed and cost-efficiency compared to traditional methods.
“Indeed, we may be very close to the day when the first and primary uses of stablecoins will not be just trading but global capital flows and commerce,” Coinbase predicted.
Coding Thrives Amid Regulatory Challenges
Coinbase expects tokenized assets to see continued growth in 2025. Real tokenized assets (RWA) capitalization increased by more than 60% last year, reaching nearly $14 billion.
RWA's capitalization is estimated to increase by at least $2 trillion over the next five years, backed by traditional financial giants such as BlackRock and Franklin Templeton.
The tokenization phenomenon extends beyond traditional assets like U.S. Treasuries and money market funds to areas like private credit, commodities, corporate bonds, real estate, and insurance.
Coinbase predicted: “Ultimately, we believe that tokenization could simplify the entire portfolio building and investment process by bringing it on-chain, though this may be a few years away. Of course, these efforts face a set of unique challenges, including liquidity fragmentation across multiple chains and ongoing regulatory hurdles.”
A report from Messari echoed these sentiments, predicting that Bitcoin and tokenized RWAs will dominate the 2025 discussions.
DeFi Boom in 2025
Despite the market cap exceeding $3.7 trillion, the total value locked in DeFi (TVL) has yet to regain its previous high of $200 billion, currently standing at $120 billion.
Coinbase argues that DeFi has faced significant challenges in the last cycle, with many protocols delivering unsustainable returns. However, regulatory changes in the US could allow DeFi protocols to share revenue with token holders, boosting the recovery.
The report also references comments from Federal Reserve Governor Christopher Waller, who stated that decentralized finance could complement centralized finance (CeFi) with distributed ledger technology (DLT), enhancing the efficiency of data storage.