Author: Pantera Capital Managing Partner Paul Veradittkit, Coindesk; Translated by Tao Zhu, Golden Finance
Every year, bulls and bears leverage short-term case studies to predict whether cryptocurrency will face apocalyptic decline or exponential growth. Each year, claims from both dimensions are not correct.
Notable events this year: Ethereum's Dencun upgrade; elections, crypto ETF, Wyoming's DUNA, wBTC controversy, Robinhood's Wells notice, Hyperliquid's nearly $2 billion airdrop, Bitcoin reaching $100,000, and SEC Chair Gary Gensler's resignation announcement in January.
2024 will be a year without significant shocks to the market. Moreover, although it did not bring an explosive growth of new capital, it demonstrated that an increasing number of companies within the crypto ecosystem are sustainable. Bitcoin is valued at $1.9 trillion, while all other cryptocurrencies are valued at $1.6 trillion. Since the beginning of the year, the market cap of all cryptocurrencies has doubled.
The diversification of cryptocurrencies enhances their resilience to shocks. Payments, DeFi, gaming, ZK, infrastructure, consumers, etc., are all growing segments. 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 when adopting Web3 data analytics tools, so we invested in the gaming analytics platform Helika. Due to the fragmentation of the AI stack, 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 similar to Web2.
Intent-based infrastructure is chaotic, and order flow is fragmented, so Everclear standardizes processes by connecting all stakeholders. The integration of zkVM is complex, so Nexus uses modularity to meet clients who only need part of an ultra-scalable layer. Building consumer applications faces challenges in attracting users, so we made the largest investment ever in TON, which directly has 950 million monthly active users from Telegram.
We enter 2025 driven by potential regulatory clarity, sustained mainstream interest, and continuously rising cryptocurrency prices. Even after experiencing a slump this summer, cryptocurrency users enter the new year with strong optimism (or 'greed').
Review of 2024 predictions:
Before we dive into the 2025 predictions, let's review how I predicted 2024. I rate myself on accuracy, with 1 being the least accurate and 5 being the most accurate.
The revival of Bitcoin and 'DeFi Summer 2.0'. Accuracy: 4/5
Tokenized social experiences targeted at new consumer use cases. Accuracy: 2/5
Increase of TradFi-DeFi 'bridges' such as stablecoins and mirrored assets. Accuracy: 5/5
The intersection of modular blockchains and zero-knowledge proofs. Accuracy: 4/5
More computationally intensive applications move on-chain, such as AI and DePIN. Accuracy: 2/5
The 'center-radiation' model integrating public blockchain ecosystems and application chains. Accuracy: 2/5
2025 predictions
This year, I received help 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%, reaching $13.7 billion. About 70% of RWA is private credit, with the remainder largely comprising treasury bonds and commodities. The inflow of funds into these categories is accelerating, and more complex RWA may be introduced by 2025.
First, private credit is accelerating due to infrastructure improvements. This figure nearly sums it all up; by 2024, asset values will increase by nearly $4 billion. As more companies enter this field, utilizing private credit as a means of transferring funds to cryptocurrency becomes increasingly easy.
Secondly, there are treasury bonds and off-chain commodities worth trillions of dollars. The on-chain value of treasury bonds is only $2.67 billion, and their ability to generate yields (as opposed to stablecoins, which allow issuers to earn interest) makes them a more attractive alternative than stablecoins. Blackrock's BUIDL T-Bill fund has only $500 million on-chain, while it has billions of dollars in off-chain government securities. Since DeFi infrastructure has fully embraced stablecoins and treasury bonds RWA (integrating them into DeFi pools, lending markets, and Perps), the friction in adopting them has significantly decreased. The same goes for commodities.
Finally, the current scope of RWA is limited to these basic products. The infrastructure for establishing and maintaining RWA protocols has been greatly simplified, and operators have a better understanding of the risks and appropriate mitigations associated with on-chain operations. Dedicated companies manage wallets, minting mechanisms, witch sensing, crypto neobanks, etc., meaning 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, I was very strong in my predictions for Bitcoin finance, but it didn't 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 increasing demand for more BTC assets (runes, ordinal, BRC20), 1% of Bitcoin will participate in Bitcoin-Fi.
Fintech becomes a gateway to cryptocurrency
TON, Venmo, Paypal, WhatsApp have witnessed the growth of cryptocurrency due to their neutrality. They are gateways for users to interact with cryptocurrencies without pushing specific applications or protocols; in fact, they can serve as simplified entry points for cryptocurrencies. They attract different users; TON has an existing 950 million Telegram users, Venmo and Paypal have 500 million payment users each, and WhatsApp has 2.95 billion monthly active users.
Felix runs on WhatsApp, allowing instant transfers via messages, enabling digital transfers and cash withdrawals at partner locations (such as 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 leader in L2 trading volume
Uniswap's TVL is close to $6.5 billion, with 500,000 to 800,000 transactions daily and daily trading volumes of $1 to $4 billion. Arbitrum's daily trading volume is about $1.4 billion (of which Uniswap accounts for one-third), and Base's daily trading volume is about $1.5 billion (of which Uniswap accounts for one-quarter).
If Unichain only captures half of Uniswap's trading volume, it will easily surpass the largest L2 and become the leading L2 in trading volume.
NFT revival, but in specific applications
NFTs are a tool within cryptocurrency, not a means to an end. NFTs are used as utilities in on-chain gaming, AI (ownership of trading models), identity, and consumer applications.
Blackbird is a restaurant rewards application that integrates NFTs into its customer identification within its platform connecting Web3 to dining. By combining open, liquid, recognizable blockchains with restaurants, they can provide consumer behavior data to restaurants and easily create/subscription, memberships, and discounts for customers.
Sofamon created web3 bitmoji (i.e., NFT), called wearables, unlocking the financial layer of the emoji market. They recognize the increasing 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 a broader goal of tokenizing global intellectual property, making originality the focus of creative exploration and creators. IWC (Swiss luxury watch brand) has membership NFTs that grant access to exclusive communities and events.
NFTs can be integrated into ID transactions, transfers, ownership, memberships, but can also be used to represent and assess assets, leading to monetary growth and potentially speculative growth. This flexibility brings the power of NFTs. Use cases will only increase.
Restart
By 2025, re-staking protocols such as Eigenlayer, Symbiotic, and Karak will eventually launch their mainnets, which will pay operators AVS and cut fees.
As more networks utilize it, re-staking will attract power. If a protocol uses infrastructure supported by a specific re-staking protocol, it will derive value from that connection, even if it is not direct. It is through this power that the protocol may lose relevance but still retain considerable valuation. We believe re-staking remains a multi-billion-dollar market as more applications become application chains, leveraging re-staking protocols or other protocols built on re-staking protocols.
New ideas:
zkTLS brings off-chain data on-chain
zkTLS uses zero-knowledge proofs to validate the authenticity of data from the Web2 world. This new technology has not been fully implemented yet, but (hopefully) when fully implemented this year, it will bring new types of data.
For example, zkTLS can be used to prove that data comes from a certain website to other sites. Currently, there is no way to do this. The technology leverages advances in TEE and MPC and can be further improved to allow for certain data to remain confidential.
This is a new idea, but we predict that companies will intensify their efforts to start building this idea and integrating it into on-chain services, such as verifiable or cryptographically protected data oracles for non-financial data.
Regulatory support
The regulatory environment in the U.S. appears to finally take a positive stance towards cryptocurrency. 278 House candidates supporting cryptocurrency were elected, while 122 candidates opposing cryptocurrency were elected. Anti-cryptocurrency SEC Chair Gary Gensler announced he would resign in January. Reports indicate that Trump will nominate Paul Atkins to lead the U.S. Securities and Exchange Commission. He served as an SEC commissioner from 2002 to 2008, openly supporting the crypto industry and advising the Digital Chamber, which is 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 cryptocurrency czar.' Trump's statement said, '[David Sacks] will develop a legal framework to provide the clarity that the cryptocurrency industry has long sought.'
We hope that the SEC's lawsuit will conclude with a clear definition of cryptocurrency as a specific asset class and considerations in terms of taxation.
