With the support of ETFs, the market situation looks promising
Citigroup's latest analysis report points out that 2025 will be a critical turning point for cryptocurrencies, with the growth of ETF products, accelerated adoption of stablecoins, and a more favorable regulatory atmosphere likely to become the core driving forces behind the continued rise of the crypto market. The analyst team emphasizes that although the overall market capitalization of cryptocurrencies has experienced turbulence this year, it has still grown by over 90%, indicating strong investor interest in the industry.
It is worth mentioning that Bitcoin first broke the 100,000 mark by the end of 2024, benefiting from the prior approvals of several spot ETFs, which significantly lowered the investment threshold. This move allowed more investment institutions and retail investors to allocate Bitcoin through traditional stock accounts and ETFs, leading to active market trading; at the same time, the Federal Reserve's shift towards a rate-cutting policy later this year also boosted overall capital market confidence in risk assets.
Political environment and market turbulence intertwined
The report also pointed out that Donald Trump's victory in the presidential election has far-reaching implications for the cryptocurrency industry. The Trump administration actively appointed several pro-crypto officials and nominated Paul Atkins as chairman of the Securities and Exchange Commission (SEC), which the market views as a more constructive approach to crypto regulation. Encouraged by this positive news, Bitcoin once surged to over 100,000, boosting the prices of other tokens as well. However, the Federal Reserve's concerns about inflation and asset bubbles have made market sentiment turbulent in the second half of the year. Citigroup analysts remind us that although the overall outlook for risk assets is positive, challenges may arise later due to ongoing policy and market volatility variables.
To maintain investment enthusiasm, the market is closely watching the upcoming economic direction of the Trump administration and the anticipated regulatory 'relaxation' by many. However, Citigroup emphasizes that the so-called 'deregulation' may be overstated, and what is more likely in the future is a clear framework jointly established by Congress and regulatory agencies, replacing the past strategy of 'law enforcement first.'
The dual drivers of ETFs and stablecoins
The rise of spot Bitcoin and Ethereum ETFs is seen by Citigroup as a 'Game Changer' for this bull market. The report data shows that since July, Bitcoin ETFs have attracted $36.4 billion in inflows, while Ethereum ETFs have seen $2.4 billion injected. Analysts state that if ETF expansion continues through 2025, it is expected to continually drive new capital into the market, consolidating the overall market capitalization of cryptocurrencies.
On the other hand, the status of stablecoins in the market is also gradually rising. After Trump took office, he showed much support for the issue of stablecoins, promoting companies like Circle to expand their issuance plans and build more collaborations. Citigroup believes that the diversification of stablecoins helps to mitigate systemic risks and could also become a driving force for decentralized finance (DeFi). If there is more collaboration between traditional finance and blockchain, it could open up more application scenarios.
User adoption and institutional reform are key
The report concludes by emphasizing that whether the crypto market can continue to rise depends on the growth of the number of real users and the implementation of regulatory frameworks. Recently, there have been instances in high-inflation countries like Turkey and Argentina where people have turned to crypto assets as a hedge, but achieving widespread adoption still requires a balance of 'security and convenience.'
Citigroup analysts also remind us that while high-risk assets have recently seen lively trading, in the long term, if they are to be included in a diversified investment portfolio, investors should consider the highly volatile nature of cryptocurrencies. For institutional allocations, if the proportion of Bitcoin is to be increased to 5%, then Bitcoin must have a higher return rate and overcome its volatility to match that risk.
From a long-term perspective, Citigroup analysts believe that 2025 could be an important stage for cryptocurrencies to solidify their status and further move towards the mainstream. Whether it is the surge in ETF inflows, the deepening penetration of stablecoins, or the opening up of regulatory frameworks, all inject new opportunities into the market. However, the report reiterates that the establishment of any bull market still requires foundational usage and application support; otherwise, the risk of 'profit going to zero' due to slight reversals in the environment cannot be underestimated.
'Will cryptocurrencies continue to explode in 2025? Citigroup analysts say two major fields will steer the future!' This article was first published in 'Crypto City'
