Citi analysts are optimistic about the cryptocurrency space achieving significant growth in 2025, believing that this growth will be driven by favorable policies from the Trump administration, increased inflows from exchange-traded funds (ETFs), and advances in stablecoin technology , Bitcoin has the potential to reach new highs (ATH).
“It’s been a strong year for cryptocurrencies, with total market capitalization growing by more than 90%,” Citi analysts led by Alex Saunders said in a note on Friday.
The pro-cryptocurrency approach of Trump-appointed U.S. Securities and Exchange Commission (SEC) officials is creating a more favorable environment for digital assets. Bitcoin has hit all-time highs this year, buoyed by U.S. spot ETF approvals and Trump’s election victory, although some assets have outperformed Bitcoin.
Market analysts predict that Bitcoin and Ethereum will experience significant developments by 2025, driven by anticipated approval of U.S. cryptocurrency ETFs and the potential establishment of a Bitcoin strategic reserve.
The U.S. Securities and Exchange Commission (SEC) has given the green light for Bitcoin spot ETFs, further enhancing investor interest and capital inflow into Bitcoin. According to CoinDesk's Bitcoin price index, this approval has demonstrated considerable impact, with Bitcoin's price more than doubling since last year. Analysts state, "These capital flows have consistently been the most important driver of cryptocurrency returns, and we expect this trend to continue into 2025."
Expectations that Trump could implement cryptocurrency-friendly policies after re-election have also injected optimism into the cryptocurrency market. However, it has also been pointed out that the Federal Reserve's interest rate policies could affect investor sentiment and potentially shift investors' focus away from risk assets like Bitcoin.
Analysts indicate that in this year's surge, Bitcoin will add value to diversified asset portfolios. Nevertheless, it remains a volatile risk asset, with over 3% allocation accounting for 10% or more of the total portfolio risk. Therefore, Citigroup analysts say that the pricing of cryptocurrency returns needs to be several percentage points higher than the expected returns of stocks to justify a 1% portfolio allocation, "If the portfolio allocation is 5%, then the performance must be double digits."
In addition, analysts believe that the continued issuance of stablecoins will help create a healthier cryptocurrency market. After Trump's election, enthusiasm for the industry was rekindled, and the issuance of stablecoins was also boosted. The purpose of stablecoins is to maintain a stable price over time, which means that as long as the issuers of stablecoins have sufficient collateral to back them up, their volatility is smaller than that of cryptocurrencies like Bitcoin.
Analysts indicate that innovations, partnerships, and new entrants in the stablecoin space may pose risks to Tether's dominance, but "these developments could help stablecoins continue to lead the evolution of decentralized finance." They largely believe that the diversification of the stablecoin market is positive, as it will reduce the likelihood of systemic risks posed by specific issuers.
Finally, with Trump's inauguration, regulation is set to be a major theme next year. The incoming U.S. president has appointed several pro-cryptocurrency candidates to the cabinet. While the industry generally expects regulation to be more relaxed, the actual policies remain unclear. Analysts indicate that the outcome may shift from enforcement-based regulation to a more legislation-based approach, "rather than deregulation, it could be seen as removing adverse factors."
Overall market outlook
The cryptocurrency sector is expected to experience substantial growth driven by various factors, including the approval of U.S. cryptocurrency ETFs, Bitcoin strategic reserves, and stablecoin innovations. These developments are anticipated to make cryptocurrencies more mainstream and boost investor confidence. Citigroup analysts believe that the cryptocurrency market will witness significant growth in 2025, with both Bitcoin and Ethereum likely to reach new historical highs. However, investors must remain vigilant to the risks posed by these highly volatile assets.
Key factors driving cryptocurrency growth include:
The approval of U.S. spot ETFs has significantly increased investor interest and capital inflow into Bitcoin, driving its price surge.
Cryptocurrencies have a place in diversified asset portfolios, and portfolio allocation will be key to future returns.
Officials appointed by Trump, including the nomination of Paul Atkins as the new SEC chairman, are expected to lead to regulatory relaxation, which may drive broader adoption of cryptocurrencies.
Innovation in stablecoins is also expected to play a key role in the growth of the cryptocurrency market, providing investors with more stable alternatives.
The current macro environment is characterized by central bank interest rate cuts and other policies supporting economic growth, which are expected to continue supporting risk trading until the first quarter of 2025.
The U.S. government may establish a Bitcoin strategic reserve, further boosting Bitcoin's price and enhancing its mainstream acceptance.
Citigroup analysts state that if the U.S. government can implement a Bitcoin strategic reserve, it may further boost Bitcoin's price. Some forecasts suggest that Bitcoin could reach $180,000 to $200,000 by 2025, and some even predict that if such a reserve is established, the price could reach $500,000.
Regarding Ethereum's forecasts, other analysts in the market also predict a broad trading range for 2025, with a minimum price possibly around $2,666 and a maximum price potentially near $5,501. The expected average price is $3,906.18, indicating growth potential relative to 2024.
The growth of Ethereum is also expected to be driven by the expansion of its ecosystem and Bitcoin reaching new historical highs. These combined factors could push Ethereum's price up to $5,888 if favorable conditions persist. In 2024, Ethereum's resistance level is at $3,966.75, and the support level is at $3,098.08. The expected support price for 2025 is at $3,174.56, with a resistance price at $4,872.09.
"Citigroup Analysts: 2025 Will See Significant Growth, Bitcoin Has Potential to Reach New Highs" was first published on (Blockke).
