Citi analysts are predicting that 2025 will be a transformative year for the cryptocurrency industry, driven by factors such as the growth of ETFs, stablecoin adoption, and a more supportive regulatory environment. The cryptocurrency market saw a significant surge in 2024, with the launch of several Bitcoin spot ETFs, making it easier for investors to trade Bitcoin. This, along with favorable economic policies such as central bank rate cuts, fueled optimism in the industry.
One of the key moments in 2024 was Donald Trump’s victory on Election Day, which was seen as a positive development for digital assets. Trump’s supportive stance on cryptocurrencies led to a surge in the market, with Bitcoin reaching $100,000 for the first time. Altcoins also saw significant gains, pushing the total cryptocurrency market cap to $3.4 trillion. However, there were some challenges following the Federal Reserve’s hawkish comments.
Despite the favorable economic environment at the beginning of 2025, Citi analysts warn that uncertainty over Trump’s actions regarding the economy and stock market volatility could impact the market later in the year. They believe that high-risk trades will continue to perform well in the near term, but caution that the macroeconomic outlook may become less favorable as the year progresses.
The launch of spot ETFs for Bitcoin and Ethereum has been a game-changer for the cryptocurrency market, attracting billions of dollars in inflows since their introduction. These funds have made it easier for investors to gain exposure to cryptocurrencies without actually owning the coins. The analysts expect the growth of ETFs to continue driving returns in the crypto market in 2025.
In addition to ETFs, analysts are also focusing on the role of cryptocurrencies in diversified investment portfolios. While adding Bitcoin to multi-asset portfolios has proven to add value, the high volatility of crypto assets means that they need to yield significantly higher returns to justify the risk. The analysts emphasize the importance of crypto adoption for sustained growth in the industry.
One trend that is gaining momentum is the rise of stablecoins, which are cryptocurrencies pegged to the value of stable assets like the U.S. dollar. The market for stablecoins has seen increased activity following Trump’s victory, with new issuances and partnership plans in the works. Citi analysts see diversification in the stablecoin market as a positive development, reducing systemic risks and potentially driving more adoption in decentralized finance (DeFi).
Looking ahead to regulatory changes in 2025, analysts expect Trump’s administration to bring clarity to the regulatory landscape rather than full deregulation. While there are hopes for lighter regulations with pro-crypto appointees in key positions, analysts believe that the focus will be on a more legislative-based approach to regulation. This shift is seen as a positive step for the industry, removing regulatory headwinds and fostering continued growth in the cryptocurrency market.
