Will 2025 be the year of the cryptocurrency boom? Coinbase has outlined five key trends that will shape the future of the industry.
On December 18, Coinbase, one of the largest cryptocurrency exchanges in the world, released its report titled "Crypto Market Outlook: 5 Things to Watch in 2025."
This report not only forecasts trends but also provides an in-depth analysis of the factors that will impact the cryptocurrency market in 2025, including stablecoins, tokenization, ETFs, DeFi, and the regulatory landscape.
Crypto Market Capitalization. Source: Coinbase
Stablecoins will expand beyond traditional trading scopes.
Coinbase asserts that stablecoins are becoming a "killer app" for the cryptocurrency market. Evidence of this is the 48% growth in stablecoin market capitalization in 2024, reaching a record high of $193 billion as of December 1. Analysts predict that this number could reach $3 trillion within the next five years.
A noteworthy point is that the role of stablecoins is gradually expanding beyond mere trading.
With a trading volume of $27 trillion so far this year (three times higher than the same period in 2023), stablecoins have proven to be highly effective in facilitating fast and cost-efficient transactions on a global scale.
Coinbase predicts that in the near future, the primary applications of stablecoins will be in capital flows and international trade, rather than just serving as a trading tool.
Stablecoin market capitalization. Source: Coinbase.
Asset tokenization will be the foundation of the current market cycle.
In 2024, the tokenization of real-world assets (RWA) saw significant growth, with the value of RWA increasing by over 60%, reaching $13.5 billion (excluding stablecoins) as of December 1st.
This trend is not limited to traditional assets like U.S. Treasury bonds and money market funds, but is expanding into areas such as private credit, commodities, corporate bonds, real estate, and insurance.
Coinbase believes that despite ongoing challenges, continuous investment and technological advancements will make tokenization one of the key foundations of the current market cycle.
In the longer term, tokenization could revolutionize the entire portfolio building and investment process by bringing everything onto the blockchain.
Market capitalization of tokenized assets. Source: Coinbase.
Cryptocurrency ETFs may evolve to increase attractiveness
The launch of the Bitcoin spot ETF in the U.S. has marked a major milestone for the cryptocurrency market. Most institutional investors, from pension funds, hedge funds, and investment advisers to family offices, have now adopted cryptocurrency ETFs.
Coinbase believes that this group of institutional investors will serve as a stable, long-term demand source for the market.
However, the report also emphasizes that the growth potential of cryptocurrency ETFs will depend on future changes, such as:
Approval of spot ETFs for altcoins: XRP, SOL, LTC, HBAR, etc.
Allowing creation and redemption of ETFs with assets: Instead of only using cash, as it stands now.
Enabling staking within ETFs: This could increase returns for investors.
These changes could narrow the buy/sell spread, improve the alignment between ETF share prices and net asset value (NAV), thereby attracting more investors.
DeFi will enter an era of innovation
After the turbulence of the previous cycle, DeFi is returning with a more sustainable and flexible ecosystem.
Lending protocols have reached record highs in total value locked (TVL), while decentralized exchanges (DEXs) are gaining market share over centralized exchanges (CEXs).
New DeFi applications, such as decentralized physical infrastructure networks (DePIN) and prediction markets, are also gaining attention.
Coinbase believes that changes in the regulatory landscape in the U.S. and the adoption of on-chain verification will pave the way for traditional institutional investors to enter DeFi, fueling the sector's growth.
Regulatory frameworks will become a driving force for the market
After years of facing unclear and inconsistent regulations, the cryptocurrency market in the U.S. is about to enter a new phase. With bipartisan support in Congress, the U.S. is expected to soon enact a comprehensive legal framework for cryptocurrencies, including stablecoin laws and putting an end to the "regulation by enforcement" era.
The upcoming support for cryptocurrency seats in the U.S. Senate and House of Representatives. Source: Coinbase
Not only the U.S., but many G20 countries and major financial hubs are also working on legislation to regulate digital assets. These moves will create a favorable environment for innovation and growth in the global cryptocurrency market.
Coinbase believes that 2025 will be a pivotal year, with breakthroughs and advancements that could shape the long-term future of the cryptocurrency industry. The development of stablecoins, tokenization, ETFs, DeFi, and the regulatory landscape will play a crucial role in pushing the cryptocurrency market closer to its true potential.
#USUALAnalysis #MarketPullback #FranklinCryptoETF #GrayscaleSUITrust #Coinbase
