According to a recent report by Citi, the continued adoption of stablecoins and cryptocurrency exchange-traded funds (ETFs) is expected to propel digital asset performance in 2025. The report highlights several key metrics that indicate a growing interest in cryptocurrencies, particularly among institutional investors.
Adoption: The Key to Long-Term Performance
As Citi notes, adoption is the most important concept to track for long-term performance of crypto assets. The report cites increased ETF activity and stablecoin market capitalization as indicators of growing adoption.
Stablecoin Market Capitalizations
Stablecoin market capitalizations have surged significantly since President-elect Donald Trump’s election win in November 2024. The top three stablecoins – Tether’s USDt, USD Coin (USDC), and Dai (DAI) – collectively grew by more than $25 billion, according to Citi.
Onchain Activity
Onchain activity has also accelerated, particularly for stablecoins. This could be a key performance driver next year, as stablecoins serve as the on-ramp to decentralized finance (DeFi).
Ethereum Network Growth
Activity on the Ethereum network, including layer-2 scaling chains, is up 210% compared to 2023 averages, according to Citi.
Crypto Wallets
The number of large and small crypto wallets has increased slightly since the November US election, further indicating growing adoption.
ETF Inflows: A Key Performance Driver
Crypto ETF inflows are among the most important metrics to watch because they are more likely than other trading activity to be new funds/market participants entering the crypto space. They also have a strong effect on price performance, especially for Bitcoin (BTC).
2024 Performance
In 2024, BTC ETF inflows accounted for ‘~46% of the variance in BTC price action, with the beta showing that $1 billion of inflows has led to ~4.7% returns,’ according to Citi.
Institutional Inflows
Surging institutional inflows could cause positive ‘demand shocks’ for Bitcoin, potentially sending BTC’s price soaring in 2025, as asset manager Sygnum Bank noted in December.
Positive Demand Shocks
Asset manager Sygnum Bank has predicted that surging institutional inflows could cause positive ‘demand shocks’ for Bitcoin, potentially leading to a price increase in 2025.
Breakthrough for US Bitcoin ETFs
On November 21, US Bitcoin ETFs broke $100 billion in net assets for the first time, according to data from Bloomberg Intelligence.
Why Adoption Matters
As Citi notes, adoption is crucial for long-term performance of crypto assets. The report highlights several key metrics that indicate growing interest in cryptocurrencies, particularly among institutional investors.
Key Takeaways
- Continued adoption of stablecoins and cryptocurrency ETFs is expected to propel digital asset performance in 2025.
- Crypto ETF inflows are a key performance driver, with a strong effect on price performance, especially for Bitcoin.
- Stablecoin market capitalizations have surged since President-elect Donald Trump’s election win in November 2024.
- Onchain activity has accelerated, particularly for stablecoins, which could be a key performance driver next year.
By tracking these key metrics and understanding the importance of adoption, investors can gain valuable insights into the long-term potential of digital assets. As the cryptocurrency market continues to evolve, staying informed about trends and developments is crucial for making informed investment decisions.