2025Crypto Assets will continue to erupt? Citi Analyst: 2 major areas will steer the future!

ETF endorsement, market outlook optimistic

A recent analysis report released by Citibank pointed out that 2025 will be a key turning point for cryptocurrencies, with the growth of ETF products, accelerated adoption of stablecoins, and a more friendly regulatory environment likely to become the core driving force for the continued rise of the crypto market. The analyst team emphasized in the report that although the overall market capitalization of cryptocurrencies has experienced fluctuations this year, it has still grown by over 90%, indicating strong interest from funds in this industry.

It is worth mentioning that Bitcoin broke through the 100,000 mark for the first time at the end of 2024, thanks to the previous regulatory approval of multiple spot ETFs, which significantly reduced the investment threshold. This allows more institutional investors and retail investors to allocate Bitcoin through traditional stock accounts and ETFs, promoting active market trading. At the same time, the Federal Reserve (Fed) shifted to an interest rate cut policy later this year, which also boosted confidence in risk assets in the overall capital market.

The intertwining of political environment and market turbulence

The report also pointed out that Donald Trump's victory in the election had a profound impact on the cryptocurrency industry. The Trump administration actively appointed several officials who support cryptocurrencies, and nominated Paul Atkins as the chairman of the Securities and Exchange Commission (SEC), which was seen by the market as being more constructive in cryptocurrency regulation. Encouraged by this positive news, Bitcoin once rose to over 100,000, leading to a rise in the prices of other tokens. However, the Federal Reserve's concerns about inflation and asset bubbles have caused market sentiment to become more volatile in the second half of the year. Citigroup analysts reminded that although the overall risk assets are bullish at the moment, challenges may arise again in the later stage due to remaining variables in policy and market volatility.

To maintain investment enthusiasm, the market is highly concerned about the future economic direction of the Trump administration and the anticipated 'deregulation' by the majority. However, Citigroup emphasizes that the so-called 'deregulation' may be overstated, and it is more likely that a clear framework will be jointly developed by Congress legislation and regulatory agencies in the future, replacing the previous 'law enforcement priority' strategy.

ETF and the dual-wheel drive of stablecoin

The rise of spot Bitcoin and Ethereum ETFs is seen by Citigroup as a 'Game Changer' in this bull market. Data from the report shows that since July, Bitcoin ETFs have attracted a inflow of $36.4 billion, while Ethereum ETFs have also received an injection of $2.4 billion. Analysts say that if ETFs maintain their expansion trend by 2025, it is expected to continue to attract new capital, consolidating the overall market value of the cryptocurrency market.

On the other hand, the position of stablecoins in the market is gradually rising. After Trump took office, he supported the stablecoin issue, and promoted Circle and other operators to expand their issuance plans and establish more cooperation. Citigroup believes that the diversification of stablecoins helps to diversify systemic risks and may also become a driver of decentralized finance (DeFi). If more traditional finance and blockchain cooperate, it may open up more application scenarios.

User adoption and institutional reform are key

The report emphasizes that whether the cryptocurrency market can continue to rise depends on the growth of the actual number of users and the implementation of regulatory measures. Although there have been cases of people turning to cryptocurrency assets for hedging in high inflation countries such as Turkey and Argentina, achieving widespread use still requires a balance of "security and convenience".

Citi analysts also reminded that although high-risk assets have been trading actively recently, in the long run, investors should consider the highly volatile nature of cryptocurrencies when including them in a diversified investment portfolio. For institutional allocation, if the proportion of Bitcoin is to be increased to 5%, then Bitcoin needs to have a higher rate of return and overcome the characteristics of greater volatility to match this risk.

In the long run, Citi analysts believe that 2025 may be an important stage for cryptocurrencies to consolidate their position and move further into the mainstream. Whether it is a surge in ETF inflows, a deepening penetration of stablecoins, or the opening up of regulatory regimes, new opportunities have been injected into the market. However, the report also re-emphasizes that the establishment of any bull market still needs the support of basic usage and application landing, otherwise the environment will be slightly reversed, and the risk of "profit zeroing" of market fluctuations is still not to be underestimated.

'Will cryptocurrencies continue to explode in 2025? Citi analyst: 2 major areas will steer the future!' This article was first published in 'Crypto City'.