Summary:
Blockbuster year for crypto largely due to Trump's election win.
Citi analysts identify 6 key factors influencing crypto in 2025.
Continued inflows to crypto spot ETFs expected to drive growth.
Crypto's role in multi-asset portfolios critical for future returns.
Stablecoin issuance could lead to a healthier crypto market.
Broader adoption required to sustain post-election returns.
Less regulation anticipated under Trump's administration.
Crypto just had a blockbuster year fueled largely by Trump's election win. Citi analysts are closely watching several factors that could influence the industry in 2025. Here are 6 pivotal factors to keep an eye on:
A Supportive Macro Backdrop
The analysts expect the current macro backdrop to continue supporting risky trades into Q1 2025, but warn that the outlook beyond that is uncertain, depending on Trump's economic policies and stock volatility.
Continued Inflows to Spot ETFs
Strong inflows into crypto spot ETFs are anticipated to continue into 2025, providing additional growth momentum. Bitcoin spot ETFs have seen inflows of $36.4 billion since trading began in January, while Ethereum spot ETFs have garnered $2.4 billion since July.
Crypto in Multi-Asset Portfolios
Portfolio allocation will be key for future returns. Bitcoin's inclusion in multi-asset portfolios during this year's rally could add value, but it remains a volatile asset. Analysts suggest that crypto returns need to be priced higher than equities to justify significant allocations.
Stablecoin Issuance
Stablecoins are expected to see continued issuance, especially after Trump's election, creating a healthier market. This could challenge Tether's dominance, particularly with new partnerships emerging in the space.
More Widespread Adoption
The most crucial theme to track is adoption. While ETF activity and stablecoin market caps have improved, analysts believe that broader adoption is necessary for sustained returns.
Less Regulation
Finally, the analysts predict that regulation will play a significant role as Trump takes office, with expectations for lighter regulations that could facilitate broader adoption. This shift is seen as a move from enforcement to a more legislative approach.
Overall, these factors could significantly shape the crypto landscape as we head into 2025, making it an exciting time for investors and enthusiasts alike.
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