We believe cryptocurrencies will continue to notch new highs in 2025, driven by improving regulatory clarity and friendlier policymakers.
Positive post-US election developments, friendlier investor attitudes towards cryptos, and a supportive market backdrop may drive performance.
US President Donald Trump has signalled a desire for a strategic bitcoin reserve and has installed crypto-friendly policymakers.
Digital assets enjoyed strong performance in 2024. Following Republican victories in the US House, Senate, and presidency, bitcoin broke above the $100,000 mark, and the market capitalisation of all cryptocurrencies now sits at $3.3 trillion as of 31 December, 2024.1
While US large-cap equities have risen 3.2% since the election, bitcoin has risen 43.9% and ether has risen 39.7%.2 In 2025, we expect this momentum to continue as a series of positive headlines and legislative progress look likely.
Cryptocurrencies are disproportionately influenced by broader macro conditions and sentiment, in our view. We believe both are shifting to be more supportive for digital assets, including positive post-US election developments, friendlier investor attitudes towards cryptos, and a market backdrop that looks likely to be positive given central bank rate cuts and a more normal global growth environment.
We highlight five stand-out factors below that suggest cryptocurrencies may continue to see positive performance in 2025:
President Donald Trump has signalled a slew of crypto-friendly policies, including his desire for a strategic bitcoin reserve and the installation of crypto-friendly policymakers at the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), the two key US regulators for the crypto space. However, the surge in digital assets support is broader-based than just the president: According to a pro-crypto industry group, 294 pro-crypto candidates from both parties were elected to the House and Senate in the 2024 election.[3]
This will most likely mark a significant departure from the Biden administration’s approach, which has generally been hostile towards digital assets. For example, the SEC under Chair Gary Gensler pursued a number of cases against crypto enterprises without specifying the framework they were following, earning the unpopular description of a “regulation by enforcement” approach to policy. Biden himself has generally pushed back on crypto, opposing the Financial Innovation and Technology for the 21st Century Act (FIT21) bill despite bipartisan support.
A key flashpoint is SAB 121, an SEC bulletin published in 2022 that imposed strict requirements for publicly traded institutions that hold custody of digital assets on behalf of clients. SAB 121 forced such institutions to record these assets on their balance sheets, triggering regulatory capital requirements and effectively shutting out most banks from participating in the digital asset’s ecosystem.
In the absence of bank custody solutions, many crypto investors have instead turned to a myriad of costly (and at times unreliable) solutions. Under new SEC leadership in 2025, industry participants expect that SAB 121 may be revised or revoked altogether, opening the door for more large institutions to provide custody solutions in the digital assets space.
As the US posture towards digital assets evolve, we anticipate that a larger cohort of investors will embrace digital assets and may help propel a bull market in cryptocurrencies.
Sources: Bloomberg, L.P., Invesco. Daily data as of 31 Dec, 2024. On 11 Jan, 2024, 11 spot bitcoin ETF began trading in the US.
2024 brought the launch of spot bitcoin ETFs in the US and Hong Kong, helping to propel $34.6 billion in net flows. 2025 may see additional countries permit spot ETFs to a broader set of investors, and additional cryptocurrencies may become more easily accessed through ETF products. As more products become available to a wider set of investors, we anticipate cryptocurrency prices will benefit.
As bitcoin market cap grows, investor attitudes towards the largest cryptocurrency continue to evolve. The launch of spot bitcoin ETFs in the US in January 2024 marked a key milestone as the world’s largest capital market provided an easy on-ramp for investors to gain exposure to bitcoin (and later, ether). In the US, for example, investors have already allocated $34.5 billion to spot bitcoin ETFs since 11 January, 2024, making up $101.8 billion in assets as of the end of 2024. Compare this to gold ETFs, which have $124.2 billion in AUM.4
Sources: Bloomberg, L.P., Invesco. Daily data as of Dec. 31, 2024. On Jan. 11, 2024, 11 spot bitcoin ETF began trading in the US.
Lower rates in the US, eurozone, UK, and other major economies suggest that 2025 may be a risk-on year in global markets. Indeed, our outlook for 2025 favors more cyclically-oriented parts of the market, including stocks and credit. This backdrop is likely to be supportive of cryptocurrencies, which tend to be influenced substantially by macro conditions.
Tokenisation involves representing something on a blockchain in the form of a token, which enables a variety of benefits for information and asset custody management and exchange. We believe today’s financial system can realise a number of benefits through tokenisation such as reduced counterparty risk, faster payment and settlement, and improved customisability in client investing experiences.
Already, central bank digital currencies and asset tokenisation pilot projects have been building momentum over the past five years, including tokenised money market funds, tokenised bonds, and tokenised private markets offerings. The UK government is planning to issue tokenised gilts for the first time within the next two years. In the eurozone, the European Central Bank is preparing to launch its digital euro, which is expected to facilitate tokenised use cases. As the adoption of this technology increases, we anticipate cryptocurrencies may also benefit.
Overall, we suspect that cryptocurrencies will continue to notch new highs in 2025, driven by improving regulatory clarity and friendlier policymakers. As in the past, bitcoin and other cryptocurrencies could benefit substantially on positive news flow (see, for example, crypto price behavior around Trump’s election win, the announcement of Trump’s SEC chair pick, and the authorisation of spot bitcoin and ether ETFs in the US) helped by an anticipated pick-up in broad market risk appetite.
The European ETF market had a record year, bringing the industry’s total assets under management to US$2.3 trillion at the end of 2024. Find out more in our latest European ETF Demand Monitor.
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In December, bond markets generally performed poorly, driven by rising government bond yields as economic data showed the US economy's resilience, leading to a more hawkish outlook from the Federal Reserve. Read our latest thoughts on how fixed income markets performed during the month and what we think you should be looking out for in the near term.
1 Source: Bloomberg L.P., and Macrobond, as of 31 December 2024.
2 Source: Bloomberg L.P., as of 31 December 2024.
3 Crypto industry dreams of a golden era under Trump, FT January, 2025
4 Sources: Bloomberg L.P. and Invesco, as of 31 December 2024.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Cryptocurrencies are high risk and do not have any intrinsic value and may become worthless.
Data as at 16th January 2025.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Views and opinions are based on current market conditions and are subject to change.
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