Continued Adoption of Stablecoins and ETFs to Drive Digital Asset Performance in 2025
A recent research report from Citi, released on December 26, 2024, predicts that the continued adoption of stablecoins and cryptocurrency exchange-traded funds (ETFs) will propel digital asset performance in 2025. The report highlights the significant spike in crypto ETF inflows, onchain activity, and stablecoin usage following President-elect Donald Trump’s victory in the United States presidential election in November.
Adoption as a Key Performance Driver
According to Citi, adoption is the most crucial concept to track for the long-term performance of cryptocurrencies. The report emphasizes that the broader volumes and ETF activity are improving, with stablecoin market caps rising swiftly, especially post-election. This increase in adoption metrics indicates a growing interest in digital assets among investors.
Crypto ETF Inflows: A Key Metric
Crypto ETF inflows are considered one of the most important metrics to watch because they tend to attract new funds and market participants entering the crypto space. The report notes that these inflows have a significant impact on price performance, particularly for Bitcoin (BTC). In 2024, BTC ETF inflows accounted for approximately 46% of the variance in BTC price action. Furthermore, the beta showed that $1 billion of inflows has led to around 4.7% returns.
Breakthrough for US Bitcoin ETFs
On November 21, 2024, US Bitcoin ETFs broke the $100 billion mark in net assets for the first time, according to data from Bloomberg Intelligence. This milestone demonstrates the growing institutional interest in digital assets and could lead to a surge in demand, causing positive "demand shocks" for Bitcoin.
Positive Demand Shocks for Bitcoin
Sygnum Bank’s asset manager stated that surging institutional inflows could cause positive "demand shocks" for Bitcoin, potentially sending BTC’s price soaring in 2025. This prediction is based on the idea that increased adoption and institutional investment will drive demand for digital assets.
Onchain Activity: A Key Performance Driver
Onchain activity has also accelerated, particularly for stablecoins. Stablecoin market capitalizations have increased sharply after Trump’s election win, with the combined market capitalizations of the top three stablecoins (Tether’s USDt, USDC, and Dai) growing by more than $25 billion. This is a bullish sign for decentralized finance (DeFi), as stablecoins serve as an on-ramp to DeFi platforms.
Other Measures of Onchain Growth
Citi reported that other measures of onchain growth are also outperforming. Activity on the Ethereum network, including layer-2 scaling chains, has increased by 210% compared to 2023 averages. Additionally, the number of large and small crypto wallets has increased slightly since the November US election.
Impact on Decentralized Finance (DeFi)
The report emphasizes that stablecoins are essential for DeFi platforms as they provide a reliable and efficient way to enter and exit decentralized finance. The growing adoption of stablecoins could lead to increased participation in DeFi, driving its growth and development.
Conclusion
In conclusion, the continued adoption of stablecoins and cryptocurrency exchange-traded funds (ETFs) will propel digital asset performance in 2025. As investors become increasingly interested in cryptocurrencies, we can expect to see a surge in demand, leading to positive "demand shocks" for Bitcoin. Furthermore, onchain activity and stablecoin usage will continue to drive growth, particularly in decentralized finance (DeFi). As the crypto market continues to mature, it’s essential to track key adoption metrics and understand their impact on price performance.
Key Takeaways
- Continued adoption of stablecoins and ETFs will propel digital asset performance in 2025.
- Crypto ETF inflows are a key metric to watch, as they attract new funds and market participants entering the crypto space.
- Onchain activity has accelerated, particularly for stablecoins, with market capitalizations increasing sharply after Trump’s election win.
- Positive "demand shocks" could cause Bitcoin’s price to soar in 2025 due to surging institutional inflows.
- Decentralized finance (DeFi) is expected to grow and develop as a result of the increased adoption of stablecoins.
Related Articles
- 2025 ‘Demand Shocks’ Will Spike Bitcoin’s Price — Sygnum
- Crypto ETF Inflows
