Major Transformations Likely in Cryptocurrency Realm by 2025
In 2024, new crypto exchange-traded funds (ETFs) focusing on spot cryptocurrencies officially came into existence. This year also saw Bitcoin (-2.66%) becoming a significant topic in political campaigns for the first time. Moreover, the fervor for meme coins reemerged in the crypto market. These events have translated into impressive gains for most major cryptocurrencies. For instance, Bitcoin has surpassed a 100% growth rate for the year and is quickly approaching the $100,000 price mark.
So, what may unfold in 2025? While a straightforward claim would be "more of the same," there could be significant shifts just around the corner.
Evolution of the Crypto Regulatory Landscape
Since the crypto market crash of 2022 and the collapse of the prominent crypto exchange FTX, there have been ongoing discussions about the US enacting a more comprehensive regulatory framework for digital currencies. The crypto landscape has been characterized as a 'Wild West' that necessitates regulation. Regrettably, not much has been achieved in that regard over the last two years.
However, 2025 may witness the establishment of a new regulatory frame for crypto. This progress might include reducing the SEC's role as the primary regulatory entity in the crypto realm. Newly-elected President Donald Trump has announced that he would replace Gary Gensler, the head of the SEC, on his first day in office. This move is seen favorably by crypto investors who have grown tired of the SEC's perceived firm-handed approach to regulating digital assets.
If the crypto regulation legislation is approved in Congress, it would likely lead to the CFTC becoming the primary regulatory body for digital currencies, displacing the SEC. This legislation would also contribute to a clearer understanding of permitted and prohibited activities in the crypto investment sector. It may even culminate in the repeal of SAB 121, a disliked accounting rule by the SEC that governs the balance sheet management of cryptocurrencies for financial institutions.
Sovereign Governments Diving into Crypto
During the presidential campaign, there were conversations about crypto emerging as a brand new strategic priority for various nations. Some crypto advocates have even proposed a 'Bitcoin arms race,' where sovereign governments worldwide compete in buying and hoarding Bitcoins.
In the US, this Bitcoin hoarding might initiate with the creation of a strategic Bitcoin reserve designated to buy 1 million Bitcoins over the next five years. The Strategic Bitcoin Reserve would serve a role similar to the Strategic Petroleum Reserve, but with Bitcoin instead of petroleum. If the US successfully acquires 1 million Bitcoins (which corresponds to approximately 5% of the current circulating supply), it would become a 'Bitcoin powerhouse,' as promised by Donald Trump during his campaign.
This Bitcoin accumulation spree could prompt other nations to follow suit. Interestingly, China, which has enforced a crypto ban since late 2021, could be compelled to dismantle its restrictions if it feels the pressure to participate in this Bitcoin amassing race. This scenario could result in a substantial Bitcoin boom.
Additionally, the world's largest sovereign wealth funds could jump into the Bitcoin purchasing bandwagon, further fueling the crypto rally. There have been rumors about affluent nations like the UAE, Saudi Arabia, Kuwait, and Qatar secretly adding Bitcoin to their sovereign wealth funds. Even BlackRock, the world's largest asset manager, has hinted at sovereign wealth funds potentially investing in the new Bitcoin spot ETFs, including its own.
Emergence of a Brand New Crypto Phenomenon
If there is a crypto market bull run pending in 2025, it seems plausible that a new crypto star could come to light. This happened during the 2020 and 2021 crypto bull run, which saw the emergence of decentralized finance (DeFi) and non-fungible tokens (NFTs), leading to the rise of hot new crypto tokens. The previous bull run also saw the ascent of Layer 1 blockchain networks such as Solana.
Therefore, we should anticipate fresh crypto tokens to garner attention in 2025. New opportunities in Bitcoin mining emerge due to President Donald Trump's campaign pledge to mine all subsequent Bitcoins domestically.
Curb Your Enthusiasm
Approaching 2025, it is easy to notice the high spirits within the crypto market right now. It seems that anything is achievable due to Elon Musk's contribution and the formation of the Department of Government Efficiency (D.O.G.E.), leading to increased talks about Dogecoin as a catalyst for government efficiency. While fun, it's also a bit alarming.
With that said, it is important to maintain a level-headed perspective. Despite the progress in the regulatory front, there is still a lot of work to be done. The proposal to establish a strategic Bitcoin reserve is still at its conceptual stage and might not materialize. However, one thing is indisputable: The opportunities for cryptocurrencies like Bitcoin to skyrocket in value next year will be abundant, provided the necessary pro-crypto policies are enacted.
In the context of potential regulatory changes, here are two sentences that contain the words 'finance', 'money', and 'investing':
If the crypto regulation legislation is approved in Congress, it could lead to significant shifts in crypto finance, potentially making it easier for institutions to invest in digital currencies. If newly-elected President Donald Trump replaces Gary Gensler and the SEC's role in crypto regulation is reduced, there might be improved investment opportunities in the crypto market.
