Factors That Could Shape Crypto’s Trajectory in 2025

The cryptocurrency market experienced a groundbreaking year, with significant developments propelling its growth. In January, the launch of numerous spot Bitcoin ETFs marked the beginning of a rally, simplifying access for Bitcoin trading. By September, central bank rate cuts and other measures further supported the rally, creating favorable conditions for economic expansion.

However, one of the most impactful events for the sector was Donald Trump’s victory. During his campaign, Trump voiced strong support for cryptocurrencies and has since appointed several crypto advocates to key roles in his administration, such as Paul Atkins as the new chair of the SEC.

These policy shifts contributed to Bitcoin surpassing the $100,000 milestone for the first time, with alternative cryptocurrencies also gaining momentum. The excitement drove the overall crypto market cap to $3.4 trillion—nearly double compared to 2023.

Looking ahead to 2025, Citi analysts point out six critical factors influencing cryptocurrency prices. First, they predict the macroeconomic environment will continue to support risk-on trades in the first quarter, although uncertainty remains for the latter half of the year. Much will depend on Trump’s policies and fluctuations in stock market volatility.

The debut year of spot crypto ETFs saw substantial inflows, and this trend is expected to persist into 2025, further driving growth. Spot Bitcoin ETFs attracted $36.4 billion since their launch in January, while spot Ether ETFs drew $2.4 billion after their introduction in July. The SEC’s approval of these ETFs, following years of regulatory hurdles, has streamlined crypto trading by allowing investors to track price movements without directly purchasing the assets.

Moreover, portfolio strategies will play a key role in future returns, according to the analysts. Bitcoin’s inclusion in diversified portfolios provided added value during last year’s rally, though its volatility makes it a high-risk asset. The analysts recommend allocations of 1% or less for conservative portfolios and stress that higher allocations require proportionately higher returns to justify the additional risk.

Stablecoins are also expected to shape the market’s trajectory. Following Trump’s election, enthusiasm in the crypto sector bolstered stablecoin issuance. These assets, typically pegged to fiat currencies such as the USD, offer reduced volatility compared to other cryptocurrencies. A growing number of stablecoins could challenge Tether’s dominance, with Circle’s collaboration with Binance leading the charge. The analysts view this diversification as a step toward mitigating systemic risks and fostering broader adoption of decentralized finance (DeFi).

Adoption remains the central theme for sustaining growth beyond the initial post-election surge. The analysts state that they are closely monitoring metrics like Bitcoin trading volumes, stablecoin market caps, and increased usage in nations with struggling economies, such as Venezuela, Turkey, and Argentina.

Finally, regulation is poised to be a defining issue in the coming year as Trump’s administration takes office. With several pro-crypto officials in key positions, the industry anticipates a shift from enforcement-based regulation to a legislative approach, potentially removing significant obstacles to growth. The analysts suggest this transition is less about deregulation and more about reducing headwinds, setting the stage for broader adoption and innovation in the crypto space.

Industry actors like Bit Digital Inc. (NASDAQ: BTBT) will be watching these trends closely to see how they can realign their strategies to benefit from the evolving crypto landscape in the U.S. and other major markets.

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