Boom or bust? Key factors that will determine the future of cryptocurrency in 2025

Citi analysts like Alex Saunders are calling 2025 a game-changing year for cryptocurrencies, predicting a surge driven by ETF expansion, stablecoin adoption, and regulatory changes toward innovation. After achieving a remarkable 90% growth in market capitalization by 2024, cryptocurrency has gained unstoppable momentum.

Trump’s re-election has sparked optimism as his cryptocurrency-friendly policies and SEC leadership shake-up set the stage for Bitcoin’s historic $100,000 milestone. Altcoins also followed suit, increasing their market value to a whopping $3.4 trillion.

From Bitcoin spot ETFs simplifying investing to central bank interest rate cuts reinvigorating markets, 2025 will be the year when cryptocurrencies truly reshape the global financial order.

Ripe foundation for cryptocurrency investment

Citi analysts believe that high-risk assets such as cryptocurrencies are off to a good start in 2025 due to good economic conditions and a positive outlook. But they warned that that could change later this year as people become more uncertain about President Trump’s possible economic policies and markets remain volatile. Although macroeconomic conditions look good for now, analysts say looming volatility could hurt markets.

Bitcoin and Ethereum are expected to surge in 2025, with Steno Research predicting that Bitcoin will surpass $150,000 and Ethereum will surpass $8,000. These estimates are driven by factors including falling interest rates, strong liquidity, and improved regulatory clarity.

Additionally, Bitcoin’s halving cycle, a periodic event known to trigger price increases, could act as a catalyst for a surge in altcoin investment. The report notes that the combination of institutional adoption and post-halving dynamics provides a “unique opportunity” for major cryptocurrencies to thrive.

Although there is much optimism, analysts emphasize the need for vigilance as the economic environment changes. With unpredictable policy changes and market volatility on the horizon, questions remain as to how long this favorable climate can sustain the upward momentum of cryptocurrencies.

History of Interest in Cryptocurrency ETFs

The launch of Bitcoin and Ethereum spot ETFs completely changed the way investors deal with cryptocurrencies. After years of legal challenges, these ETFs now make investing easier, allowing investors to gain exposure to cryptocurrencies without owning the assets directly.

Led by Blackrock’s IBIT and Fidelity’s FBTC, the innovation has attracted billions of dollars in capital, including $36 billion inflows into Bitcoin ETFs and $2.4 billion into Ethereum ETFs since March.

These investments signal growing confidence in digital assets as mainstream financial tools. Analysts emphasize that these ETFs play a pivotal role in shaping the future of cryptocurrencies and provide a regulated path for institutions to participate.

Experts believe that ETFs will continue to play an important role in individual and institutional investing, which will make cryptocurrencies an increasingly important part of various trading strategies.

Cryptocurrency for diversification

Cryptocurrencies are increasingly included in multi-asset portfolios, highlighting their potential as high-yield investments. Nonetheless, volatility poses problems, especially if allocations exceed a small percentage. Citi analysts emphasize that for a “5% allocation” to be justified, cryptocurrencies must deliver significantly higher returns compared to traditional stocks.

Sygnum’s Future of Finance report found that 63% of large investors are willing to accept high-risk investments, with more than half allocating more than 10% of their portfolio to digital assets.

44% of investors still choose single token investments, while 40% prefer actively managed investments. Martin Burgherr, CCO at Sygnum, also believes that the BTC spot ETF has a key role to play in increasing “institutional adoption” of the cryptocurrency, which is consistent with Finery Markets’ 2024 report.

Experts see this trend as reflecting growing institutional trust in digital assets. However, the high-risk, high-reward nature of cryptocurrency investments means investors must carefully weigh the potential returns against the inherent volatility. As adoption increases, the ability of cryptocurrencies to consistently outperform other assets will be critical to their continued integration into diverse portfolios.

The rise of stablecoins

Stablecoins are also showing growth thanks to the election of President Trump. Optimism surrounding stablecoins has led to an increase in issuances and partnerships, such as the collaboration between Circle and Binance, challenging Tether’s dominance in the space.

Citi experts believe that a more diverse stablecoin market is a good thing because it lowers the systemic risk of overreliance on a single provider. It is likely that many people will start using stablecoins, especially in decentralized finance (DeFi).

Ethereum (ETH) could become the asset of the year, achieving a ratio of 0.06 against Bitcoin (BTC), according to Steno Research. This could mark the start of a new “altcoin season,” with significant price increases expected for assets such as Ethereum and Solana.

Analysts believe that Ethereum’s emergence as a leading altcoin is due to its strong on-chain activity and extensive ecosystem. As stablecoins and other cryptocurrencies become more popular, the digital asset market is becoming more diverse. This gives people more options besides Bitcoin.

Increased institutional adoption

For the cryptocurrency rally to maintain momentum, analysts stress widespread adoption is needed. Trading volume and growth in stablecoins indicate a strong market, but digital assets should be leveraged for everyday trading and investor portfolios.

A recent study by Nickel Digital found that 92% of asset managers predict an increase in cryptocurrency funding, demonstrating growing institutional interest in cryptocurrencies.

Countries struggling with economic instability, including Turkey, Argentina, and Venezuela, have become hotspots for cryptocurrency adoption as citizens seek alternatives to the depreciating local currency. Analysts are closely monitoring these regions for signs of how digital assets could develop into viable solutions to financial problems.

Domestically, the Trump administration is seen as a potential catalyst for greater adoption. With the promise to appoint cryptocurrency-friendly regulators and position the U.S. as a leader in blockchain innovation, markets expect an environment that supports decentralized finance (DeFi) and blockchain applications.

That’s why experts like Zeebu CEO Raj Brahmbhatt believe regulatory clarity and government support could “help” growth and solidify cryptocurrency’s role as a global financial force.

A wave of cryptocurrency regulation

Citi analysts predict that 2025 will bring pivotal changes to cryptocurrency regulation under the Trump administration. The industry is looking to lighter, more structured policies that favor innovation without compromising oversight.

President-elect Donald Trump has pledged to move away from restrictions and take a more supportive stance. His promise is already taking shape with the appointment of Paul Atkins as the next Chairman of the Securities and Exchange Commission and David Sacks as the White House’s designated cryptocurrency policy leader.

Trump transition spokesman Brian Hughes emphasized the administration’s commitment in a statement, noting that efforts to “stifle” innovation within Washington’s bureaucratic environment are coming to an end. Hughes promised that President Trump would defend America’s leadership in the burgeoning cryptocurrency sector and pave the way for the United States to become a global hub for blockchain-based innovation.

These anticipated changes in the regulatory environment could remove barriers that previously held the industry back. Analysts see this shift as essential to ushering in the next wave of innovation in blockchain and decentralized finance. By 2025, the balance between regulation and innovation will define the future trajectory of cryptocurrencies and their integration into global financial markets.

The fate of cryptocurrency in 2025

The cryptocurrency sector is gearing up for its biggest year yet in 2025, with promises of legislative support, technological improvements, and corporate adoption.

Of course, these are just promises and predictions, and some are still a long way from becoming actual realities.

However, we have never seen a better time for cryptocurrencies than now, and it will be up to regulators, major investors, and the general cryptocurrency community to decide the fate of cryptocurrencies in 2025.