Investing.com — Cryptocurrencies are poised to continue their momentum after nearly doubling total market capitalization in 2024, but their broader adoption in 2025 will depend on how effective the crypto-friendly Trump administration is -currencies, will be able to establish a clearer regulatory path for cryptocurrencies to thrive.
“This year (2024) was a strong year for crypto, seeing an increase of over 90% in total market capitalization,” noted Citi Research in its 2025 outlook. “Markets are optimistic on the regulatory front given the crypto-friendly views and personnel of the new US administration.”
The dramatic 2024 gains were fueled by the launch of spot and ETFs, which collectively attracted $36.4 billion and $2.4 billion in net inflows through Dec. 19, respectively. These flows have been the most important driver of cryptocurrency returns, Citi said, expecting this trend to continue into 2025.
But the prospects remain far from simple. Although the new administration of President-elect Donald Trump is widely seen as pro-crypto, the potential for meaningful regulatory reform remains uncertain.
“The ‘Trump nudge’ from a regulatory perspective is not necessarily a story of deregulation… Some market participants believe the new administration may seek to replace more regulators it sees as having a track record crypto-skeptics, and to promote those whose views better align with those of his administration,” Citi said.
Trump had signaled a desire to move away from the current administration’s “anti-crypto crusade,” which he criticized for stifling innovation. Its proposed policies include a shift from enforcement-oriented regulation to a more legislative approach, aimed at reducing uncertainty for both investors and issuers.
In a sign that the winds of change are moving, Trump nominated crypto-friendly Paul Atkins to replace SEC chief Gary Gensler, who is expected to leave office on January 20.
The regulatory environment exerts influence on crypto adoption, Citi said, highlighting several other metrics, including exchanges/flows, on-chain metrics, and total value locked in decentralized finance, as key metrics to watch.
The regulatory framework will be an important determinant for adoption,” Citi said, highlighting the prospect of increased regulatory transparency bringing other cryptocurrencies into the investor spotlight.
“One consequence of the potential change in the regulatory regime is that crypto could mean much more than just Bitcoin,” Citi added.
Citi cautions, however, that macroeconomic factors could disrupt this optimistic narrative, as political uncertainty threatens to trigger volatility in risk assets.
“ Macro (BCBA:) could become less favorable over the remainder of the year (2025) given increased uncertainty in US politics and expected volatility in stocks,” he said.
