Investing.com – Cryptocurrencies are poised to continue their momentum after their total market capitalization nearly doubled in 2024, but their wider adoption in 2025 will depend on how effective the crypto-friendly Trump administration is in creating a clearer regulatory path for the crypto boom.
“This year (2024) has been a strong year for cryptocurrencies, recording a 90%+ increase in total market cap,” Citi Research noted in its 2025 forecast. “Markets are bullish on the regulatory front given the views of the incoming US administration and its crypto-friendly staff.”
The big gains in 2024 were driven by the launch of spot funds and ETFs, which collectively attracted $36.4 billion and $2.4 billion in net inflows through December 19, respectively. Citi said that these flows were the most important driver of cryptocurrency returns, expecting this trend to continue in 2025.
But the outlook is still far from clear. While the incoming administration under President-elect Donald Trump is widely viewed as pro-cryptocurrencies, the possibility of meaningful regulatory reform remains uncertain.
“‘Supporting Trump’ from a regulatory lens is not necessarily a story of deregulation… Some market participants believe the incoming administration may seek to replace more regulators they view as having skeptical track records on cryptocurrencies, and strengthen those with their own views,” Citi said. : “It's better to get along with his administration.”
Trump has expressed his willingness to move away from the current administration's “anti-crypto crusade,” which he has criticized for stifling innovation. Its proposed policies include a shift from enforcement-focused regulation to a legislation-based approach, with the aim of reducing uncertainty for both investors and issuers.
In a sign that the winds of change are moving, Trump nominated cryptocurrency-friendly Paul Atkins to replace SEC Chairman Gary Gensler, who is set to step down on January 20.
The regulatory environment has an impact on cryptocurrency adoption, Citi said, citing several other metrics including trading/flows, on-chain metrics and total value locked in DeFi as key measures to monitor.
Citi said the regulatory framework will be an important determinant of adoption, suggesting the potential for increased transparency in regulation drawing other cryptocurrencies into the investor spotlight.
“One consequence of the potential change in the regulatory regime is that cryptocurrencies could mean much more than just Bitcoin,” Citi added.
However, Citi warns that macroeconomic factors could disrupt this optimistic narrative, as policy uncertainty threatens to spark volatility in risk assets.
“ Macro (BCBA:) may become less favorable over the rest of the year (2025) given increasing US policy uncertainty and expected equity volatility.”
