Our expectations of digital assets in 2025

Summary

• The crypto market follows cycles in which Bitcoin grows first, followed by altcoins. Currently, Bitcoin dominates, with altcoins that can expect growth later.
• The altcoin market is becoming more competitive, with sectors such as AI, RWA, and DePIN showing promise through value creation and innovation.
• In 2024, the crypto market grew due to spot ETFs, tokenization through BlackRock's BUIDL fund, and increased institutional interest. Adoption is expected to continue to grow in 2025.
• In 2024, crypto received more political attention, especially during the U.S. elections. New regulations such as MiCAR and bills in the U.S. emphasize recognition and investor protection.

Our expectations

With the market in the final quarter of 2024, the digital assets market is seeing renewed momentum, driven by factors like the U.S. presidential election and improving macroeconomic conditions, setting the stage for a potentially strong year-end performance. Looking ahead to 2025, what can we anticipate for returns, adoption, and regulatory developments? This article explores our market projections, focusing on major trends expected to shape financial markets and the political landscape in the coming year.

Good times lie ahead

The digital assets market is known for its cyclical nature. Typically, Bitcoin gains momentum first, sparking an upward trend across the market. Eventually, liquidity flows from Bitcoin into altcoins, leading to a phase of altcoin outperformance often referred to as "altseason." Following this period, the market usually experiences a phase of capitulation, characterized by significant downward movement until a new bottom is established, thus completing the cycle.

The digital assets market is currently in a Bitcoin-dominant phase, evidenced by Bitcoin's performance in 2024, which stands around 55%, significantly outpacing major altcoins like Ethereum, Avalanche, and BNB, which have returned approximately 7%, -40%, and 27%, respectively. Bitcoin Dominance, which measures Bitcoin's market cap against the entire crypto market, is also nearing its 3,5 year-high of 60%. In the short term, we expect both Bitcoin's price and dominance to continue rising, as a new all-time high for Bitcoin is generally needed before altcoins can enter a strong growth phase.

Our expectations for Bitcoin and altcoins in 2025

Based on our market analysis, we expect Bitcoin to surpass the $100,000 level by the end of the current cycle, likely between June 2025 and year-end. Predicting an exact price is speculative, but we use risk-level analysis in our projections; in previous cycles, Bitcoin has peaked around a 0.9 risk level. Given this, we project Bitcoin’s price will top between $100,000 and $162,000, though this range is subject to various market conditions. This would mean that we will experience a price increase of 44% - 138% with the current prices. While we anticipate Bitcoin’s price will continue climbing, we also expect liquidity to shift toward altcoins, allowing them to lead in performance during 2025. This is also seen in the chart above, as Bitcoin’s dominance drops, altcoins gain more momentum as liquidity shifts toward these assets.

Best performing altcoin sectors in 2025

The altcoin market is evolving rapidly, and unlike the previous cycle, only some altcoins are poised to increase in value. This shift makes it more challenging for investors to predict potential gains. Additionally, the market has become more competitive, with capital merely rotating rather than seeing new inflows into altcoins. The only significant fresh capital has been directed toward the Bitcoin ETF. This environment creates substantial difficulty for market participants, which is why we're actively seeking the most relevant narratives in the space.

Among altcoin sectors, we expect that Artificial Intelligence (AI), Real-World Assets (RWA), and Decentralized Physical Networks (DePIN) will perform significantly well. AI has become an increasingly important and popular topic in traditional markets and this hype has also found its way into digital assets. What makes the sector interesting is that we observe serious innovations such as decentralized AI models and high user activity. 

When looking at the RWA sector, we observe a potentially true integration of traditional markets and digital assets. In essence, developers tokenize assets such as bonds, stocks, or real estate and implement this onto the blockchain, allowing it to be traded and stored on the blockchain. This allows the asset to leverage the blockchain’s unique features such as transparency, low transaction costs, and immutability.

DePIN is a relatively new theme within the digital assets industry and its sector is quite broad. DePIN projects are decentralized applications (dApps) that use tokens to incentivize users to crowdsource and build connected real-world physical infrastructure. By bundling individual resources such as excessive computing power, computing storage, and energy, the network isn’t reliant on a centralized party. 

We expect these sectors to perform well as they create or capture value from external markets, enabling them to grow independently of the digital assets industry's internal market forces. Interested in learning more about these sectors? You can explore our previous publications through the links below.

• Investment Thesis: RWA & DePIN
• What is Artificial Intelligence in crypto?

Adoption in financial markets will continue

During 2024, the digital assets market experienced various monumental developments regarding adoption. Firstly, we saw Bitcoin and Ethereum enter traditional markets through the launch of spot ETFs, allowing institutional investors to add these assets to their portfolios in an accessible manner. 

The second major development is the widespread use of tokenization. Although tokenization is becoming increasingly popular, 2024 marks a milestone. This was mostly spearheaded by BlackRock who launched its first tokenized treasury fund called BUIDL on Ethereum, shining a massive light on the trend. The BUIDL fund was welcomed with open arms as it amassed over $500 million in two months.

In 2025, we anticipate accelerated trends in ETF integration and asset tokenization. With investor sentiment toward digital assets, especially Bitcoin, becoming increasingly positive, the influx of capital into digital asset ETFs is likely to grow. Additionally, Asset managers like VanEck and 21Shares have already applied for Solana and Ripple ETFs, with initial deadlines set for mid-March 2025, signaling further mainstream adoption.

Furthermore, tokenization is gaining traction among organizations for its cost-efficiency, transparency, and tradeability. Projects are already tokenizing private credit, commodities, and stocks, so we expect more institutions to introduce tokenized products as the technology continues to demonstrate its value across diverse asset classes.

Digital assets are becoming legitimized 

In 2024, besides financial markets, we also observed that digital assets became an increasingly important topic in politics, especially in the US presidential election. Ex-president Donald Trump mentioned the industry on various occasions and made promises to make the US the digital assets capital of the world. Furthermore, he spoke at the leading Bitcoin conference and Nashville and stated that the US wouldn’t sell its reserves of Bitcoin if was elected president. This also forced vice-president Kamala Harris to voice her opinion on the industry although less vocal than Trump, Harris did state that it’s a promising sector and that she supports the innovation of the industry.

Increasing digital asset regulation

With digital assets becoming an increasingly integral part of daily life, we are seeing various regulatory frameworks taking shape, with the most prominent being the European Union's Markets in Crypto-Assets Regulation (MiCAR). This comprehensive framework will take effect in 2025, establishing clear guidelines for market participants and investors alike. Meanwhile, the first digital asset bills are also moving through the U.S. House of Representatives, reflecting the growing recognition by governments that this industry is here to stay.

In 2025, we expect this regulatory trend to continue, and we support these developments, as investor protection is crucial in financial markets. We believe such regulation will provide safety and confidence for a new wave of investors. However, we hope this regulation is developed collaboratively with digital asset firms rather than imposed unilaterally.

Hodl’s takeaways

Although Bitcoin has performed well, altcoin performance has significantly lagged. In the short term (Q4), we expect Bitcoin to continue its upward momentum in terms of price and dominance. Currently, Bitcoin’s dominance is near its all-time high and we expect that this level will be its high before reversing. After this phase, we expect more liquidity to shift to altcoin allowing them to take the lead in 2025. 

In terms of financial adoption, the spot ETFs of Bitcoin and Ether will continue to amass more assets as it’s the most effortlessly traded digital asset instruments available. Although Bitcoin is currently the biggest winner, we do expect that Ether will gain more traction than it did before. Additionally, the market has witnessed the first applications for Solana and XRP ETFs. So we do believe that there will be more options for investors to choose from in 2025. Furthermore, financial market adoption will continue to gain momentum through technologies such as tokenization which has become increasingly popular among institutional investors. Lastly, these institutions are already experimenting with private and public blockchains and we don’t see this stopping anytime soon. 

In 2024, digital assets emerged as a central issue in U.S. politics, with former President Trump pledging to support the industry, including maintaining U.S. Bitcoin reserves if re-elected, while Vice President Harris expressed backing for the sector’s innovation. Regulatory frameworks are evolving, such as the EU's Markets in Crypto-Assets Regulation (MiCAR), which takes effect in 2025, along with new U.S. digital asset bills, signaling increased government involvement and support. The year 2025 will be pivotal for digital asset regulation, as we see these frameworks' impacts on markets and investors, and overall, we hold positive expectations for these developments.

In summary, we anticipate 2025 to be an exciting year for digital assets, with altcoins potentially leading in performance, the introduction of more financial instruments, ongoing adoption in traditional financial markets, and increasingly clear regulations.