Crypto Rises in 2024, But Regulatory Path Is Key to Adoption in the Next Year By Investing.com
Investing.com — Cryptocurrencies are poised to continue their momentum after nearly doubling their total market capitalization in 2024, but wider adoption in 2025 will depend on how effectively the crypto-friendly Trump administration can establish a clearer regulatory path for cryptocurrencies moving forward.
“This year [2024] was strong for crypto, posting a 90%+ increase in total market cap,” Citi Research noted in its 2025 outlook. “Markets are bullish on the regulatory front given the crypto-friendly stance and staff of the incoming US administration.”
Dramatic gains in 2024 were fueled by the launch of spot and ETFs, which together attracted $36.4 billion and $2.4 billion of net inflows through December 19, respectively. Those flows have been the most significant driver of crypto returns, Citi said, expecting this trend to continue in 2025.
But the outlook is far from clear. While the incoming administration under President-elect Donald Trump is widely seen as pro-crypto, the potential for meaningful regulatory reform is still uncertain.
“The ‘Trump boost’ from a regulatory lens isn’t necessarily a story of deregulation…some market participants believe the new administration could try to replace more regulators it sees as having a crypto-skeptic track record and promote those whose views align better with those of his administration “, Citi said.
Trump has signaled a willingness to move away from the “crusade” of the current administration, which he has criticized for stifling innovation. His proposed policies include a shift from enforcement-oriented regulation to a more legislative-based approach, with the aim of reducing uncertainty for investors and issuers.
In a sign that the winds of change are moving, Trump has nominated crypto-friendly Paul Atkins to replace SEC chief Gary Gensler, who is set to step down on January 20.
The regulatory environment is having an impact on crypto adoption, Citi said, pointing to several other metrics including trade/flows, on-chain metrics and total value locked in decentralized finance as key measures to monitor.
The regulatory framework will be an important determinant of adoption,” Citi said, noting the prospect of increased regulatory transparency putting other cryptocurrencies in the spotlight for investors.
“One consequence of the potential change in the regulatory regime is that crypto can mean much more than just Bitcoin,” Citi added.
Citi, however, warns that macroeconomic factors could derail this upbeat narrative as policy uncertainty threatens to trigger volatility in risk assets.
“ Macro (BCBA:) may become less favorable during the rest of the year [2025] given heightened US policy uncertainty and anticipated equity volatility,” it said.
