Sign in Subscribe
Featured

Market Outlook 2025

Digital assets are positioned for growth in 2025, driven by macro trends, tech innovation, and regulatory clarity. Investment advisor demand should accelerate ETF adoption, while blockchain scaling advances fuel DeFi, stablecoins, and asset tokenization in traditional markets.

Gabriel Selby, Mark Pilipczuk

• 6 min read
Market Outlook 2025

To access the full report, click here

Inflection Points: Macro Pressures, Regulatory Clarity, and Mass Adoption

Digital assets are positioned for steady growth in 2025, supported by macroeconomic trends, technological advancements, and evolving regulatory frameworks. Bitcoin and Ether ETFs continue to gain traction, marking a significant step toward broader institutional adoption. Meanwhile, Federal Reserve rate cuts and moderating inflation provide a constructive environment for risk assets, with Ethereum’s Layer 2 solutions reinforcing its role in decentralized finance and stablecoins. Asset tokenization, expected to surpass $30 billion, and AI-driven blockchain utilities highlight ongoing innovation. As regulatory clarity improves post-election, digital assets are gradually becoming more integrated into mainstream financial markets, signaling a measured shift forward.

Market Summary

The recent quarter saw digital assets reach record highs, fueled by shifting monetary policy and political dynamics. September began cautiously, with labor market softness and slowing growth weighing on sentiment. Optimism surged mid-month after the Federal Reserve cut rates by 50 basis points, signaling confidence in inflation nearing its 2% target. Projections of rates falling below 3% bolstered risk assets, with Bitcoin and Ether outperforming expectations during a seasonally challenging period.

In November, Trump’s election victory spurred expectations of pro-crypto policies, driving fund inflows to $5.4 billion and pushing Bitcoin to new all-time highs. The launch of options on Bitcoin ETFs added momentum, triggering a catch-up rally in altcoins. December began strong, with Bitcoin surpassing $108,000, but optimism waned after a 25-basis-point Fed rate cut came with hawkish guidance. Concerns about inflation’s resilience prompted a market pullback, with Bitcoin falling 15% and altcoins erasing post-election gains. The Fed’s cautious tone highlighted ongoing tension between policy and market expectations.

Source: CF Benchmarks, Bloomberg, as of December 18, 2024

Macro Backdrop:

Growth: Global economy is expected to show moderate growth into 2025, with significant regional variations. The U.S. outlook is cautiously optimistic, driven by Trump's expected return and potential policy changes. Growth will likely maintain modest pace through mid-2025, supported by consumer spending and business investment. "Animal spirits" are evident in renewed business confidence, though monetary policy remains a constraint. The U.S. may outperform 2.1% slowdown forecasts, with consumer resilience and business confidence challenging consensus expectations.

Source: CF Benchmarks, (Top) Conference Board, NFIB, Bloomberg. (Bottom) Bloomberg Consensus Forecasts, as of December 19, 2024

Inflation: Global inflation is cooling but unevenly across regions. U.S. inflation expected to persist above Fed's 2% target at 2.3%, with sticky services and shelter costs. Europe shows more promise, targeting 2% by mid-2025 with ECB planning 100bps in rate cuts. Japan sees structural shift with rising wages and persistent inflation. Emerging markets present contrasts: China battles deflation amid property crisis, Turkey and Argentina struggle with high rates, while India maintains balance between growth and inflation control.

Source: CF Benchmarks, (Top) Bloomberg, San Francisco Fed. (Bottom) Bloomberg, as of December 17, 2024

Monetary Policy: Global central banks navigate a delicate balance heading into 2025, with the Fed charting a measured path of 50bps in cuts while keeping hawkish tools at the ready. Bond vigilantes loom as a critical risk factor, as mounting interest burdens approach historical peaks and CBO projections signal unsustainable trajectories. While bond markets remain stable for now, the Fed stands prepared with unconventional measures should yields spiral. Looking ahead, rising debt monetization risks may boost inflation expectations, benefiting hard assets like Bitcoin as hedges.

Source: CF Benchmarks, Bloomberg, as of December 18, 2024

Policy Outlook: Trump's 2025 policy agenda spans ambitious tax cuts, targeted tariffs, and regulatory reforms, though fiscal hawks may resist deficit expansion. Key initiatives include the DOGE department under Musk, a Strategic Bitcoin Reserve, and comprehensive immigration reforms targeting deportations. While Fed leadership changes remain uncertain through 2026, the regulatory landscape shows promise for crypto markets. A formal framework similar to FIT21 could establish clearer SEC-CFTC oversight, though implementation timing may create market volatility amid broader policy transitions.

Source: CF Benchmarks, Bloomberg, as of December 18, 2024

Secular Themes

Scaling: Blockchain networks have evolved significantly from 2020's capacity constraints, with Layer 1 and 2 solutions dramatically expanding throughput capabilities. Looking ahead to 2025, on-chain capacity is projected to nearly double to 1600 TPS, with blockspace utilization expected at just 2.4%. This headroom enables enhanced NFT ecosystems, governance experiments, and high-frequency trading applications. Smart contract platforms with strong network effects stand to benefit most, while rising DeFi TVL signals increased on-chain activity across trading and lending segments.

Source: CF Benchmarks, Dune Analytics, as of December 13, 2024

Stablecoins: Stablecoin market poised for significant expansion in 2025, projected to reach $300 billion, marking a 50% increase. While USDT currently dominates with 70% market share, new entrants like rUSD and USDG are positioned to challenge its leadership, potentially growing alternative issuers from 5% to 20% market share. Regulatory clarity post-U.S. election and Layer 2 efficiencies support institutional adoption, with on-chain payment volumes forecast to reach $16-20 trillion. This growth trajectory, coupled with increased competition, signals positive momentum for Ethereum's ecosystem.

Source: CF Benchmarks, Dune Analytics, Defillama as of December 13, 2024

Tokenization: Real world asset tokenization is accelerating, projected to reach $30B in 2025, with on-chain money market funds leading growth at 33% of total RWAs. BlackRock's BUIDL fund and USDtb stablecoin are key catalysts, pushing money market segment to $10B. While regulatory framework for tokenized securities is expected in 2025, substantial growth may delay until 2026. Financial institutions are positioning through crypto-native partnerships and acquisitions. This trend benefits Ethereum as the institutional network of choice, while competitors like Solana gain from regulatory clarity.

Source: CF Benchmarks, Dune Analytics, as of December 13, 2024

Institutional Adoption: Crypto ETFs have shattered debut records with Bitcoin ETFs accumulating $35B since January. Current ownership shows hedge funds leading with 45.3% of Bitcoin and 23.2% of Ethereum ETFs, while investment advisors hold 28% and 33% respectively. Looking ahead to 2025, advisor allocations are projected to exceed 50% for both assets as the $88T wealth management industry embraces digital assets, surpassing 2024's $40B record flows. This shift signals a maturing market, with ETFs becoming core portfolio components amid improving institutional infrastructure.

Source: CF Benchmarks, Statista.com Bloomberg, analysis only includes reportable ownership through 13F regulatory filings, as of December 17, 2024

Crypto x AI: AI agents are set to transform blockchain ecosystems in 2025, projected to drive over 10% of all on-chain activity through autonomous transactions and asset management. DePIN networks emerged as significant players in 2024, challenging traditional cloud providers with up to 90% cost reduction in GPU compute. Following 20% growth in global cloud revenues to $600B, DePIN rental spending has grown tenfold. Looking ahead, on-chain cloud spending could exceed $50M in 2025, positioning decentralized networks to disrupt traditional infrastructure providers.

Source: CF Benchmarks, Dune Analytics as of December 13, 2024

Asset Class Overview & Forecasts:

Global markets point to divergent opportunities in 2025, with Chinese and emerging market equities leading projected gains. Central banks signal broad policy easing, led by BoE and ECB cuts, while the BoJ bucks the trend with approximately 50 bps of hikes. Dollar weakness emerges as a key theme, particularly against the Yen and CAD. Commodities show mixed prospects with gold reaching $2,675/oz while oil dips below $68. Growth outlook varies regionally, from Australia's relative expansion to U.S. growth moderation.

Source: CF Benchmarks, Consensus Forecasts, Bloomberg, as of December 19, 2024

To read the our full market outlook report, please click here.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell any of the underlying instruments cited including but not limited to cryptoassets, financial instruments or any instruments that reference any index provided by CF Benchmarks Ltd. This communication is not intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. Please contact your financial adviser or professional before making an investment decision.

CF Benchmarks Ltd (“CF Benchmarks”), a company registered in England and Wales with company number 11654816 and authorised and regulated by the Financial Conduct Authority. Information about us can be found on the Financial Services Register (register number 847100).

Registered Office: 6th Floor One London Wall, London, United Kingdom, EC2Y 5EB.

You agree not to, and have no rights to, use the CF Benchmarks Data to create, calculate, issue, settle, maintain, support or develop any financial instruments (including but, without limitation exchange traded products, certificates, warrants, contracts for difference, swaps, binary options, structured products), indices, products, services (including but without limitation, portfolio management services, pre- and post-trade risk management services, or valuation services) or any other derivative works without the express written consent of CF Benchmarrks.

You agree not to analyze, reverse-engineer or disassemble any CF Benchmarks data and not to insert any code or product to manipulate the Website content in any way that affects any user’s experience. Unless CF Benchmarks gives you prior written permission, use of any Web browsers (other than generally available third-party browsers), engines, scripts, software, spiders, robots, avatars, agents, tools or other devices or mechanisms (such as crawlers, browser plug-ins and add-ons, or other technology) to navigate, access, copy in bulk, retrieve, harvest, index, search or analyse any portion of the Website is strictly prohibited.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of CF Benchmarks Ltd. Use and distribution of the CF Benchmarks data requires a license from CF Benchmarks or its authorized licensing agents.

All information is provided for information purposes only. All information and data contained on this website is obtained by CF Benchmarks, from sources believed by it to be accurate and reliable. Such information and data is provided "as is" without warranty of any kind.

CF Benchmarks, nor its directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or implied, either as to the accuracy, timeliness, completeness or merchantability of any information or of results to be obtained from the use of the CF Benchmarks indices or the fitness or suitability of the same indices for any particular purpose to which they might be put. Any representation of historical data accessible through CF Benchmarks indices is provided for information purposes only and is not a reliable indicator of future performance.

No responsibility or liability can be accepted by CF Benchmarks nor their respective directors, officers, employees, partners or licensors for any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this website or links to this website.

CF Benchmarks and its respective directors, officers, employees, partners or licensors do not provide investment advice and nothing accessible through CF Benchmarks, should be taken as constituting financial or investment advice or a financial promotion. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of any assets.

CF Benchmarks is a member of the Crypto Facilities group of companies which is in turn a member of the Payward, Inc. group of companies. Payward, Inc. is the owner and operator of the Kraken Exchange, a venue that facilitates the trading of cryptocurrencies. The Kraken Exchange is a source of input data for certain CF Benchmarks indices. Payward, Inc. is the owner and operator of the Staked, a venue that operates the block production nodes for decentralized PoS protocols on behalf of institutional investors. Staked.us is a source of input data for certain CF Benchmarks indices.

Please refer to the individual product family documentation for more information about applicable input data sources.