Crypto surged in 2024, however regulatory path key for adoption in coming 12 months

starcrypto — Cryptocurrencies are poised to proceed their momentum after almost doubling whole market cap in 2024, however wider adoption in 2025 will rely on how successfully the crypto-friendly Trump administration can set up a clearer regulatory path for cryptocurrencies to thrive.

“This 12 months [2024] was a robust one for crypto, registering a 90%+ enhance in whole market cap,” Citi Analysis famous in its 2025 outlook. “Markets are optimistic on the regulatory entrance given the incoming U.S. administration’s crypto-friendly views and personnel.”

The dramatic positive factors in 2024 have been fueled by the launch of spot and ETFs, which collectively drew $36.4 billion and $2.4B in web inflows via Dec. 19, respectively.  These flows have been probably the most important driver of crypto returns, Citi stated, anticipating this pattern to proceed in 2025.

However the outlook stays removed from simple. Whereas the incoming administration underneath President-elect Donald Trump is broadly seen as pro-crypto, the potential for significant regulatory reform remains to be unsure. 

“The ‘Trump increase’ from the regulatory lens isn’t essentially a de-regulation story … some market individuals reckon the incoming administration might search to interchange extra regulators who it deems as having crypto-skeptical monitor data, and promote these whose views higher align with that of his administration,” Citi stated.

Trump had signaled a willingness to step away from the present administration’s “anti-crypto campaign,” which he criticized for stifling innovation. His proposed insurance policies embrace a shift from enforcement-focused regulation to a extra legislative-based strategy, aiming to cut back uncertainty for each buyers and issuers​.

In an indication that the winds of change are in movement, Trump has nominated crypto-friendly Paul Atkins to interchange SEC head Gary Gensler, who is about to step down from his position on Jan. 20.

The regulatory surroundings holds sway for crypto adoption, Citi stated, pointing to a number of different metrics together with buying and selling/flows, on-chain metrics and whole worth locked in decentralized finance as key measures to observe.

The regulatory framework will probably be an necessary determinant for adoption,” Citi stated, flagging the prospect of elevated transparency on regulation bringing different cryptocurrencies into the investor highlight.

“One consequence of the potential change within the regulatory regime is that crypto might imply way more than simply Bitcoin,” Citi added.

Citi warns, nevertheless, that macroeconomic elements might disrupt this optimistic narrative as coverage uncertainty threatens to spark a volatility in danger belongings. 

“ Macro (BCBA:) might flip much less favorable over the remainder of the 12 months [2025] given heightened U.S. coverage uncertainty and forecasted fairness volatility,” it stated.