Author: Invesco|Blockchain in Vernacular
Invesco is a leading global independent investment management company founded in 1935 and headquartered in the United States. Invesco manages assets of more than US$1.8 trillion (as of 2024) and has operations in more than 20 countries around the world. In recent years, it has actively deployed blockchain and crypto asset investments and is committed to exploring investment opportunities in Bitcoin and other crypto assets.
Written by Ashley Oerth, assistant global market strategist at Invesco, this article discusses the strong performance of crypto assets in 2024 and believes that the crypto industry will continue to hit new highs in 2025, driven by an improved regulatory environment and more friendly policymakers.
The following is the text:
We believe that the crypto industry will continue to set new highs in 2025, mainly benefiting from the gradual clarification of regulatory policies and more friendly policymakers.
Positive developments following the U.S. presidential election, a shift in investor attitudes toward the crypto industry, and a supportive market backdrop could drive crypto asset performance. President Trump has expressed his desire to establish a strategic Bitcoin reserve and has appointed policymakers who support the crypto industry.
Crypto assets have had a strong year in 2024. With the US Republicans winning the House, Senate, and Presidential elections, Bitcoin has surpassed the $100,000 mark, and the total market value of all crypto assets has reached $3.5 trillion as of January 31, 2025. US large-cap stocks are up 4.8% since the election, Bitcoin is up 47.6%, and Ethereum is up 37.4%. We expect this momentum to continue in 2025 as a series of positive news and legislative developments look likely.
In our view, crypto assets are largely influenced by the macroeconomic environment and market sentiment, which can lead to large fluctuations in their prices. Currently, the market environment and sentiment are shifting in a more favorable direction for crypto assets, including some positive developments after the US election, investors' more friendly attitude towards the crypto industry, and the overall supportive background of the market due to central bank interest rate cuts and the global economy returning to a normal growth environment.
We have listed below five prominent factors that indicate why crypto assets are likely to continue to perform well in 2025.
01. Crypto-friendly US policymakers take office
President Trump has indicated that he will continue to roll out a series of crypto-friendly policies, including the desire to establish a strategic Bitcoin reserve and appoint crypto-friendly policymakers to key regulatory agencies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). However, support for crypto assets does not come from just the president. According to data from a group supporting the crypto industry, a total of 294 crypto-friendly candidates from both parties were elected to the House of Representatives and Senate of the U.S. Congress in the 2024 election.
This could mean that Trump's policies will diverge sharply from those of the Biden administration, which has historically been hostile to crypto assets. For example, the Securities and Exchange Commission under SEC Chairman Gary Gensler has filed lawsuits against crypto companies on multiple occasions without clearly stating the specific framework it followed, and has been criticized for taking an "enforcement-in-lieu-of-policy" approach. Biden himself is also opposed to the crypto industry, and he still opposes the 21st Century Financial Innovation and Technology Act (FIT21) despite bipartisan support for the bill.
One of the key points of contention is SAB 121, a 2022 SEC announcement that requires publicly traded institutions to strictly follow regulations when custodying crypto assets for clients. SAB 121 requires these institutions to include crypto assets on their balance sheets, which not only triggers capital regulatory requirements, but also prevents most banks from participating in the digital asset ecosystem. Because SAB 121 requires publicly traded institutions to include crypto assets on their balance sheets, most banks lack sufficient capital or relevant risk management measures to support this additional burden and are therefore unable to participate in the crypto asset ecosystem.
Due to the lack of effective custody solutions from banks, many crypto investors have been forced to turn to some expensive and often unreliable alternatives. Now that SAB 121 has been repealed, it has opened a new path for more large institutions to provide crypto asset custody services.
As the US policy changes in the field of crypto assets, we expect more investors to begin to accept crypto assets, which may drive the crypto market into a bull market. Since the November election, investor interest in US Bitcoin CEX trading products (ETP: Exchange-Traded Product) has continued to rise.
Total asset size growth and capital inflow trends of US Bitcoin ETP since its listing on January 11, 2024
02. Investing in crypto assets has become easier
In 2024, spot Bitcoin products (ETFs) were launched in the United States and Hong Kong, which attracted $34.6 billion in net inflows by the end of 2024, according to Bloomberg data. It is expected that by 2025, more countries may allow a wider range of investors to participate in spot ETF trading. In addition, more crypto assets are likely to become easier to invest in through ETFs. According to the latest regulatory filings of the U.S. Securities and Exchange Commission (SEC) as of the end of January, several ETFs have plans to start investing in other crypto assets. As more investment products are launched and attract more investors, we expect that the price of crypto assets may rise as a result.
03. The perception of Bitcoin is changing
As Bitcoin's market value continues to grow, investors' attitudes toward this leading crypto asset are also changing. In January 2024, the United States launched a widely accessible spot Bitcoin exchange-traded product (ETF), marking an important milestone. The world's largest capital market provides investors with a convenient way to easily invest in Bitcoin (and possibly Ethereum in the future). For example, as of January 11, 2024, U.S. investors have invested $40.6 billion in spot Bitcoin ETFs, and by the end of 2024, the total assets of this product reached $101.8 billion. In comparison, gold ETFs have $124.2 billion in assets under management.
One year after the launch of the Bitcoin ETF, its asset size is close to that of the US gold ETF.
04. The market environment looks more favorable
The interest rate cuts in major economies such as the United States, the eurozone, and the United Kingdom suggest that 2025 may become the "risk-on year" for global markets. In fact, our expectations for 2025 are more optimistic about the more cyclical areas of the market, such as stocks and credit. Crypto assets may see support when investors are more willing to take risks, as they are generally more affected by the macroeconomic environment.
05. Tokenization is gradually advancing
Tokenization is the recording of certain assets or information on the blockchain in the form of tokens, which brings many benefits to asset management and exchange. We believe that the current financial system can achieve a variety of potential advantages through tokenization, such as reducing counterparty risk, speeding up payment and settlement, and enhancing the personalization of customer investment experience.
Over the past five years, pilot projects for central bank digital currencies and asset tokenization have gradually made progress, including tokenized money market funds, tokenized bonds, and tokenized market products. The UK government plans to issue tokenized government bonds for the first time in the next two years. In the eurozone, the European Central Bank is preparing to launch a digital euro, which is expected to promote the further development of tokenization applications. As this technology becomes more popular, we expect crypto assets to benefit from it as well.
06. Summary: 2025 is a year worth paying attention to
Crypto assets are volatile investments that can fluctuate significantly based on news events. Overall, we believe that the crypto market will continue to hit new highs in 2025, mainly due to increased regulatory clarity and more friendly policies, which have brought positive news to digital assets (for example, the volatility of crypto market prices after Trump's election, the news that Trump nominated the chairman of the U.S. Securities and Exchange Commission (SEC), and the U.S. approval of spot Bitcoin and Ethereum ETFs). We also expect that interest rate cuts in many major economies may stimulate demand for risky assets.
Note: The above views represent only the author's personal views as of February 14, 2025 and cannot be regarded as investment advice. They are for reference only. Forward-looking statements do not guarantee future results, and the risks, uncertainties and assumptions involved may cause actual results to differ from expectations.
