These developments are expected to fuel a positive price performance and expand the crypto ecosystem despite lingering macroeconomic uncertainty.

Key Drivers of Crypto Growth

Analysts at Citi said 2025 could be a pivotal year for digital assets, citing multiple factors that will power this market. Some of the strong catalysts include the growing adoption of stablecoins to make the DeFi markets stronger and the expansion of crypto ETFs, which create easier access and more institutional exposure in the space.

Source:X

“Adoption is, in our view, the most important concept to track for the long-term performance of crypto,” Citi’s report said. Increasing ETF activity and market capitalizations of stablecoins are two of the signs of a growing crypto ecosystem, according to the firm.

The Role of ETFs and Institutional Inflows

One of the major catalysts driving this crypto rally is exchange-traded funds, which reportedly are seeing massive inflows of Bitcoin ETFs. For this year alone, according to Citi, nearly 46% of BTC price action could be attributed to inflows from the said Bitcoin ETFs in 2024. These inflows have a direct impact on prices, with $1 billion of ETF investments leading to approximately 4.7% returns. As of November 2024, Bitcoin ETFs surpassed $100 billion in net assets, signaling growing institutional interest in the sector.

Bitcoin (BTC) price chart. Source:Bitcoin Liquid Index (BLX) via Brave New Coin

The approval of Bitcoin and Ethereum spot ETFs has significantly altered the investment landscape, providing a more convenient way for traditional investors to gain exposure to cryptocurrencies. Since their launch in early 2024, these ETFs have attracted billions in inflows, further fueling the bullish sentiment around Bitcoin and Ethereum.

Stablecoins’ Expanding Role in DeFi

Stablecoins, particularly Tether (USDT), USD Coin (USDC), and Dai (DAI) are also playing a pivotal role in crypto’s growth. The combined market capitalization of the top stablecoins increased by over $25 billion following the 2024 U.S. presidential election, signaling a shift in the digital asset landscape. Citi views stablecoins as a primary driver for decentralized finance (DeFi), noting that “stablecoins are the on-ramp to decentralized finance.”

As stablecoin usage expands, more participants are likely to enter DeFi applications, which use these assets for lending, borrowing, and other financial services. The rapid rise in Ethereum network activity, including layer-2 scaling solutions, has also bolstered this growth, with on-chain activity up by 210% compared to 2023 levels.

Trump’s Election: A Catalyst for Crypto

The election of Donald Trump as U.S. President-elect is another pivotal factor cited by Citi analysts. His stance on the industry, particularly support for pro-crypto officials, is massively considered one major optimism factor among investors for their support. This will also increase crypto-friendly policies initiated during his administration and involve appointments of key heads within key agencies, such as the head of the Securities and Exchange Commission, Paul Atkins.

Crypto prices, including Bitcoin, reaching an unprecedented valuation of $100,000 for the first time in history, jumped immediately after the victory of Trump in November 2024. A conducive regulatory framework coupled with growing involvement by institutions could lead to a “demand shock” for Bitcoin, pushing up its price even further into the next few years.

Sustained Growth Through Adoption and Regulation

Citi analysts added that, although the outlook for 2025 remains upbeat, sustained growth would depend on broad-based adoption. They note countries such as Turkey, Argentina, and Venezuela, which face economic instability and thus increased demand for digital assets, as the countries to keep an eye on. However, they warned that ongoing regulatory development may also play a very important role in deciding the fate of the market.

Citi believes the regulatory environment under the administration of Trump is set to become clearer. A move from regulation by enforcement to one more legislative-based might mean much-needed stability to lure even more institutional capital and retail investors into the sector.

A Promising 2025 for Crypto?

According to Citi, 2025 could be a seminal year for the cryptocurrency market, assuming stablecoin adoption, inflows into ETFs, and a conducive regulatory environment result in consistent growth for the sector. While many challenges remain—such as macroeconomic circumstances and an unclear regulatory regime—the combination of these elements positions the crypto market to extend further. Indeed, the stage is already set for a new era of growth within the blockchain ecosystem, with increased adoption of digital assets among institutions and individual investors.