Author: Invesco | Bai Hua Blockchain
Invesco is a leading independent global investment management firm, founded in 1935 and headquartered in the United States. Invesco manages over $18 trillion in assets (as of 2024) and operates in more than 20 countries around the world. In recent years, Invesco has actively invested in blockchain and crypto asset investments, committed to exploring investment opportunities in Bitcoin and other crypto assets.
This article was written by Ashley Oerth, Invesco's Global Market Strategist Assistant. In this article, Oerth discusses the strong performance of crypto assets in 2024 and believes that the crypto industry will continue to set new highs in 2025, driven by an improved regulatory environment and more crypto-friendly policymakers.
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We believe the crypto industry will continue to set new highs in 2025, primarily driven by the gradual clarification of regulatory policies and more crypto-friendly policymakers.
The positive developments after the US presidential election, the changing attitudes of investors towards the crypto industry, and the supportive market backdrop may drive the performance of crypto assets. Former President Trump has expressed a desire to establish a strategic Bitcoin reserve and has appointed policymakers who support the crypto industry.
Crypto assets performed strongly in 2024. With the Republican Party winning the House, Senate, and the presidency, Bitcoin broke through the $100,000 mark, and the total market capitalization of all crypto assets reached $3.5 trillion as of January 31, 2025. The US stock market has risen 4.8% since the election, while Bitcoin has risen 47.6% and Ethereum 37.4%. We expect this momentum to continue in 2025, as a series of positive news and legislative progress appear likely.
In our view, crypto assets are largely influenced by the macroeconomic environment and market sentiment, which may lead to significant price volatility. 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 market backdrop due to central bank rate cuts and the global economy's return to normal growth.
We have outlined the following five prominent factors indicating why crypto assets are likely to continue performing well in 2025.
01. Crypto-Friendly US Policymakers Taking Office
Former President Trump has stated that he will continue to implement a series of crypto-friendly policies, including his desire to establish a strategic Bitcoin reserve and appoint policymakers who support the crypto industry in 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 the president alone. According to data from a pro-crypto industry group, 294 candidates from both parties who support the crypto industry were elected to the US House and Senate in the 2024 election.
This may mean that Trump's policies will be vastly different from the Biden administration, which has been hostile towards crypto assets. For example, SEC Chairman Gary Gensler's SEC has repeatedly sued crypto companies but has not clearly stated the specific framework it is following, leading to criticism of an "enforcement-first, policy-later" approach. Biden himself has also opposed the crypto industry, despite the bipartisan support for the 21st Century Financial Innovation and Technology Act (FIT21).
One key point of contention is SAB 121 - an SEC announcement issued in 2022 that requires publicly traded entities to strictly comply with regulations when custodying crypto assets for clients. SAB 121 requires these entities to list crypto assets on their balance sheets, triggering capital regulatory requirements and making it impossible for most banks to participate in the digital asset ecosystem. Since SAB 121 requires publicly traded entities to include crypto assets on their balance sheets, and most banks lack sufficient capital or relevant risk management measures to support this additional burden, they are unable to participate in the crypto asset ecosystem.
Due to the lack of effective custody solutions from banks, many crypto investors have had to turn to some expensive and often unreliable alternatives. Now, SAB 121 has been repealed, paving the way for more large institutions to provide crypto asset custody services.
With the change in US crypto asset policies, we expect more investors to start accepting crypto assets, which could drive the crypto market into a bull market. Since the November election, investor interest in US Bitcoin exchange-traded products (ETPs) has continued to rise.
Growth in total assets and inflows of US Bitcoin ETPs since their launch on January 11, 2024
02. Investing in Crypto Assets Becoming Easier
In 2024, the US and Hong Kong launched spot Bitcoin products (ETFs), which, according to Bloomberg data, have attracted $34.6 billion in net inflows by the end of 2024. By 2025, more countries may allow a wider range of investors to participate in spot ETF trading, and more crypto assets may also become more investable through ETFs. According to the latest regulatory filings from the US SEC as of the end of January, multiple ETF plans have begun investing in other crypto assets. With the launch of more investment products attracting more investors, we expect the prices of crypto assets to potentially rise as a result.
03. Perceptions of Bitcoin Are Changing
As Bitcoin's market capitalization has continued to grow, investor attitudes towards this leading crypto asset have also been transforming. In January 2024, the US launched a widely accessible spot Bitcoin exchange-traded product (ETP), marking an important milestone as the world's largest capital market provided investors with a convenient way to easily invest in Bitcoin (and potentially Ethereum in the future). For example, as of January 11, 2024, US investors have invested $40.6 billion in the spot Bitcoin ETP, and by the end of 2024, the total assets of this product reached $101.8 billion. In comparison, the assets under management of the US Gold ETF are $124.2 billion.
One year after the launch of the Bitcoin ETP, its asset size is approaching the level of the US Gold ETF.
04. The Market Environment Appears More Favorable
The interest rate cuts in the US, Eurozone, and UK suggest that 2025 may be a "risk-on" year for global markets. In fact, we are more optimistic about cyclical sectors in the market for 2025, such as equities and credit. In a situation where investors are more willing to take on risk, crypto assets may receive support, as they are typically more influenced by the macroeconomic environment.
05. Tokenization Is Progressing
Tokenization is the process of representing an asset or information on a blockchain in the form of a Token, which brings many benefits to asset management and exchange. We believe the current financial system can achieve various potential advantages through Tokenization, such as reducing counterparty risk, accelerating payments and settlement, and enhancing the personalized customization of the customer investment experience.
Over the past five years, pilot projects for central bank digital currencies and asset Tokenization have made gradual progress, including Tokenized money market funds, Tokenized bonds, and Tokenized crowdfunding products. The UK government plans to issue its first Tokenized government bonds within the next two years. In the Eurozone, the European Central Bank is preparing to launch the digital euro, which is expected to further drive the development of Tokenization applications. As this technology becomes more widespread, we expect crypto assets may also benefit from it.
06. Summary: 2025 is a year worth watching
Crypto assets are a highly volatile investment that may fluctuate significantly due to changes in news events. Overall, we believe the crypto market will continue to reach new highs in 2025, mainly due to increased regulatory transparency and more friendly policies, which have brought positive news for digital assets (for example, the price fluctuations in the crypto market after Trump's election, the news of Trump's nomination of 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 the author's personal views as of February 14, 2025, and should not be regarded as investment advice, but for reference only. Forward-looking statements do not guarantee future results, and the risks, uncertainties, and assumptions involved may lead to actual results differing from expectations.
