A recent report from Citi highlights the growing adoption of stablecoins and cryptocurrency exchange-traded funds (ETFs), which is expected to propel digital asset performance in 2025.
Key Drivers of Crypto Adoption
Citi’s research suggests that several metrics, including crypto ETF inflows, onchain activity, and stablecoin usage, have spiked following the US presidential election in November. These elevated levels are expected to continue into the new year, indicating a significant increase in adoption.
Adoption as a Key Performance Indicator
According to Citi, "adoption is, in our view, the most important concept to track for the long-term performance of crypto." The report emphasizes that ETF activity and broader volumes are improving, while stablecoin market caps are rising rapidly, particularly after the election.
ETF Inflows: A Key Metric
Crypto ETF inflows are considered a critical metric by Citi, as they indicate new funds and market participants entering the crypto space. These inflows have a significant impact on price performance, especially for Bitcoin (BTC). In 2024, BTC ETF inflows accounted for approximately 46% of the variance in BTC price action, with a beta showing that $1 billion in inflows led to around 4.7% returns.
Breaking Down ETF Inflows
On November 21, US Bitcoin ETFs broke $100 billion in net assets for the first time, according to data from Bloomberg Intelligence. This milestone underscores the growing institutional interest in crypto and its potential impact on price performance.
Sygnum Bank’s View: Positive Demand Shocks
Surging institutional inflows could cause positive "demand shocks" for Bitcoin, potentially sending BTC’s price soaring in 2025, according to Sygnum Bank. This perspective highlights the potential for increased adoption to drive significant price increases.
Onchain Activity: A Key Performance Driver
Citi’s research also emphasizes that onchain activity has accelerated, particularly for stablecoins. The combined market capitalizations of the top three stablecoins – Tether’s USDt (USDT), USD Coin (USDC), and Dai (DAI) – collectively grew by more than $25 billion after Trump’s election win.
Impact on Decentralized Finance
The increased adoption of stablecoins is particularly bullish for decentralized finance (DeFi). As Citi notes, "stablecoins are the on-ramp to decentralized finance." This perspective highlights the growing importance of stablecoins as a gateway to DeFi.
Other Measures of Onchain Growth
Citi’s report also points out that other measures of onchain growth are outperforming. Activity on the Ethereum network, including layer-2 scaling chains, is up 210% versus 2023 averages. Additionally, the number of large and small crypto wallets has increased slightly since the November US election.
Conclusion
The continued adoption of stablecoins and cryptocurrency ETFs is expected to propel digital asset performance in 2025. Citi’s research highlights several key metrics, including ETF inflows, onchain activity, and stablecoin usage, which are driving this growth. As institutional interest in crypto continues to increase, we can expect significant price increases and a further expansion of the crypto ecosystem.
Recommendations
Based on Citi’s report, investors and traders may consider the following:
- Keep an eye on ETF inflows, as they have a strong impact on price performance.
- Monitor stablecoin market capitalizations, as they are a key indicator of adoption.
- Look out for positive "demand shocks" caused by increased institutional inflows.
- Consider investing in DeFi platforms that utilize stablecoins.
Final Thoughts
The growing adoption of stablecoins and cryptocurrency ETFs is a clear indication of the increasing interest in digital assets. As investors and traders, it’s essential to stay informed about these developments and adjust our strategies accordingly. By doing so, we can maximize our potential returns and navigate the ever-changing crypto landscape.
Sources:
- Citi Research Report (Dec 26)
- Bloomberg Intelligence
- Sygnum Bank
Related Articles:
- 2025 ‘Demand Shocks’ Will Spike Bitcoin’s Price – Sygnum
- Crypto ETF Inflows