As 2024 draws to a close, investors will be praising Wall Street. The rise of artificial intelligence (AI) and euphoria over stock splits have helped the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite reach multiple all-time highs.
But Wall Street’s gains are paltry compared to the phenomenal year that cryptocurrencies have delivered. As of midnight on December 28, when this article is being written, the total value of the entire cryptocurrency market has increased from $1.71 trillion to $3.32 trillion since the beginning of the year. This 94% increase would be three times the return of the growth-oriented Nasdaq Composite in 2024.
Bitcoin (CRYPTO: BTC) led the rally, pushing the world’s largest digital currency by market cap past $1 trillion in value, increasing its value by 125% since the beginning of the year. The introduction of a spot Bitcoin ETF (exchange-traded fund) played a key role in driving mainstream investment in the leading cryptocurrency in 2024.
Moreover, Donald Trump’s victory in November pushed Bitcoin to over $100,000 per token. President Trump and Vice President-elect J.D. Vance have a favorable view of Bitcoin.
But in the investment environment, it’s all about looking ahead. After another record-breaking year, here are five predictions for cryptocurrencies in 2025.
1. The crypto bear market will return
The first prediction promises to be unpopular: the bear market will return.
The stars aligned perfectly for Bitcoin in 2024. The debut of a spot Bitcoin ETF spurred some needed buying, and the April 2024 halving event slowed the pace of new Bitcoin mining. But the biggest catalyst for the world’s largest digital currency may be the emergence of MicroStrategy (NASDAQ: MSTR) as the world’s first “Bitcoin Treasury Company.”
MicroStrategy CEO Michael Saylor, a longtime supporter of the world’s leading digital currency, oversaw the purchase of 442,262 Bitcoin at an average price of $62,257 through December. 23. Saylor funded MicroStrategy’s big bet on Bitcoin by selling convertible notes and issuing his own stock. He is now seeking approval to increase the number of shares outstanding in his company by up to 10 billion to 10.33 billion.
This leveraged bet on Bitcoin has some investors believing in the legendary “infinite money glitch,” but we’ve seen many leveraged investment scenarios fail on Wall Street. To make matters worse, MicroStrategy may not have enough operating cash flow from its AI enterprise analytics software division to even cover its debt service costs.
Bitcoin’s bullish momentum will slow if it doesn’t continue buying from MicroStrategy, which is likely to taper off sometime in the new year. Major catalysts have already passed, Bitcoin’s history has been full of surprising corrections, and a bear market drop of 20% or more is expected.
2. Ethereum will easily outperform bitcoin
Second, don’t be surprised if Ethereum (CRYPTO: ETH), the second-largest cryptocurrency by market cap, significantly outperforms Bitcoin in the new year. For comparison, Ethereum’s 48% gain year-to-date is well below Bitcoin’s 125% gain.
One specific catalyst for Ethereum is the approval of more than six spot Ethereum ETFs by the Securities and Exchange Commission (SEC) in May 2024. Establishing a way for retail investors to buy Ethereum without having to buy it on an obscure crypto exchange could give the second-largest cryptocurrency the same momentum we’ve seen with Bitcoin in 2024.
Moreover, history is on Ethereum’s side. The last time we saw such a large gap in overall crypto market cap dominance between Bitcoin and Ethereum was in early 2021. Between June 2020 and June 2021, Ethereum more than tripled Bitcoin’s returns. Historically, when Ethereum’s dominance relative to Bitcoin weakens, investors flock to the second-largest cryptocurrency.
3. Ultra-popular dog-themed meme coins could lose half their value
While altcoins are expected to be hot commodities after Bitcoin’s big rise in 2025, ultra-popular meme tokens Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) could lose 50% of their value.
Dogecoin surged after Trump’s victory in November. The increase comes after President Trump appointed Tesla CEO Elon Musk as secretary of the Department of Government Efficiency (DOGE) alongside Vivek Ramaswamy. Musk has admitted to owning Dogecoin and has previously offered to help developers improve the network. His appointment as DOGE Secretary under the Trump Administration was seen as a positive for the sentimental Dogecoin.
But with Dogecoin and Shiba Inu, the story is always the same: they generate a lot of buzz on social media but have virtually no real-world use and barely differentiate themselves from a long list of other crypto projects.
History has repeatedly shown that when Bitcoin weakens, meme coins like Dogecoin and Shiba Inu get hit even harder. With neither token having a real catalyst or competitive advantage, 2025 is likely to be a tough one for both.
4. A host of new spot cryptocurrency ETFs are set to be approved
The new year could also pave the way for spot ETFs beyond Bitcoin and Ethereum to be listed on major Wall Street exchanges.
SEC Chairman Gary Gensler, a vocal critic of cryptocurrencies, has already announced that he will step down on the day of President Trump’s inauguration (January 20, 2025). With the new administration insisting on clarifying cryptocurrency laws, this should make the path for crypto spot ETFs to be listed in 2025 (and beyond) much easier.
The next logical candidates to be included in a spot ETF would be Solana (CRYPTO: SOL), XRP (CRYPTO: XRP) and even Cardano, the largest digital cryptocurrencies after Bitcoin and Ethereum. Issuers have already filed for spot ETFs for Solana and XRP with the SEC.
However, the important thing to remember about the crypto bill is that it is not necessarily a priority for the new administration. Simplifying the cryptocurrency environment will eventually be on the agenda, but it will likely take a backseat to tax, trade and immigration policy until late 2025.
5. A Strategic Bitcoin Reserve Won’t Be Established in the United States
Finally, there’s a lot of excitement surrounding President-elect Trump’s desire to establish a “Strategic Bitcoin Reserve.” While the United States already holds 200,000 Bitcoins (as of November 2024) confiscated from criminals, President Trump’s plan involves keeping the existing Bitcoin (i.e. not selling any more) and selectively buying more.
“We’re going to do something big with cryptocurrency, because we don’t want China or anyone else to — and not just China but other countries are welcoming it — and we want to take the lead,” the president-elect said in an interview with CNBC a few weeks ago.
But establishing a strategic Bitcoin reserve in the United States will be a major challenge in 2025.
For example, it’s more likely that Congressional approval would be needed to fund the strategic reserve. Although Republicans control both houses of Congress, digital currencies are not widely supported among them. Given the large budget deficit, getting a majority of elected officials to approve buying Bitcoin seems impossible.
Moreover, Federal Reserve Chairman Jerome Powell recently said that the central bank has no intention of holding Bitcoin, further complicating President Trump’s proposal to create a Bitcoin reserve.
Moreover, according to Reuters, Barclays analysts believe that funding a strategic Bitcoin reserve would require issuing new government bonds. This would certainly face significant resistance, given the US’s already growing national debt.
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