As a seasoned crypto enthusiast and tech-savvy individual who has navigated through the blockchain landscape for over a decade now, I find the insights presented in this article not only insightful but also incredibly exciting. The potential for growth and innovation within the realm of Web3 is truly astounding, and it’s fascinating to see how various technologies are converging to create a more interconnected and decentralized world.
Year after year, bulls and bears analyze short-term scenarios to predict either a catastrophic crash or rapid expansion in the cryptocurrency market. However, neither side manages to make an accurate prediction.
2021 saw several significant occurrences: The Ethereum Denmei Upgrade, the American presidential election, the introduction of crypto ETFs, Wyoming’s DUNA development, the wBTC debate, Robinhood receiving Wells notice, Hyperliquid’s nearly $2 billion airdrop, Bitcoin reaching $100,000, and SEC Chair Gary Gensler announcing his resignation in January.
2024 saw minimal significant market disruptions, but it did demonstrate that a growing number of crypto companies have the ability to endure. By the end of this year, Bitcoin’s value stood at $1.9 trillion, while all other cryptocurrencies combined were worth approximately $1.6 trillion. Notably, the total market capitalization of all cryptos has nearly doubled since the beginning of 2024.
As a researcher delving into the dynamic world of cryptocurrencies, I’ve observed that the diversification of this field has significantly bolstered its resilience against shocks. This expansive landscape now encompasses various sub-sectors such as payments, decentralized finance (DeFi), gaming, zero-knowledge (ZK) technology, infrastructure, consumer applications, and more. Each of these distinct areas has developed its unique funding mechanisms, markets, motivating factors, and potential bottlenecks.
This year at Pantera, we’ve put our funds into businesses addressing niche issues within their respective ecosystems. For instance, crypto gaming companies have struggled with integrating Web3 data analysis tools. To tackle this problem, we backed Helika, a platform dedicated to gaming analytics. Meanwhile, AI products in the Web3 sector encounter adoption hurdles due to the fragmented nature of their tech stack. To address this issue, Sahara AI is developing an all-encompassing platform that encourages open collaboration while maintaining a user-friendly experience akin to traditional web platforms.
Everclear simplifies the process by linking all parties involved in intent infrastructure due to its disorganized nature and fragmented orderflow.
2025 approaches with the promise of potential regulatory guidance, persistent market enthusiasm, and increasing cryptocurrency values as its tailwinds. Despite a dip in activity during the summer months this year, crypto enthusiasts are welcoming the upcoming year with robust confidence (or “excessive optimism,” if you prefer a more colorful term).
Review of 2024 Predictions:
Let’s first review my 2024 predictions before moving on to our 2025 forecast. On a scale of 1 (least accurate) to 5 (most accurate), I will rate my performance myself.
- The resurgence of Bitcoin and “DeFi Summer 2.0.” Accuracy: 4/5
- Tokenized social experiences for new consumer use cases. Accuracy: 2/5
- An increase in TradFi-DeFi “bridges” such as stablecoins and mirrored assets. Accuracy: 5/5
- The cross-pollination of modular blockchains and Zero Knowledge Proofs. Accuracy: 4/5
- More computationally intensive applications moving on-chain, such as AI and DePIN. Accuracy: 2/5
- Consolidation of public blockchain ecosystems and a “Hub-and-Spoke” model for app-chains. Accuracy: 2/5
2025 Predictions
This year, I sought assistance from the Pantera investment group. I’ve classified my forecasts into two groups: potential growth areas and innovative concepts.
Rising Trends:
By the end of the year, Wrapped Assets (excluding stablecoins) are projected to make up about 30% of the total value locked on-chain (currently accounting for 15%). This year alone, their value has grown by over 60%, reaching approximately $13.7 billion. At present, approximately 70% of these Wrapped Assets are tied to private credit, while a significant portion of the remaining assets are invested in T-Bills and commodities. There’s an increasing trend of investments flowing into these categories, and it is possible that more complex Wrapped Assets may become available by 2025.
Initially, the growth of private credit is primarily driven by advancements in infrastructure. Interestingly, this sector saw a surge of around $4 billion in assets by 2024, according to figures. As more businesses join the field, using private credit to invest in cryptocurrencies becomes increasingly convenient.
To elaborate, a vast amount of T-Bills and commodities are held off-chain, with an estimated value in the trillions. However, on-chain, there is only about $2.67 billion worth of T-Bills, making them more appealing due to their ability to generate returns (unlike stablecoins where the minting party captures the interest). For instance, Blackrock’s BUIDL T-Bill fund holds merely $500 million on-chain compared to the tens of billions it manages off-chain. The ease of incorporating stablecoins and T-Bills into DeFi platforms (including pools, lending markets, and futures) has significantly reduced the barriers to their adoption. This trend is also observed in commodities.
Presently, RWAs are primarily confined to essential financial products. The simplification and streamlining of infrastructure for RWA protocols have significantly improved operators’ understanding of associated risks and countermeasures in on-chain operations. With specialized firms handling digital wallets, minting processes, Sybil detection, crypto neo-banks, and more, it seems that complex financial instruments such as stocks, ETFs, bonds, may soon be introduced onto the blockchain. These advancements are expected to further boost the adoption of RWAs towards 2025.
Last year, my prediction about Bitcoin’s financial sector was robust but it didn’t quite hit the 1-2% of all Bitcoins Total Value Locked (TVL) benchmark. However, this year, driven by native Bitcoin finance protocols such as Babylon that don’t necessitate bridging, promising returns, rising Bitcoin prices, and a growing interest in BTC assets like runes, Ordinals, and BRC20, approximately 1% of Bitcoins will engage with the Bitcoin-Fi sector.
Financial technology companies (Fintechs) are evolving to serve as access points for cryptocurrencies. Platforms like TON, Venmo, Paypal, and Whatsapp are gaining traction in the crypto space because of their neutrality. They provide a platform where users can engage with cryptocurrency without being biased towards specific apps or protocols, making them easy entryways into the world of crypto. Each platform appeals to a different user base: TON through its 950 million Telegram userbase, Venmo and Paypal with their respective 500 million payment users, and Whatsapp with its massive 2.95 billion monthly active users.
Felix, a service that works through WhatsApp, facilitates immediate money transfers. These transfers can be done digitally or, if preferred, collected in cash at partner locations such as 7-Eleven. Behind the scenes, they utilize stablecoins and Bitso on the Stellar platform. Now, users are able to purchase cryptocurrency directly through Metamask using Venmo, while Stripe has recently acquired Bridge (a stablecoin company), and Robinhood has purchased Bitstamp (a cryptocurrency exchange).
It’s likely that fintech companies will serve as entry points to the cryptocurrency world, either deliberately or due to their capacity to integrate third-party applications. As they expand in popularity, some fintechs might even amass significant amounts of cryptocurrencies, potentially competing with smaller decentralized exchange platforms.
Uniswap takes the lead among Layer 2 solutions in terms of daily transaction volume, with around $1-4 billion worth of transactions being processed each day, and approximately 50,000 to 80,000 transactions taking place daily. Compared to this, Arbitrum and Base process roughly $1.4 billion and $1.5 billion in daily transaction volume respectively, with a significant portion of their volumes coming from Uniswap transactions (around one third for Arbitrum and one fourth for Base).
As an analyst, I can confidently state that if Unichain manages to garner merely half of Uniswap’s trading volume, it would undeniably outrank the current top Layer 2 (L2) solutions in terms of transaction volume, making it the leading L2 platform.
NFTs initially emerged within the cryptocurrency realm, serving as a versatile instrument rather than an ultimate goal. However, their applications have expanded significantly into areas such as on-chain gaming, trading intellectual property like AI models, digital identities, and various consumer applications.
The restaurant app named Blackbird uses NFTs (Non-Fungible Tokens) to identify customers within its platform that links Web3 with dining experiences. This integration allows restaurants to access customer behavior data and effortlessly create, mint, and manage subscriptions, memberships, and discount offers for their patrons.
Sofamon develops web3 bitmoji’s (NFTs known as wearables), opening up the financial aspect of the emoji market. Aware of the growing significance of intellectual property on blockchain, they are eager to partner with influential figures such as KOLs and K-pop stars to combat digital piracy. Story Protocol, a company that recently secured $80 million at a valuation of $2.25 billion, aims to tokenize global intellectual property, making originality the heart of creative endeavors. IWC, a renowned Swiss luxury watch brand, offers an NFT membership that grants entry to an exclusive community and events.
Non-Fungible Tokens (NFTs) have the ability to be incorporated into identification, transactions, transfers, ownership records, memberships, and more. They can also serve as a means to represent and assign value to various assets. This dual functionality could potentially lead to economic growth, possibly including speculative expansion. It’s this versatility that gives NFTs their strength. As time goes on, the potential uses for NFTs will only expand.
2025 marks the anticipated debut of restaking platforms such as Eigenlayer, Symbiotic, and Karak, where they will unveil their main networks. These platforms are expected to distribute earnings to operators from AVS and slashing. It appears that in this year, the concept of restaking has been somewhat overshadowed or diminished.
As the usage of Restaking increases across multiple networks, it gains strength. If other protocols rely on an infrastructure powered by a specific Restaking protocol, they indirectly derive value from this connection. This power is what allows protocols to remain significant even if they lose relevance, while still maintaining high valuations. We are confident that the market for Restaking remains a multi-billion dollar opportunity, and as more applications transform into appchains, they will either utilize Restaking protocols directly or ones built on top of them.
New Ideas:
As a forward-thinking crypto investor, I’m excited about zkTLS, a game-changer that leverages zero-knowledge proofs to authenticate data from the traditional Web2 realm. If successfully implemented this year (fingers crossed!), it could potentially bring a wave of fresh, off-chain data onto our beloved blockchain ecosystem, opening up new avenues for investment and innovation.
For example, zkTLS can be used to prove that data came from a certain website to others. Currently, there is no way to do this. This tech takes advantage of advancements made in TEE’s and MPC’s, and may be further improved to allow some of the data to be private.
It’s a novel concept, yet we anticipate that businesses will start developing this and incorporating it into blockchain services. For instance, they may create verifiable oracles for non-financial data, or use cryptographically secure oracles.
The U.S. regulatory landscape appears more favorable towards cryptocurrencies than ever before. In recent elections, 278 pro-crypto candidates were victorious compared to 122 who are against cryptocurrencies. Gary Gensler, known for his skepticism towards crypto, is stepping down as the head of the SEC in January. It has been reported that President Trump plans to appoint Paul Atkins, a vocal supporter of the crypto industry and former SEC Commissioner, to lead the SEC. Additionally, Trump has created a new position titled “AI & Crypto Czar,” which he intends to fill with tech investor David Sacks, who previously served as CEO of Yammer and COO of PayPal. According to the announcement, Sacks will work on establishing legal guidelines to provide the crypto industry with the clarity it has been seeking.
We’re hoping for an easing of SEC legal actions, definitive clarifications on the classification of cryptocurrency as a distinct asset category, and tax implications to be addressed.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
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2024-12-16 18:19