Galaxy: 23 Predictions for Cryptocurrency in 2025 How high can BTC and ETH rise

Preface

2024 saw a massive shift for Bitcoin and digital assets. 2024 saw new products, record capital inflows, huge policy shifts, growing adoption, and Bitcoin’s solidification as an institutional asset.

This year saw two major developments: the launch of a spot-based Bitcoin ETP in the U.S. and the election of Donald Trump to a second non-consecutive presidential term. Between these events, the market has been in a volatile, indecisive sideways consolidation for 237 days. While these events served as both catalyst and backdrop for the market in 2024, 2025 will see a broadening of market breadth and narrative. Without further ado, here are some Galaxy Research predictions for 2025.

Bitcoin

1. Bitcoin will break through $150,000 in the first half of the year and test or reach a maximum of $185,000 in the fourth quarter of 2025. The combination of institutional, corporate, and national adoption will drive Bitcoin to new heights in 2025. Since its existence, Bitcoin has appreciated faster than all other asset classes, especially the S&P 500 and gold, and this trend will continue in 2025. Bitcoin will also reach 20% of the market value of gold.

2. By 2025, the total assets of US spot Bitcoin ETPs will exceed $250 billion. In 2024, Bitcoin ETPs absorbed a total of more than $36 billion in net inflows, becoming the largest ETP in history. 13F documents show that many major hedge funds in the world have purchased Bitcoin exchange-traded products, including Millennium, Tudor and DE Shaw, while the Wisconsin Investment Board (SWIB) has also purchased Bitcoin exchange-traded products. Just one year later, the asset size of Bitcoin exchange-traded products (ETFs) is only 19% ($24 billion) away from the asset size of all physical gold exchange-traded products in the United States.

3. By 2025, Bitcoin will once again be one of the best performing risk-adjusted assets among global assets. The above AUM comparison is due to record inflows in 2024 and the rise in Bitcoin prices. In fact, Bitcoin is the third best performing asset after risk adjustment. It is worth noting that the best Sharpe ratio belongs to MicroStrategy, a company that calls itself "Bitcoin Finance Company".

4. At least one of the top wealth management platforms will announce a recommended Bitcoin allocation of 2% or more. Due to various reasons, including maturity, internal education, compliance requirements, etc., no large wealth management company or asset management company has officially added Bitcoin allocation recommendations to investment advice model portfolios. This situation will change in 2025, which will further increase the flow of US dollars and the scale of assets under management.

5. Five Nasdaq 100 companies and five countries will announce that they have added Bitcoin to their balance sheets or sovereign wealth funds. Whether for strategic, portfolio diversification, or trade settlement reasons, Bitcoin will begin to find a place on the balance sheets of major corporate and sovereign allocators. Competition between nation-states, especially non-aligned countries, countries with large sovereign wealth funds, and even countries hostile to the United States, will drive the adoption of strategies to mine or otherwise acquire Bitcoin.

6. Bitcoin developers will reach consensus on the next protocol upgrade in 2025. Since 2020, Bitcoin core developers have been arguing about which operations can safely enhance transaction programmability. As of December 2024, the two most supported pending operations for transaction programmability include OP_CTV (BIP 119) and OP_CAT (BIP 347). Since the birth of Bitcoin, reaching consensus on soft forks has been a time-consuming and rare feat, including OP_CTV, OP_CSFS, and/or OP_CAT in the next soft fork upgrade -Gabe Parker.

7. More than half of the top 20 publicly traded Bitcoin miners by market cap will announce transformations to or partnerships with hyperscalers, AI, or high-performance computing companies. The growing demand for AI computing will lead Bitcoin miners to increasingly transform, build, or co-locate HPC infrastructure with Bitcoin mining farms. This will limit year-over-year growth in hash rate, which will reach 1.1 zetahash by the end of 2025.

8. Bitcoin DeFi (considered as the total amount of BTC locked in DeFi smart contracts and deposited in staking protocols) will almost double by 2025. As of December 2024, more than $11 billion worth of wrapped BTC is locked in DeFi smart contracts. Notably, more than 70% of locked BTC is used as collateral for lending protocols. There are approximately $4.2 billion in additional deposits through Babylon, Bitcoin's largest staking protocol. The Bitcoin DeFi market is currently worth $15.4 billion and is expected to expand significantly in multiple areas by 2025, including existing DeFi protocols on Ethereum L1/L2, new DeFi protocols on Bitcoin L2, and staking layers such as Babylon. The current doubling of the market size may be driven by several key growth factors: cbBTC supply increased by 150% year-on-year, WBTC supply increased by 30%, Babylon's TVL reached $8 billion, and the new Bitcoin L2 achieved a $4 billion DeFi TVL.

Ethereum

9. Ethereum will trade at over $5,500 by 2025. The easing of regulatory resistance to DeFi and staking will push Ethereum to new all-time highs in 2025. New partnerships between DeFi and TradFi, perhaps in a new regulatory sandbox environment, will eventually allow traditional capital markets to seriously experiment with public blockchains, Ethereum and its ecosystem to see the largest share of usage. Enterprises will increasingly experiment with their own layer 2 networks, primarily based on Ethereum technology. Some games that leverage public blockchains will find product-market fit, and NFT trading volumes will rebound significantly.

10. Ethereum staking rate will exceed 50%. The Trump administration is likely to provide clearer regulation and guidance for the crypto industry. Demand for staking will continue to rise next year and may exceed half of Ethereum's circulating supply by the end of 2025, prompting Ethereum developers to consider changes to the network's monetary policy more seriously. More importantly, the increase in staking will drive greater demand and value flows through Ethereum staking pools such as Lido and Coinbase, as well as re-staking protocols such as EigenLayer and Symbiotic.

11. The ETH/BTC ratio is one of the most watched pairs in all cryptocurrencies and has been on a dangerous downward trend since Ethereum's "merge" upgrade to proof of stake in September 2022. However, the expected regulatory shift will help Ethereum and its application layer, especially DeFi, reignite investor interest in the world's second-largest blockchain network by value.

12. By 2025, L2 as a whole will generate more economic activity than Alt L1. L2 fees as a percentage of Alt L1 fees (currently in the mid-single digits) will exceed 25% of total Alt L1 fees by the end of the year. L2 will approach scaling limits early this year, resulting in frequent spikes in transaction fees, which will require changes to Gas limits and Blob market parameters. However, other technical solutions (e.g., Reth clients or altVMs such as Arbitrum Stylus) will provide greater efficiency for aggregation to keep transaction costs at usable levels.

Decentralized Finance (DeFi)

13. DeFi will enter the "dividend era" as on-chain applications will distribute at least $1 billion to users and token holders through treasury funds and revenue sharing. As DeFi regulation becomes clearer, the value sharing of on-chain applications will expand. Applications such as Ethena and Aave have initiated discussions or passed proposals to implement their fee switches, the infrastructure for distributing value to users. Other protocols that previously rejected such mechanisms, including Uniswap and Lido, may reconsider their positions due to regulatory clarity and competitive dynamics. The combination of a relaxed regulatory environment and increased on-chain activity suggests that protocols may conduct buybacks and direct revenue sharing at a higher rate than previously observed.

14. On-chain governance will recover, and applications will experiment with future governance models. The total number of active voters will increase by at least 20%. On-chain governance has historically faced two problems: 1) lack of participation, and 2) lack of voting diversity, with most proposals passing by overwhelming margins. However, the easing of regulatory tensions has been a limiting factor for on-chain voting, and the recent success of Polymarket suggests that both of these will improve in 2025. By 2025, applications will begin to shift from traditional governance models to future governance models, improve voting diversity, and regulatory tailwinds will promote governance participation.

Banks and Stablecoins

15. The U.S. Office of the Comptroller of the Currency (OCC) will create a channel for banks in various countries to custody digital assets, guiding the world's four largest custodial banks to provide digital asset services: Bank of New York, State Street, JPMorgan Chase and Citigroup.

16. TradFi partners will support the launch of at least 10 stablecoins. From 2021 to 2024, stablecoins have experienced rapid growth, and the number of projects has now reached 202, including several projects closely related to traditional finance (TradFi). In addition to the number of stablecoins launched, its transaction volume growth has also exceeded that of major payment networks such as ACH (about 1%) and Visa (about 7%). In 2024, stablecoins will be increasingly integrated into the global financial system. For example, FV Bank, which has obtained a US license, now supports direct stablecoin deposits, while Japan's three major banks are working with SWIFT through Project Pax to achieve faster and more cost-effective cross-border fund flows. Payment platforms are also building stablecoin infrastructure. For example, PayPal launched its own stablecoin PYUSD on the Solana blockchain, and Stripe acquired Bridge to natively support stablecoins. In addition, asset management companies such as VanEck and BlackRock are working with stablecoin projects to establish a foothold in the field. Looking ahead, as regulatory clarity grows, TradFi players are expected to integrate stablecoins into their operations to stay ahead of the trend, while first movers are poised to gain an advantage by building infrastructure for future business development.

17. By 2025, the total supply of stablecoins will double to more than $400 billion. Stablecoins are increasingly finding markets for products suitable for payments, remittances, and settlements. Increasingly clear regulation of existing stablecoin issuers and traditional banks, trusts, and depository institutions will lead to an explosive growth in the supply of stablecoins in 2025.

18. Tether’s long-term market dominance will fall below 50%, challenged by yield alternatives such as Blackrock’s BUIDL, Ethena’s USDe, and even Coinbase/Circle’s USDC Rewards. As Tether internalizes yield income from its USDT reserves to fund portfolio investments, marketing spend by stablecoin issuers/protocols to pass on income will shift existing users away from Tether and toward new users to their yield solutions. USDC rewards on users’ Coinbase exchange and wallet balances will become a powerful hook that will drive the entire DeFi space and may be integrated by fintech companies to enable new business models. In response, Tether will begin to pass on income from collateral holdings to USDT holders, and may even offer new competitive yield products such as Delta Neutral Stablecoins.

Investment and policy

19. Total cryptocurrency venture capital investment will exceed $150 billion, up more than 50% year-over-year. The surge in venture capital activity will be driven by allocators’ increased interest in risk activities given falling interest rates and increased regulatory transparency for cryptocurrencies. Cryptocurrency venture capital financing has historically lagged behind broader cryptocurrency market trends and will have a degree of “catch-up” over the next four quarters.

20. Stablecoin legislation will pass both houses of Congress and be signed by President Trump in 2025 , but market structure legislation will not. Legislation formalizing and establishing a registration and oversight regime for U.S. stablecoin issuers will be passed with bipartisan support and signed into law by the end of the year, which, combined with the expected relaxation of restrictions on banks, trusts, and depository institutions, will lead to significant growth in stablecoin adoption. Market structure—creating registration, disclosure, and oversight requirements for token issuers and exchanges, or adapting existing SEC and CFTC rules to incorporate them—is more complex and will not be completed, passed, and signed into law in 2025.

21. The U.S. government will not purchase Bitcoin in 2025, but will create an inventory using the Bitcoin it already holds, and some actions will be taken within departments and agencies to review the expanded Bitcoin reserve policy.

22. The SEC is launching an investigation into Prometheum, the first so-called “special purpose broker-dealer.” A previously unknown broker-dealer has suddenly emerged that coincides with the SEC’s overall views. Chairman Gensler’s views on the securities status of digital assets have attracted attention in 2023, especially when the unknown company was awarded the first broker-dealer license in a new category. According to FINRA records, the CEO was reprimanded in Congress by Republican members of the House Financial Services Committee. Republicans called on the Department of Justice and the SEC to investigate Prometheum’s “ties to China,” while others pointed out irregularities in its fundraising and reporting. Whether Prometheum is investigated or not, the special purpose broker-dealer license will most likely be revoked in 2025.

23. Dogecoin will eventually reach $1, and the world's largest and oldest meme coin will reach a market value of $100 billion. However, Dogecoin's market value will be overshadowed by the Department of Government Efficiency, which will identify and successfully implement cuts to the U.S. fiscal budget that exceed Dogecoin's 2025 high-water mark market value.