As a seasoned analyst with over two decades of experience in the financial markets, I have seen countless trends come and go. However, the recent surge in stablecoins and cryptocurrency ETFs is one that has caught my attention. The data presented in the Citi research report is compelling, especially considering the spike in metrics following the 2016 US presidential election.
The increasing use of stablecoins and crypto ETFs is expected to significantly boost the growth of digital assets by the year 2025, as suggested in a research report published by Citibank on December 26th.
After Donald Trump’s victory in the U.S. presidential election in November, there was a significant increase in investments in Crypto ETFs, onchain activities, and stablecoin usage, according to Citi. This trend has persisted and remains high as we enter the new year.
According to the report, we believe that understanding adoption is crucial for predicting the long-term success of cryptocurrencies.
“ETF activity and broader volumes are improving, and stablecoin market caps — which we view as a measure of flows into the crypto ecosystem — are swiftly rising (especially post-election).”
ETF inflows
According to the report, it’s crucial to keep an eye on the inflows into Crypto ETFs as these investments are often made by fresh capital or new market entrants joining the cryptocurrency sector.
They also have a strong effect on price performance, especially for Bitcoin (BTC).
By 2024, an asset manager reported that approximately 46% of the fluctuations in Bitcoin’s price movements could be attributed to investments into Bitcoin Exchange-Traded Funds (ETF). The beta analysis indicated that a $1 billion influx into these ETFs might result in around 4.7% increase in returns.
On November 21st, for the very first time, U.S.-based Bitcoin Exchange-Traded Funds (ETFs) collectively exceeded a net asset value of $100 billion, as per data provided by Bloomberg Intelligence.
Institutional investments pouring into Bitcoin might trigger “supply and demand” disruptions (positive demand shocks), which could lead to a significant increase in Bitcoin’s value by the year 2025, as suggested by Sygnum Bank in their December statement.
Onchain activity
The pace of on-chain transactions, notably those involving stablecoins, appears to be increasing significantly. It’s possible that this trend might serve as a significant factor in driving performance next year.
Following Donald Trump’s victory in the 2016 presidential election, there was a significant surge in the market capitalizations of stablecoins. Specifically, the combined total market caps of the top three stablecoins – Tether (USDT), USD Coin (USDC), and Dai – collectively grew by over $25 billion, according to Citibank’s estimation.
This finding is especially positive for Decentralized Finance (DeFi), since stablecoins serve as the entrance point to this decentralized system, as stated in the report.
Additionally, other indicators of blockchain expansion are showing impressive growth as well. According to Citi’s analysis, activity on the Ethereum network, including layer-2 solutions for scaling, has increased by an astonishing 210% compared to the average of 2023.
As an analyst, I’ve observed a slight uptick in both large and small cryptocurrency wallets following the U.S. presidential election in November.
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2024-12-27 18:40