The continued adoption of stablecoins and cryptocurrency exchange-traded funds (ETFs) will propel digital asset performance in 2025, according to a Dec. 26 Citi research report.
Crypto ETF inflows, on-chain activity, and stablecoin usage all spiked after President-elect Donald Trump won the United States presidential election in November, and those metrics remain elevated going into the new year, Citi said.
“Adoption is, in our view, the most important concept to track for the long-term performance of crypto,” according to the report.
“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
Crypto ETF inflows are among the most important metrics to watch because they are “more likely than other trading activity to be new funds/market participants entering the crypto space,” the report said. They also have a strong effect on price performance, especially for Bitcoin (BTC).
In 2024, BTC ETF inflows accounted for “~46% of the variance in BTC price action, with the beta showing that $1bn of inflows has led to ~4.7% returns,” the asset manager said. On Nov. 21, US Bitcoin ETFs broke $100 billion in net assets for the first time, according to data from Bloomberg Intelligence.
Surging institutional inflows could cause positive “demand shocks” for Bitcoin, potentially sending BTC’s price soaring in 2025, asset manager Sygnum Bank said in December.
On-chain activity
On-chain activity has also accelerated, particularly for stablecoins. This could be a key performance driver next year.
Stablecoin market capitalizations increased sharply after Trump’s election win. The combined market caps of the top three stablecoins — Tether (USDT), USD Coin (USDC), and Dai — collectively grew by more than $25 billion, Citi said.
This is particularly bullish for decentralized finance (DeFi), as “stablecoins are the on-ramp to decentralized finance,” according to the report.
Other measures of on-chain growth are also outperforming. Activity on the Ethereum network, including layer-2 scaling chains, is up 210% versus 2023 averages, Citi said.
Citi said the number of large and small crypto wallets has increased slightly since the November US election as well.