The Breakdown - $200k BTC and More Crypto 2025 Predictions

Episode Date: December 14, 2024

Bitwise recently published a set of predictions for 2025. NLW reviews and analyzes the firm's bets, using them to contextualize the year that was. Read more: https://bitwiseinvestments.com/crypto-market-insights/the-year-ahead-10-crypto-predictions-for-2025 Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It's Thursday, December 12th, and today we are talking some predictions for next year. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, we are officially in the recap slash prediction time of the year. One of my favorite points.

For anyone who likes Big Think can't possibly actually know, but fun to make it sound like you do stuff, this is the best time of the year. And so for our first episode of this type of the season, we're actually turning to a new report from Bitwise. CIO Matt Hogan and head of research Ryan Rasmussen looked at where they expect the industry to go over the next year and presented 10 crypto predictions for 2025. Unsurprisingly, one of the big themes of the year and really of this cycle, I think, has been the transition from the DGen era to the institutional era and what all that means

from everything from price action to cycle norms and so, so much more. So what we're going to do today is go over a set of these predictions from Bitwise. We'll be doing a lot of this type of content this year, but this is a great way to kick off. Let's start with the simplest prediction, price. Bitwise expects new all-time highs across the board in 2025. Bitcoin at 200k, Ethereum at 7,000, and Solana getting to 750. These price targets are substantially above even the most bullish investment banknotes, which are generally targeting a Bitcoin top at 150K this cycle,

which of course also President-elect Trump has targeted, according to some reporting from earlier this week. Bitwise pointed to a simple set of tailwinds that they think can get Bitcoin to 200, though. They cite continued high ETF inflows, macro windfalls from rate cuts and Chinese stimulus, as well as corporate buying. Importantly, this price target does assume some level of buying from global governments in 2025. At the same time, though, it presumes the Lummis proposal for the U.S. to buy one million Bitcoin over five years is rejected, and we see a much less ambitious version of the Bitcoin's

strategic reserve. If the U.S. government does end up buying Bitcoin next year, Bitwise predicts a price of $500,000 or more. Now, this is a time of year when we tend to make eye-popping predictions. Back in 2021, Lynn Alden called for $100K Bitcoin by the following year, and ArkInvest CEO Kathy Woods set her sights on million-dollar Bitcoin by 2030. Particularly that ARC Big Ideas report has some reasoning that's worth re-examining. Arc set their long-term price target by assuming strong adoption on corporate balance sheets combined with Bitcoin displacing bonds as a risk-off

allocation. Fast forward a few years and we have new corporate announcements almost every week, and micro-strategy changing bond market paradigms with their issuance of convertible notes. Bundled up in the 200K prediction is the idea that at some point over the next year, Bitcoin will be viewed as undervalued at current levels. That's, of course, difficult to grasp at the moment with the sticker shock of 100K Bitcoin still being processed, but it also speaks to how massively the world can change in just a year's time. And frankly, we've seen this before in Bitcoin. In 2017, the mainstream view was still that Bitcoin is for criminals while a thriving parallel financial market was being established. In 2021, the view was that Bitcoin was just a speculative asset, while corporate and sovereign

adoption was beginning. Now we see the prevailing opinion that the crypto industry is still the Wild West, as Wall Street adoption surges and regulatory frameworks are set up in every major jurisdiction. What differentiates older predictions from the ones Bitwise are making today is that we can now directly measure the tailwinds for Bitcoin as they grow. We don't have to wonder what a Bitcoin ETF would do to the market. We can look at daily inflows in new allocations to observe the change. Bitcoin is no longer, assumed to be a 0% allocation for most investors. It is steadily grown to closer to 1% over the past year. Indeed, this is one of the key insights from the Bitwise report, likely informed by what they're seeing from their customers. They claim that next

year, 3% is the new 1%. Next prediction is around ETFs because underpinning their view on price, Bitwise predicts that ETF flows will accelerate next year. That's a big deal, given that Bitcoin ETFs were this year the single most popular range of financial products ever launched by an order of magnitude. This was the most successful first year ever, and it's not close. Combined the Bitcoin ETF saw more inflows than the leading NASDAQ index QQQ. Influence increasing next year is not only unprecedented, it implies a dramatic shift in the way Wall Street views Bitcoin. Bitwise points out that the first year is usually the slowest for successful ETFs. They note that the gold ETF saw $2.6 billion worth of inflows during its debut in 2004,

while the following year saw inflows double and they continued growing until year 6 in 2010. The firm also notes that major wirehouses are just now starting to complete their diligence and come online. Wealth managers from firms like Morgan Stanley and Merrill Lynch still aren't allowed to recommend a Bitcoin allocation to their clients. Bitwise believes that once the outbound calls begin next year, we will see a huge flow from the $100 trillion wealth management industry. Finally, Bitwise believes that the principles that hold true for smaller investors getting their first Bitcoin allocation will hold true as larger players enter as well. The firm has been working with private and professional investors for seven years and recognizes a stark pattern. Very few investors buy their first Bitcoin and then stop. Most start with a small allocation and then add to it as they

do the research and become more comfortable with the asset class. They predict that, quote, most of the investors that bought Bitcoin ETFs in 2024 will double down in 2025. Next up, they predict that Coinbase will surpass Schwab. And this more broadly represents the idea that crypto-financial firms will start overtaking their equivalence in the Tradfai world. Specifically, they're calling for Coinbase stock to double next year, which would surpass the market cap of Charles Schwab to become the most valuable brokerage in the world. They note that Coinbase isn't just a brokerage, but also has a thriving stable coin

on-chain staking and custody business. Each of these revenue streams has grown by over 30% this year, with the custody and staking business doubling. BitWise is predicting that growth of these business lines will accelerate. rate in growth next year. The end result of this growth is that Bitwise anticipates Coinbase will be added to the S&P 500. Coinbase already has a market cap of $76 billion, making them slightly larger than Workday, who will be added to the index this month. Assuming micro-strategy gets added to the NASDAQ 100, that means that both major indices

would feature a small slice of crypto exposure, which would in turn mean that the hundreds of millions of index investors will have passive exposure to the crypto industry, further normalizing the asset class. Next up, Bitwise thinks that next year is going to be the year, of the crypto IPO. The firm predicts five crypto companies to go public above a billion dollars in market cap. Specifically, they think that Circle, Crack, and Anchorage Chainalysis and Figure are all likely to IPO. If all five Crypto unicorns IPO next year, that would be a dramatic shift for public market investing all by itself. There were only $32 billion IPOs this year, a fraction of the peak of 78 back in 2021. On the stable coin front, Bitwise predicts that the total market cap of

stable coins will double to reach $400 billion. We saw explosive stable coin growth during the previous bull run. In 2020, the total market cap of stablecoins went up fivefold, followed by another fivefold increase in 2021. But back then, stablecoins were just starting to see adoption as the dominant trading pair on centralized exchanges and defy was brand new. Now, those use cases are well established, and stable coins need ecosystem growth or broader adoption to continue growing at a higher pace. Bitwise believes that both will happen next year. Alongside the natural growth from a crypto bull market, they see the beginnings of mainstream adoption. Stablecoin legislation is widely expected to come out of next year's Congress, clarifying the rules for issuing and using stablecoins. Bitwise writes,

when that happens, expects some large traditional banks like JPMorgan and others to enter the space. In addition, Bitwise sees the use of stablecoins in global trade, remittances, and FinTech continuing to ramp up. Stripe's billion-dollar acquisition of Stablecoin Platform Bridge in October paves the way for them to migrate their infrastructure onto blockchains. PayPal and Robin Hood are also pushing stablecoin adoption. And on top of all of that, there's a narrative element of this. There is a growing feeling that Stablecoins will help cement the dominance of the U.S. dollar. In a report published yesterday, City Wealth wrote, Originally, cryptocurrencies such as Bitcoin were conceived as rivals to central bank issued currencies.

Indeed, some believed and continued to believe that Bitcoin might end the U.S. dollars' hegemony. However, they continued, rather than crypto usurping the dollar, stable coins could make dollars more accessible to the world and reinforce the U.S. currency's longstanding global dominance. Another Wall Street-ish theme is real-world assets ramping up. Bitwise thinks that this sector is about to hit an inflection point. The ecosystem of RWA stood at just $2 billion at the beginning of 2022.

Now the sector is valued at $13.7 billion. Bitwise believes it will hit $50 billion next year, the largest year of growth to date. They think the reason is obvious, writing, simply put, tokenization is better. It offers instantaneous settlement, significantly lower cost than traditional securitization, and 24-7-365 liquidity, all while bringing transparency and access to nearly every asset class. Basically, every globally significant bank has already conducted a tokenization pilot, and the results have been unanimous.

tokenization delivers massive benefits. So far, the adoption has been focused on tokenized private credit in U.S. Treasuries, both of which are seeing expanded adoption. Shifting to the longer term, Bitwise is predicting that Bitcoin will overtake gold and hit $1 million per token by 2029. Yes, they are front-running Kathy Wood by a year. That would mark the top of the fifth Bitcoin cycle and represent a tenfold increase from where we are today. It's worth noting that this is almost exactly the same prediction made by ARC invest back in 2022. The main thing that's changed in the three years since the ARC report is that there's now a clear path to a million per Bitcoin. It's by no means guaranteed, but we can see the adoption happening every week. Back then, ARC was predicting the rise of stablecoins, real-world assets,

as well as Bitcoin's adoption as a reserve asset for corporates and sovereigns. All of those trends were barely beginning when the report was published. Bitwise with this report had presented a set of bold predictions, but it's far less speculative than that 2022 ARC report. These are not fanciful ideas about how Bitcoin and crypto networks might be used in the future. They are extrapolations of the current trends that are dominating the financial world. In 2022, it was aspirational to say that Bitcoin and blockchain infrastructure will reshape global financial markets. Now it's an established trend that's only accelerating. Matt Hogan, the firm CIO, tweeted, Bitcoin is up $5,000 today. In March 2020, it was worth around $5,000. Crypto comes at you've passed. Big thanks to Bitwise for kicking

off my favorite season of the year. That is going to do it for today's breakdown. Appreciate you listening as always. And until next time, be safe and take care of each other. Peace. Thanks.