GuShiio.com Since 2024, the successful approval of the Bitcoin Spot ETF marks that the crypto asset market has entered a new stage of development. With the continued inflow of institutional funds, market liquidity has increased significantly, pushing the prices of Bitcoin and other crypto assets to record highs. Looking forward to 2025, with the potential interest rate cut by the Federal Reserve, the increase in the allocation ratio of institutional investors, and the continued improvement of Web3 infrastructure, the encryption industry is expected to usher in a new round of large-scale bull market.
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Since 2024, the successful approval of the Bitcoin Spot ETF marks that the crypto asset market has entered a new stage of development. With the continued inflow of institutional funds, market liquidity has increased significantly, pushing the prices of Bitcoin and other crypto assets to record highs. Looking forward to 2025, with the potential interest rate cut by the Federal Reserve, the increase in the allocation ratio of institutional investors, and the continued improvement of Web3 infrastructure, the encryption industry is expected to usher in a new round of large-scale bull market. This article will provide an in-depth analysis of the far-reaching impact of crypto ETFs on the market and explore the core driving forces that may trigger further market gains.
1. The impact of crypto ETFs on the market
The successful implementation of the Bitcoin Spot ETF is regarded as an important milestone in the crypto market’s move towards mainstream finance. This not only provides institutional investors with a compliant and safe investment channel, but also has a profound impact on market liquidity, price discovery mechanism, volatility and market confidence. This part will conduct an in-depth analysis focusing on the following aspects:
1. Implementation of Bitcoin Spot ETF: Opening a new era of institutional investment
(1) Background and approval process of ETFs
Over the past decade, institutional investors ‘interest in Bitcoin has gradually increased, but due to regulatory restrictions, custody difficulties and market opacity, many traditional financial institutions have difficulty directly investing in crypto assets. The launch of the Bitcoin ETF provides these institutions with a low-threshold, compliant investment method. The approval of the Bitcoin ETF not only marks a loosening of the SEC’s regulatory framework for the Bitcoin market, but also paves the way for other future crypto asset ETFs (such as the Ethereum ETF).
(2) ETF trading model and attractiveness to institutions
Compared with buying Bitcoin directly, ETFs have the following advantages, making them more in line with the needs of institutional investors:
Compliance: ETFs are regulated by the SEC, so investors do not have to worry about compliance risks.
Security: Organizations do not need to manage Bitcoin themselves to avoid losses caused by lost private keys or hacking attacks.
Liquidity: ETFs can be freely bought and sold on exchanges, improving the liquidity of assets.
This series of advantages makes Bitcoin ETF the tool of choice for institutional investors to allocate crypto-assets.
2. ETF capital inflows and impact on the market
Since its launch, the Bitcoin Spot ETF has continued to attract large capital inflows, which has had a profound impact on market prices and structure.
(1) ETF capital inflow data
According to The Block and Cryptosatellite, as of Q4 2024, institutional investors ‘interest in spot Ethereum ETFs has increased significantly, and the institutional holding ratio of Ethereum ETFs has jumped from 4.8% to 14.5%. At the same time, institutional investors hold 25.4% of the assets under management (AUM) of the spot Bitcoin ETF, totaling US$26.8 billion. The holding ratio of these institutions in Q3 to Q4 in 2024 increased by 113%, and the total assets under management jumped 69% to US$78.8 billion. Especially as more sovereign countries/companies begin to include Bitcoin in strategic reserves and Ethereum ETF pledge expectations continue to increase, the market size of these ETFs will be further expanded.
(2) Promoting the price of Bitcoin
After the launch of the ETF, institutional investors gradually increased their positions in Bitcoin, which caused major changes in the supply-demand relationship of Bitcoin. In December 2024, the price of Bitcoin once exceeded the psychological barrier of US$100,000, setting a record high. In January 2025, it exceeded the US$109,000 mark on the eve of Trump’s inauguration, breaking through a record high again.
More importantly, fund inflows from ETFs are long-term held funds (HODLer), which is different from the short-term trading behavior of retail investors. This capital flow pattern reduces selling pressure on Bitcoin and creates continued buying support. If the fund inflow trend of ETFs continues, Bitcoin may see a larger increase in 2025.
3. How can ETFs change the market structure?
The successful implementation of the Bitcoin ETF is not only a catalyst for price increases, but also profoundly changes the overall structure of the crypto market.
(1) Enhancement of market liquidity
Bitcoin ETFs provide a standardized investment tool that allows more traditional financial institutions to quickly enter the market. As ETF trading volume increases, market liquidity has improved significantly, which means:
Less price manipulation: As liquidity increases, the impact of large-scale selling or buying on the market will be reduced, reducing the room for manipulation.
Spreads narrowed: In the past, the trading depth of the crypto market was limited, resulting in large differences in Bitcoin prices between different exchanges. The introduction of ETFs can promote price uniformity.
(2) The decline in Bitcoin volatility
Bitcoin has long been considered a highly volatile asset, but the launch of ETFs may reduce short-term volatility in the market:
Institutional positions are usually long-term investments and do not buy and sell as frequently as retail investors, reducing the possibility of sharp market fluctuations.
The ETF’s arbitrage mechanism can make the price of Bitcoin more stable. For example, when an ETF premium is high, carry traders will sell the ETF and buy Bitcoin, thereby suppressing price fluctuations.
Data shows that since the launch of the ETF, Bitcoin’s 30-day historical volatility has dropped from 65% to around 50%, showing a downward trend.
(3) Impact of derivatives markets
The success of Bitcoin ETFs has also contributed to the further maturity of the derivatives market. As institutional investors use ETFs to hedge, the following trends may gradually emerge:
The liquidity of the bitcoin options market will increase, provide more efficient risk management tools, enhance the linkage between the spot market and the derivatives market, reduce irrational market fluctuations, and ETF positions will become an important indicator of market sentiment and affect investor expectations.
4. Will the success of ETFs be replicated to other crypto assets?
The success of Bitcoin ETFs has attracted the market’s attention to other crypto asset ETFs (especially the pledging Ethereum ETF and copycat ETFs such as LTC, SOL, and DOGE).
(1) Expectations for pledge of Ethereum Spot ETF
At present, some Ethereum ETF issuers have submitted applications to the SEC to pledge the Ethereum Spot ETF, and the U.S. SEC has confirmed that it has received 21Shares ‘proposal to pledge the Ethereum ETF. The market generally expects that the pledged Ethereum ETF will be approved in 2025.
Once the pledging Ethereum ETF is approved, its market impact may include:
- Institutional funds accelerated their entry into the ETH market, driving up ETH prices.
- Accelerate the development of ETH ecology and increase the activity of DeFi, NFT and other tracks.
- Promote ETH 2.0 pledge demand and reduce market selling pressure.
(2) ETF products that may be launched in the future
If the pledging Ethereum ETF is successfully implemented, the crypto asset ETFs that may be approved in the future include:
- Multi-asset crypto ETF (BTC + ETH + other mainstream assets)
- Solana, Avalanche, Polkadot, Litecoin, Dogecoin, Ripple and other public chain ETFs
- DeFi blue chip ETFs (UNI, AAVE, LDO, etc.)
- RWA (Real World Assets) tokenized ETF
The launch of these products will further expand the coverage of institutional funds and promote the long-term development of the crypto market.
2. Key growth factors for the crypto market in 2025
In 2024, with the implementation of the Bitcoin Spot ETF, institutional investors began to enter the crypto market on a large scale, bringing new capital inflows and stability to the market. However, the growth of the crypto market in 2025 will not only rely on ETFs, but will also be driven by multiple factors. The following are key growth factors that may drive the crypto market to new highs in 2025:
1. Macroeconomic Environment: Liquidity Turning Point and Global Monetary Policy
(1) Federal Reserve’s monetary policy: Market dividends brought by expected interest rate cuts
The Federal Reserve’s monetary policy is an important variable affecting global capital market liquidity. Currently, the market generally expects that the Federal Reserve will continue to cut interest rates in mid-to-late 2025. This policy shift will have the following impacts on the crypto market:
Reduce the cost of capital and promote the rise of risky assets: During the interest-rate cut cycle, bond yields in traditional markets fall, and institutional investors are more willing to allocate high-growth assets, such as technology stocks and crypto assets.
Strengthen the “digital gold” attribute of Bitcoin: When real interest rates decrease or even turn negative, the attractiveness of anti-inflation assets such as Bitcoin increases, which may attract more safe-haven funds into the market.
Increased leveraged trading activity in the crypto market: After interest rates fall, traders ‘financing costs decrease, which may increase leverage demand in the crypto market and increase overall trading volume.
In addition, major central banks around the world (such as the European Central Bank and the Bank of Japan) may also enter the easing cycle simultaneously in 2025, further releasing market liquidity and creating favorable conditions for the crypto market.
(2) Geopolitics and global capital flows
In recent years, the global geopolitical situation has become increasingly tense, such as the Russia-Ukraine conflict and the challenge to the hegemony of the US dollar. These factors are accelerating the global reallocation of funds. In this context, crypto assets are becoming an important carrier of safe-haven funds and emerging market capital flows.
Emerging market investors have increased demand for Bitcoin: in countries with high inflation such as Argentina and Turkey, people are more inclined to hold cryptocurrency assets such as Bitcoin to avoid the risk of devaluation of their currencies.
Institutions ‘recognition of Bitcoin as a non-sovereign asset has increased: Sovereign debt problems have intensified, which may lead more institutions to include Bitcoin in their portfolios to hedge risks to the traditional financial system.
Growth in financing and investment needs of Web3 companies: As global capital flows into the crypto market, Web3 projects and innovative companies may usher in a new financing boom.
2. Wave of institutional configuration
According to the latest data on Bitcoin and Ethereum ETFs disclosed by the SEC, the positions of 15 institutions in Bitcoin/Ethereum spot ETFs in 2024 include investment institutions, hedge funds, banks and pension funds. The cumulative value of positions of these institutions exceeds US$13.98 billion, of which Goldman Sachs, Millennium, SIG and Brevan Howard all hold positions of billions of dollars. Compared with previous statistics on the Bitcoin spot ETF positions of mainstream institutions in multiple quarters of 2024, the allocation of these institutions has increased significantly. From the perspective of position strategies, each company has different market expectations and asset allocation directions. Many institutions have carried out large-scale increases in holdings in the fourth quarter of 2024, especially BlackRock’s IBIT is the most attractive. In terms of position structure, most institutions mainly focus on Bitcoin spot ETF products. However, starting from Q4, many institutions have increased their investment in Ethereum ETF, mainly BlackRock’s ETHA, Fidelity’s FETH and Gray’s mini trust ETH is the main focus.
3. The dual effect of ETF+ halving
Different from previous halving cycles, this time the market has welcomed institutional capital inflows from Bitcoin Spot ETFs, which means that the supply-demand relationship will become more tilted:
The daily buying demand of ETF institutions is greater than the daily new bitcoins issued by miners, which may cause a supply squeeze, which in turn drives up prices.
Assuming that ETFs buy a net 1000 bitcoins per day, while miners produce only 450 bitcoins per day, this imbalance between supply and demand could lead to a sharp reduction in the supply of liquid bitcoins in the market, accelerating price increases.
Overall, the market structure of Bitcoin will undergo major changes in 2025, and halving +ETF capital inflows may jointly push prices to record highs.
4. Ethereum Petra upgrade
According to the latest news from the Ethereum Foundation, the Prague/Electra (Pectra) upgrade is scheduled to take place in early April 2025. Its most significant planned changes include: variable verifier effective pledges up to 2048 ETH, which will significantly change pledge distribution, verifier schedules, and improve the management of large pledge providers by integrating smaller pledges. Interaction between the execution layer and the consensus layer simplifies the exchange of data between the Eth1 execution block and the beacon chain block. This will greatly simplify deposits, activations, withdrawals, and exits, speed up these processes, laying the foundation for further interaction between the consensus and execution layers. Support for direct and cheaper BLS signing and zkSNARK verification in smart contracts through the new “pair-friendly” BLS12-381 precompilation. Let Rollups adopt blob transactions by increasing blob transaction thresholds and increasing the cost of calldata allows EOA to act as a programmable account, giving it multiple calls, Sponsorship and other advanced features As you can see, Pectra will have a significant impact on the end-user experience at the pledge and consensus layers, as well as the execution layer.
5. The outbreak of tokenization of real world assets (RWA)
RWA (Real World Assets) tokenization is becoming the next growth point in the blockchain industry. In 2025, the following asset classes may accelerate their launch:
Tokenization of treasury bonds, stocks, and real estate: Financial giants such as BlackRock and Fidelity have begun to deploy the on-chain treasury bond market, which may expand to stocks and real estate in the future.
Carbon credit, art, luxury goods NFT: The application of RWA will expand from financial assets to environmental protection, culture, collectibles and other fields.
DeFi + RWA combination: RWA will drive DeFi market growth and provide real-world asset support for decentralized finance.
3. The bull market strategy in 2025-parallel stability and flexibility to seize the dividends of the new cycle
The crypto market is standing at a critical turning point in 2025. There are both the long-term benefits brought by the institutional influx of Bitcoin ETFs and the possible recovery of global liquidity caused by the Federal Reserve’s interest rate cuts. At the same time, the expansion of the Ethereum ecosystem, real-world asset (RWA) tokenization, innovation on tracks such as Meme and SocialFi will also become important drivers for market growth. In this context, investors need to adopt a more systematic strategy, flexibly capture short-term trends on the basis of a stable layout of core assets, in order to maximize returns.
1. Three core logics of the market in 2025
To understand the market in 2025, we can summarize the following three core logics:
(1) The institutionalization process is accelerating, and Bitcoin and Ethereum have become the dual pillars of “digital gold” and “on-chain finance”
The successful launch of the Bitcoin ETF has changed the market structure, institutional investors have significantly increased acceptance of crypto assets, and the potential approval of the pledging Ethereum ETF may make ETH the second largest asset allocated for institutional funds. In 2025, the performance of BTC and ETH may be similar to the dual pillars of “digital gold + on-chain finance” and become core assets held by investors for a long time.
(2) Encryption ecosystem innovation accelerates, AI Agent, RWA, and DeFAI empower a new round of growth
As the crypto market matures, the market focus is shifting from pure speculation to areas with practical application value. In 2025, the full implementation of AI Agents in the encryption industry, the listing of real-world assets (RWA), and the deep integration of decentralized finance (DeFi) and AI may bring new investment opportunities and promote the total market value. Further expansion.
(3) The return of the liquidity-driven cycle, the Federal Reserve’s interest rate cuts and global funds flowing back into the crypto market
If the Federal Reserve starts a interest-rate cut cycle, funds from traditional financial markets may flow into the crypto market in pursuit of higher yields. At the same time, factors such as global economic uncertainty and geopolitical risks may accelerate capital’s demand for decentralized asset allocation. The recovery in liquidity will further stimulate the price rise of risky assets, making 2025 the peak period of a new bull market.
2. Summary of investment strategies: Long-term stability + short-term flexibility
Faced with the market environment in 2025, the optimal investment strategy is to hold core assets steadily for the long term, while flexibly adjusting allocation to seize short-term market hotspots. Specifically, the following strategies can be adopted:
(1) Long-term holding of Bitcoin (BTC) and Ethereum (ETH) as core configurations
BTC: Continue to play the role of digital gold, is favored by institutional funds, and its price is expected to exceed US$110,000 or higher.
ETH: Ethereum’s Layer 2 and RWA ecosystem growth may drive ETH’s valuation to rise, and capital inflows after the approval of the Pledged Ethereum Spot ETF will further push up prices.
Recommended positions: 60%-70% of the portfolio (long-term investments)
(2) Focus on growth tracks: DEPIN, RWA, Solana Ecology, DeFAI
DEPIN is expected to bring another wave of AI and application implementation and expansion.
RWA (Tokenized Bonds, Real Estate, Carbon Credit) will gradually introduce institutional funds and open up a trillion-dollar market.
Solana Ecology may continue to be an important growth point for Meme, DeFi, and NFT.
DeFAI: The combination of DeFi and AI may bring a new round of capital efficiency improvements.
Recommended positions: 20%-30% of the investment portfolio (medium-term investment)
(3) Flexibility to grasp short-term trends: Meme Track, SocialFi, AI Agent
Meme Track: Leading assets such as DOGE, SHIB, and WIF, as well as emerging Meme projects, may continue to be driven by market sentiment.
SocialFi: Combining Web3 social and finance may become a new growth point.
AI Agent: AI Agents will attract a new wave of technology upgrades and applications after the current market adjustment.
Recommended positions: 10%-20% of the portfolio (short-term speculation)
3. Potential market risks and coping strategies in 2025
Although the overall trend of the crypto market is improving in 2025, it is still necessary to be alert to the following potential risks and manage them accordingly:
4. Conclusion: Market outlook for 2025: The encryption industry is maturing and a new round of wealth opportunities is opening
Overall, 2025 is expected to become an important milestone in the development of the encryption market, mainly manifested in the following:
- Accelerating institutionalization: Bitcoin ETFs and Ethereum ETFs continue to promote the admission of institutional funds, increasing market maturity.
- Technological innovation drives growth: Technology upgrades such as AI Agent, DePIN, RWA, and Petra upgrades promote the practical development of the blockchain ecosystem.
- Liquidity recovery: The global interest rate cut process has further expanded, providing financial support for the encryption market, and market confidence has rebounded.
- The rise of emerging tracks: Investment opportunities driven by market sentiment such as Meme, DeFAI, and AI Agent still exist.
For investors, 2025 may be the year when the crypto market truly enters the mainstream financial system. The coexistence of market cyclical bull market and structural growth will bring unprecedented investment opportunities. In this environment, through reasonable asset allocation and dynamic adjustment strategies, we can not only enjoy the long-term growth dividends of the market, but also flexibly seize opportunities in short-term fluctuations to achieve maximum asset appreciation.
If 2021 is the year when DeFi and NFT exploded, 2025 may be the year when institutional capital and blockchain technology are deeply integrated. This year, the crypto market may no longer be just a game for “crypto native players”, but an important part of the global capital market.
