Digital assets experienced two major waves of acceleration in the first half of 2024 with the approval of the exchange-traded products (ETPs)followed by an increase after the US presidential elections at the end of last year. The arrival of donald trump again to the White House injected more optimism into the market that trusts that favorable laws will be enacted for digital assets, which could have an impact on an increase in prices, but also in institutional adoption.
Now, after historic year of the cryptocurrency industry many investors wonder if they arrived too late. The experts at Fidelity Digital Assets (FDA), the crypto business arm for large institutional investors of the Wall Street giant, Fidelity Investment, tried to remove this doubt by analyzing how new events can interact with the macroeconomic environment and what all this could imply. for institutional portfolios.
In its recent report “2025 Look Ahead. Is it too late to enter digital assets?” FDA experts consider the increase in institutional adoption as one if not the main potential catalyst that the cryptoasset market has right now. In the chapter “The Possible Drivers of Mainstream Adoption and Diffusion in 2025,” Matt Hogan explains that the trend started with the approval of spot bitcoin exchange-traded funds (ETFs) early last year should accelerate in the next twelve months, but believes that real change will come when countries decide to invest in the king crypto asset.
“We expect 2025 to be the year this changes in both acceptance and adoption. That is, we anticipate that more nation states, central banks, sovereign wealth funds, and government treasuries will look to establish strategic positions in bitcoin. Perhaps these institutions will look to the playbook employed by Bhutan and El Salvador, and the substantial benefits they have been able to obtain from such positions in a relatively short period of time,” he explains.
Today the largest holders of bitcoin are the United States (20 billion dollars), China (19.2 billion), the United Kingdom (6.2 billion), Ukraine (4.7 billion), Bhutan (1.2 billion) and El Salvador (604 million). Of course, many of these countries have acquired this exposure through seizures and recoveries of assets associated with entities that used them for illicit financing purposes, “not necessarily because they want to establish a strategic and long-term position by possessing the asset.”
“In addition, some of these governments, such as the US, have certain requirements regarding the management or auction of this bitcoin and cannot count it as part of their treasury. Faced with challenges such as higher inflation, currency devaluation and deficits increasingly crushing taxes, not making any bitcoin allocation could become a bigger risk for nations than making one,” Hogan believes. In this sense, he believes that Trump’s plans to create a strategic reserve of bitcoin could be the turning point needed to take the next step in the institutional adoption of cryptocurrencies. Although this has been one of Trump’s most ambitious proposals during his campaign, it remains to be seen if he carries out this plan when his term begins on January 20.
It is worth remembering that Senator Lummis presented the Bitcoin Act of 2024 in the Senate in July of last year. “If the bill is enacted, we believe the political and financial game theory at play will force other nations to follow suit. However, if this strategy were adopted, nation-states would likely begin secretly accumulating bitcoin. This is because no nation has any incentive to announce these plans, as doing so could influence more buyers and drive up the price. Although it remains to be seen whether this strategy will be implemented in 2025, those who potentially adopt it will be incentivized to do so covertly,” explains the FDA expert.
But on the other hand, Hogan also believes that digital asset investment products will become popular this year, while underlining that it will be difficult to overstate the success of BTC and Ethereum ETFs in the spot markets. “With the initial success of these products, it would not be unreasonable to expect that 2025 will bring more structured passive and active digital asset management products to the world of traditional finance (TradFi),” he bets, adding that tokenization will be the star of 2025 and predicts the value of assets recorded on the blockchain will double from $14 billion to $30 billion.
“Tokenization is often perceived as a buzzword in the world of blockchain technology, but its potential in financial services and beyond is only beginning to be realized,” he noted. “Looking at the outlook for 2025, it is clear that investors are not too late to join the digital asset movement. In fact, we believe we could be entering the dawn of a new era for digital assets, one poised to encompass several years, if not decades. In this era, digital assets could permeate various sectors: industries, technologies, fields, balance sheets and even nation-states. The fundamental question for investors now is not whether to participate or not, but to what extent. will be actively involved in this transformation,” concludes the FDA expert.
Source: Ambito
