January 14th, 2025
Market Overview:
Digital assets experienced major declines this week, as US economic data signalled prolonged hawkish policies and decreased the odds of rate cuts.
- Bitcoin dropped back below $100,000 (and briefly threatened to lose the $90,000 level), reversing last week’s strong start to the year
- Bitcoin experienced a consistent decline throughout the week, from a Tuesday high of $101,830 to a Monday low of $90,120
- This decline was primarily spurred by the release of new US employment data, leading to expectations of continued hawkish Federal Reserve policy, causing drastic drops across a variety of asset classes, including crypto
- A more hawkish Fed undermines perceived risk assets through the prospect of fewer (if any) future rate cuts; leading some analysts such as CoinShares’ James Butterfill to state that “the post-election honeymoon is over, and macroeconomic data is once again a key driver of asset prices”
- However, Butterfill was also keen to stress that despite current pullbacks, Bitcoin has been the best-performing asset across all asset classes for 10 of the last 13 years
- Ether experienced an even stronger decline after outperforming Bitcoin the previous week, falling from a Tuesday high of $3,675 to a Monday low of $2,997
- Overall industry market capitalisation fell to $3.29tn
- According to industry monitoring site DeFi Llama, total value locked in DeFi dropped around $15bn to reach $115.8bn
Digital assets experienced a challenging week, with significant declines as the latest US economic data suggested prolonged hawkish Fed policy. However, Fidelity painted an optimistic picture for the year ahead, and the industry looked forward to Donald Trump’s forthcoming inauguration as the SEC faced a final legal setback of Gary Gensler’s leadership. Stablecoin giant Tether announced plans for a new headquarters in El Salvador, banking giant Standard Chartered kicked off crypto custody services in the EU, and much more.
What happened: Fidelity publishes digital asset forecast for 2025
How is this significant?
- This week, Fidelity Digital Assets published its "2025 Look Ahead", exploring many anticipated trends and events for 2025
- The 34-page report was authored by numerous analysts across Fidelity and its digital asset arm, with several insights and predictions for the coming year
- 1) Investors Are Not "Too Late", as "2025 has the potential to be the year that is looked back on as the pivotal time where the 'chasm was crossed' as digital assets begin to take root and embed themselves into multiple fields and industries"
- While Fidelity acknowledges that it might be too late for those seeking frothy frenzied speculation "we are still incredibly early in terms of this new era of sustainable adoption, diffusion, and integration"
- 2) Digital Assets are entering "mass adoption" stage; the firm posits that crypto's evolution has parallels to the development of the internet, and is now geared up to enter the cultural conversation, having emerged from the "Regulatory Attention" phase.
- 3) Macro should support Bitcoin (if stagflation doesn't occur); "any financial market disruptions in the next year will be met with even more liquidity as it has become the central banker’s tool of choice to quell volatility and dislocations. This, in turn, is historically beneficial for digital asset prices"
- 4) Solana could outperform Ether, but Ethereum's long-term future looks bright; Fidelity notes that Solana outperformed Ethereum in price over the last few years, and may do so again
- However, the former's focus on retail-based memecoin trading means "Ethereum fundamentals are slightly less dependent on speculation and may be less volatile over the long term"
- 5) Stablecoins will evolve, as "additional measures will be implemented to address counterparty and compliance risks, facilitate integration with traditional payment and lending rails, improve cross-chain interoperability, and meet the demand for yield-bearing assets"
- 6) Bitcoin could become a major reserve asset; "We anticipate more nation-states, central banks, sovereign wealth funds, and government treasuries will look to establish strategic positions in Bitcoin... Not making any Bitcoin allocation could become more of a risk to nations than making one"
- 7) Tokenisation may be 2025's "killer app"; "The total nominal amount of real-world assets on-chain currently sits at $14 billion, up from $8 billion in 2023. In our opinion, it would not be unreasonable to expect this number to double from where it currently is one year from now"
- Fidelity concludes that 2025 is "Not Too Late, and Hopefully Early to a New Era".
What happened: ETF News
How is this significant?
- Digital asset ETFs faced a substantial recent run of outflows following US economic data that reduced future rate cut chances, but also celebrated one year of exceptional trading success
- According to CoinShares data published on Monday, digital asset investment products saw modest inflows for the trading week ending Friday the 10th—but net inflows masked the scale of late macro-driven outflows
- In total, Bitcoin products experienced $214m inflows last week, but Ethereum equivalents lost $256m
- Additionally, ETFs faced a truncated trading period, following state mourning on Thursday for the death of president Jimmy Carter
- Spot Bitcoin ETFs were dominated by outflows since last Tuesday, when they added a modest $52.4m
- These daily inflows were only enabled thanks to a very strong day’s performance by BlackRock’s IBIT, which added $596m
- Since then, Bitcoin funds have faced significant consecutive daily outflows, of $568.8m (the second-largest ever), $149.4m, and $284.1m
- The largest daily outflows this week were logged by Fidelity’s FBTC on Wednesday, which surrendered $258.7m
- This was one of three nine-figure outflows on Wednesday, alongside IBIT ($124m) and ARK Investments’ ARKB ($148.3m)
- Despite Friday’s large outflows, three funds added (modest) inflows; FBTC ($16.6m), ARKB ($5.7m), and—uncharacteristically—Grayscale’s 1.5% fee GBTC ($13.5m), the only fund to have experienced net outflows since launch
- Despite depressed weekly trading, the 11th of January marked one year since spot Bitcoin ETFs began trading in the US; and it was a record-breaking year
- In total, Bitcoin ETFs generated over $660m in trading volume
- BlackRock’s IBIT became the most successful new ETF ever, accruing over $50bn of assets in its first year
- Meanwhile, after one year, FBTC stands at around $25bn AUM, and GBTC at $20bn (although this figure actually represents substantial overall outflows, as GBTC launched with $29bn AUM)
- On an inflation-adjusted basis, four Bitcoin ETFs sit within the top 20 ETF launches of all time; IBIT, FBTC, ARKB, and Bitwise’s BITB
- Bloomberg’s James Seyffart called the funds’ first year “massive”, and added “IBIT’s growth is unprecedented. It’s the fastest ETF to reach most milestones, faster than any other ETF in any asset class”
- According to Bitstamp CEO Bobby Zagotta “You just can’t underestimate the importance of that step when that first Bitcoin ETF was approved. It was two things: it’s a level of legitimacy, meaning a major government regulator had to recognize it as an asset class and that spoke volumes. The second thing it did is it provided exposure to bitcoin on a very well known, trusted pathway”
- Spot Ether ETFs experienced consistent outflows throughout the week, as not a single fund registered inflows since last Tuesday
- The most notable outflows came from Fidelity’s FETH, which shed $147.7m (of $159.4m total) on Wednesday
- FETH accounted for the vast majority of weekly outflows, as almost all other funds (including BlackRock’s market-leading ETHA) simply posted net-zero flows
- Elsewhere in ETFs, BlackRock launched an ETF for its IBIT ETF in Canada
- No, that isn’t a typo above—rather than directly buying and holding Bitcoin, the Cboe-based Canadian IBIT “invests all or substantially all of its assets in iShares Bitcoin Trust ETF (‘US IBIT’)”
- Helen Hayes of iShares Canada stated in a press release “The iShares Fund provides Canadian investors with a convenient and cost-effective way to gain exposure to Bitcoin and helps remove the operational and custody complexities of holding Bitcoin directly”
- In other ETF news, broadly crypto-themed ETFs continue to launch, including the YieldMax Crypto Industry and Tech Portfolio Income Option ETF
What happened: Stablecoin giant Tether plans El Salvador headquarters
How is this significant?
- On Monday, leading stablecoin issuer Tether revealed plans to move its corporate headquarters—to El Salvador, the first country in the world to adopt Bitcoin as legal tender back in 2021
- This decision comes after Tether was granted a DASP (digital asset service provider) licence by the Central American nation
- The company is currently incorporated in the British Virgin Islands; marking a rare case of a major corporation onshoring itself and moving operations to a larger financial jurisdiction
- In a blog post, Tether acknowledged El Salvador’s forward-looking stance on digital assets, stating “El Salvador is rapidly establishing itself as a global hub for digital assets and technology innovation. With its forward-thinking policies, favorable regulatory environment, and a growing Bitcoin-savvy community, the country has become an ideal destination for companies leading the digital finance revolution”
- Tether CEO Paolo Ardoino added “This decision is a natural progression for Tether as it allows us to build a new home, foster collaboration, and strengthen our focus on emerging markets”
- El Salvador has amassed a Bitcoin stockpile of around $600m thus far, whilst Tether-associated wallets hold approximately $7.7bn
- In other Tether news, Bloomberg reported that the firm is increasing its “strategic expansion” into A.I. by hiring A.I. filmmakers
- Ardoino called it a “significant focus area”, and commented “AI-based roles, particularly in filmmaking, bring unique advantages that align with Tether’s vision of innovation and efficiency, from scale to speed and cost being a few examples”
- Elsewhere in the stablecoin space, Bloomberg reported rising real-world payment utilisation of the assets, ranging from multi-million property deals in Dubai, to Tanzanian cooking oil imports
- In other nation-level news, the new GMC special administrative region within Bhutan (which stealthily became a Bitcoin mining powerhouse) announced the official adoption of large-cap digital assets within its strategic reserves
- Ethiopia signed an agreement with American Bitcoin mining firm BIT, allowing the latter to leverage cheap electricity prices in the former, whilst Ethiopia benefits from the introduction of mining hardware and better utilisation of its power grid
- Additionally, the governor of the Czech National Bank confirmed in local media that he has proposed Bitcoin exposure as a diversification strategy; “Sure, I consider Bitcoin, but there are seven of us on the board. Bitcoin is an interesting option for diversification against other assets”
What happened: Institutional demand doubles crypto OTC trading in the last year
How is this significant?
- A new report published by Finery Markets found that over-the-counter trades within the digital asset market more than doubled last year, growing by 106%
- The analysts highlighted ETF launches and “regulated market access” as a key factor in this growth, writing “Traditional financial leaders shifted their stance from scepticism to neutrality or acceptance as the industry matured, with institutions either entering crypto markets or planning acquisitions to establish market positions”
- In particular, Q4 saw significant growth thanks to post-election optimism in US markets, exhibiting 177% growth year-on-year
- Tim Ogilvie, Kraken’s head of institutional trading, told industry publication TheBlock that the exchange’s OTC trading was up 220% in 2024 “Long story short, OTC is going gangbusters right now. Prices are up, but volume is way up”
- Finery added “Pro-crypto sentiment in US policy and the economy opens the door to a more favorable environment for the digital asset sector. This could set the stage in 2025 for rapid mass adoption, driven by demand from US-based institutions”
- Digital asset VC funding also experienced a substantial Q4 increase, reaching $4bn across 687 deals—the strongest quarter in two years
- A new report of 430 financial advisors—commissioned by Bitwise Asset Management—backed up increased institutional exposure
- Survey responses revealed that the number of financial advisors’ allocating to digital assets for clients increased to 22% last year—doubling the 11% figure from 2023
- Additionally, the survey found 56% of advisors said they were “more likely” to invest in the asset class this year, following last year’s US election results
What happened: Digital asset exchange Gemini appoints executives for European push
How is this significant?
- Crypto exchange Gemini—co-founded by the Winklevoss twins—is ramping up its European expansion plans, making several executive hires to speed the process
- In particular, former Kraken derivatives chief Mark Jennings joined the group as its new European head, marking the latest chapter in a career that also included fintech heavyweights Citigroup, TP ICAP, and Credit Suisse
- Additionally, former Stake executive Daniel Slutzkin will lead the firm’s UK business unit under the country’s forthcoming regulatory regime, and former APAC general counsel Vijay Selvam will head the firm’s legal efforts as new global legal counsel
- The company has reportedly decided to increase its EU presence after the single-market MiCA regulations went live at the start of 2025, providing greater operational clarity to digital asset businesses
- Gemini previously selected Dublin as its European headquarters, and has plenty of room for growth; Kaiko research data shows that the firm only accounts for around 1% of European trading volume at present
What happened: Standard Chartered launches crypto custody services in Europe
How is this significant?
- British banking giant Standard Chartered this week announced the formation of a new entity in Luxembourg, acting as its regulatory entry to offer crypto custody services within the EU
- According to the bank’s press release, the move is “part of Standard Chartered’s global digital asset strategy, enabling broadening of its digital asset portfolio [following] the recent launch of digital asset custody services in the UAE, with Luxembourg having a well-balanced regulatory and financial environment in order to meet growing client demand in the EU”
- Margaret Harwood-Jones, the bank’s Global Head of Financing & Securities Services, stated that “We are really excited to be able to offer our digital asset custody services, enabling us to support our clients with a product that is changing the landscape of traditional finance… We are incredibly proud to be paving the way for our institutional clients to access the digital asset ecosystem”
- Former Société Générale innovation head Laurent Marochini will be CEO of the new Luxembourg unit
- Another European banking giant, Italy’s Intesa Sanpaolo revealed its first-ever Bitcoin purchases in a client email this week, purchasing 11 Bitcoin for €1m on Monday
- This follows on from the expansion of its digital assets desk two months ago
What happened: Political news—industry anticipates Trump inauguration
How is this significant?
- With the imminent inauguration of Donald Trump on January 20th, reporting once again focused on the industry’s hopes for the new administration after high spending during the election season
- Several digital asset CEOs reportedly visited Mar-a-Lago in the last few weeks to consult on potential policies and offer inauguration donations, including Circle chief Jeremy Allaire, Ripple executives Brad Garlinghouse and Stuart Alderoty, and Crypto.com CEO Kris Marszalek
- The Washington Post reported “On Friday, industry bigwigs will attend a ‘Crypto Ball’ to celebrate ‘the first crypto president’, according to an invitation viewed by The Post”
- The paper noted that at least ten cabinet members have links to crypto VC giants Peter Thiel and Mark Andreessen, alongside DOGE (department of government efficiency) head Elon Musk
- Andreessen was a vocal critic of industry debanking efforts dubbed “Operation Chokepoint 2.0”; efforts denied by regulators, but largely substantiated by redacted FDIC documents uncovered through a Coinbase lawsuit
- Although the FDIC didn’t explicitly bar banks from taking crypto clients, the documents revealed that banks were ordered to pause and refrain expansion of client crypto services
- Coinbase chief legal officer Paul Grewal noted “If bank regulators are willing to tell people to stand down from this legal business, what other legitimate legal activities are they willing to force banks to drop?”
- The Washington Post predicts expeditious efforts on digital asset regulation, reporting that “the Trump team has made it very clear this is a priority”
- Additionally, “[Crypto Czar David] Sacks and members of the Trump transition team have been working closely with crypto leaders to finalise a legislative strategy, and Trump is expected to issue executive orders on the first day of his presidency that may address issues including de-banking and the repeal of a controversial crypto accounting policy requiring banks holding digital assets to count them as liabilities on the bank’s own balance sheet”
- Outgoing SEC chair Gary Gensler used his last few days in power to advocate for more regulatory scrutiny and repeat prior assertions that the industry is “rife with bad actors”
- However, the last days of his administration included more legal setbacks that appeared to contravene the SEC’s claims concerning crypto
- The SEC was once again dubbed “arbitrary and capricious” by a bipartisan three-judge appeals court panel as part of Coinbase’s lawsuit regarding the agency’s refusal to provide transparent explanation of its digital asset policy
- This caThis came less than a week after a judge froze the SEC’s lawsuit against Coinbase, citing “Conflicting authority… regarding Howey’s application to crypto-assets”
- peals court judges opined that the SEC hasn’t sufficiently argued for why it ignored Coinbase’s request for clear industry rules; “Because we believe the SEC’s order was conclusory and insufficiently reasoned, and thus arbitrary and capricious, we grant Coinbase’s petition in part and remand to the SEC for a more complete explanation”
- Incoming SEC chair Paul Atkins is a noted digital asset supporter, and could lead to a change in agency policy—although it should be noted that Gensler’s appointment was initially well-received too thanks to his history teaching a “blockchain and money” course at MIT
What happened: MicroStrategy makes $243m Bitcoin purchase amidst market pullback
How is this significant?
- For the tenth week in a row, corporate Bitcoin leader MicroStrategy announced a substantial Bitcoin purchase to further increase its considerable holdings
- According to the firm’s latest SEC 8-K filings, it spent around $243m to purchase 2,530 Bitcoin at an average price of $95,972
- In the last ten weeks, the company has spent $18bn acquiring Bitcoin
- This move came within a week of a new $2bn perpetual preferred stock sale as part of an expanded Bitcoin financing strategy by the enterprise software firm
- This brings the firm’s overall holdings to 450,000 Bitcoin; around 2.1% of the asset’s total supply
- Other companies to make recent significant Bitcoin purchases include Hong Kong’s Boyaa Interactive, Semler Scientific, Japan’s Metaplanet, KULR Technologies, China’s Cango, and Singapore’s Genius Group
What happened: Mantra blockchain to tokenise $1bn of real-world assets
How is this significant?
- Layer-1 blockchain Mantra will tokenise over $1bn worth of assets from Emirati property developer DAMAC, according to a new agreement between the two parties
- According to DAMAC managing director Amira Sajwani, “Tokenising our assets will provide investors with a secure, transparent and convenient way to access a wide range of investment opportunities”
- Industry publication Coindesk reported that Mantra previously inked a deal with another Middle East property developer, MAG Group, to tokenise $500m of real estate
- In other tokenisation news, digital asset market makers Wintermute told Bloomberg that it will offer OTC trading of BlackRock’s on-chain money market BUIDL fund; the largest tokenised fund currently trading