When the curtain closes on 2024, investors will be singing Wall Street's praises. The rise of artificial intelligence (AI) and stock-split euphoria helped lift the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite to multiple record-closing highs.
However, Wall Street's gains pale in comparison to the phenomenal year delivered by the cryptocurrencies. As of this writing in the late evening on Dec. 28, the aggregate value of the entire crypto market has surged from $1.71 trillion to $3.32 trillion on a year-to-date basis. This 94% gain triples the return of the growth-centric Nasdaq Composite in 2024.
Bitcoin (BTC -0.72%) led the charge, with the world's largest digital currency by market cap adding north of $1 trillion in value, which is good for a 125% year-to-date climb. The launch of spot Bitcoin exchange-traded funds (ETFs) played a key role in facilitating mainstream investment in the leading cryptocurrency in 2024.
Image source: Getty Images.
Additionally, Donald Trump's November victory helped lift Bitcoin above $100,000 per token. Trump and soon-to-be Vice President JD Vance have a favorable view toward Bitcoin.
But the investment landscape is all about looking forward. Following another banner year, here are five cryptocurrency predictions for 2025.
1. The crypto bear market will return
The first prediction promises to be an unpopular one: the bear market will return.
The stars aligned perfectly for Bitcoin in 2024. The debut of spot Bitcoin ETFs spurred required buying, and the halving event in April 2024 reduced the pace at which new Bitcoin are being mined. However, the biggest catalyst of all for the world's largest digital currency might just be MicroStrategy's (MSTR -4.40%) ascension as the world's first "Bitcoin Treasury Company."
MicroStrategy CEO Michael Saylor has been a longtime supporter of the world's top digital currency and has overseen the purchase of 442,262 Bitcoin at an average cost of $62,257, as of Dec. 23. Saylor has financed MicroStrategy's big bet on Bitcoin by selling convertible debt and issuing shares of his company's stock. He's currently seeking approval to increase his company's outstanding share count by up to 10 billion to 10.33 billion shares.
While this leveraged bet on Bitcoin has some investors believing in the fabled "infinite money glitch," we've witnessed leveraged investment scenarios fail time and again on Wall Street. To make matters worse, MicroStrategy potentially lacks the operating cash flow from its AI-enterprise analytics software segment to even cover the servicing costs on its debt.
Without sustained purchases from MicroStrategy, which seem likely to fade at some point in the new year, Bitcoin's upward momentum will taper. With key catalysts now in the rearview mirror and Bitcoin's history filled with jaw-dropping corrections, a bear market decline of 20% or greater is expected.
2. Ethereum will handily outperform Bitcoin
Secondly, don't be surprised to see the second-largest cryptocurrency by market value, Ethereum (ETH -1.67%), notably outperform Bitcoin in the new year. For some context, Ethereum's 48% year-to-date gain significantly lags the 125% increase registered by Bitcoin.
One of the tangible catalysts for Ethereum is the approval of more than a half-dozen spot Ethereum ETFs in May 2024 by the Securities and Exchange Commission (SEC). Creating a path for everyday investors to buy Ethereum without having to purchase it on an obscure crypto exchange can provide the same lift for crypto's No. 2 coin that we saw from Bitcoin in 2024.
Furthermore, history is on Ethereum's side. The last time we witnessed a gap this wide in overall cryptocurrency market cap dominance between Bitcoin and Ethereum was in early 2021. Between June 2020 and June 2021, Ethereum more than tripled the return of Bitcoin. Historically speaking, when Ethereum's dominance dips, relative to Bitcoin, investors flock to crypto's No. 2 coin.
The Shiba Inu is the mascot for meme coins Dogecoin and Shiba Inu. Image source: Getty Images.
3. The ultra-popular dog-themed meme coins will lose half of their value
While altcoins are expected to be a hot commodity in 2025 following the huge rally in Bitcoin, ultra-popular meme tokens Dogecoin (DOGE -1.50%) and Shiba Inu (SHIB -1.58%) are likely to lose 50% of their value.
Dogecoin rocketed higher following Trump's November victory. This rally has to do with Trump appointing Tesla CEO Elon Musk to head the Department of Government Efficiency (DOGE) with Vivek Ramaswamy. Musk has admitted to owning Dogecoin and has previously offered to assist developers with improving its network. His appointment to head DOGE for the Trump administration has been viewed as a positive for the emotion-driven Dogecoin.
However, the story is always the same with Dogecoin and Shiba Inu: They create a lot of buzz on social media but have virtually no real-world utility and offer little in the way of differentiation from a long list of other cryptocurrency projects.
History has repeatedly shown that when Bitcoin weakens, meme coins like Dogecoin and Shiba Inu get hit even harder. With no true catalysts or competitive advantages for either token, expect both to have a rough 2025.
4. A number of new spot crypto ETFs will be approved
The new year can also pave the way for spot ETFs beyond Bitcoin and Ethereum to list on Wall Street's major stock exchanges.
SEC Chair Gary Gensler, whose been a harsh critic of cryptocurrencies, has already announced plans to step down from his post on the day Trump is inaugurated (Jan. 20, 2025). With the incoming administration favoring clarity on the laws governing cryptocurrencies, the path to list crypto spot ETFs should be significantly easier in 2025 (and beyond).
The logical candidates to have spot ETFs listed next are crypto's largest digital currencies behind Bitcoin and Ethereum, such as Solana (SOL -2.29%), XRP (XRP 1.69%), and possibly even Cardano. Issuers have already filed for spot ETFs with the SEC for Solana and XRP.
But the one thing to note about crypto legislation is that it's not exactly a priority for the incoming administration. While simplifying the crypto landscape is bound to be on the docket at some point, it's likely to take a back seat to tax, trade, and immigration policy until the latter-half of 2025.
5. A U.S. Bitcoin strategic reserve won't be established
Last but not least, there's been a lot of buzz surrounding President-elect Trump's desire to establish a "Bitcoin strategic reserve." Although the U.S. already holds north of 200,000 Bitcoin (as of November 2024), which it's seized from criminals, Trump's plan would entail hanging onto existing Bitcoin (i.e., no longer selling them), as well as purposefully purchasing more.
"We're going to do something great with crypto because we don't want China or anybody else -- and not just China, but others are embracing it -- and we want to be the head," said the president-elect in an interview with CNBC just a few weeks ago.
However, establishing a Bitcoin strategic reserve in the U.S. will be a tall task in 2025.
For instance, funding a strategic reserve will more than likely require approval from Congress. Even with Republicans controlling both houses of Congress, support for digital currencies isn't widespread among the GOP. Getting a majority of elected officials to approve purchases of Bitcoin amid large federal deficits doesn't appear doable.
Additionally, Federal Reserve Chair Jerome Powell recently noted the central bank has no intention of holding Bitcoin, which puts another kink in Trump's proposal to create a Bitcoin reserve.
To round things out, the analysts at Barclays believe funding a Bitcoin strategic reserve would require the issuance of new Treasury debt, per Reuters. This is bound to face significant opposition given America's already ballooning national debt.
