Author: Paul Veradittkit, Managing Partner of Pantera Capital, Coindesk; Compiler: Tao Zhu, Golden Finance
Every year, bulls and bears use short-term case studies to predict that cryptocurrencies will usher in doomsday or exponential growth. Every year, neither of these two dimensions is correct.
Some notable events this year: Ethereum's Dencun upgrade; elections, crypto ETFs, Wyoming's DUNA, wBTC controversy, Robinhood's Wells notice, Hyperliquid's nearly $2 billion airdrop, Bitcoin hit $100,000, and SEC Chairman Gary Gensler's resignation announcement in January.
2024 is the year when there is no major shock to the market. And, while it did not bring an explosion of new capital, it proved that more and more companies in the crypto ecosystem are sustainable. Bitcoin is worth $1.9 trillion and all other cryptocurrencies are worth $1.6 trillion. The market value of all cryptocurrencies has doubled since the beginning of the year.
Crypto’s diversification increases its resilience to shocks. Payments, DeFi, Gaming, ZK, Infrastructure, Consumer, and more are all growing segments. Now, each has its own funding ecosystem, its own market, its own incentives, and its own bottlenecks.
This year, at Pantera, we invested in companies that address specific problems in these ecosystems. Crypto gaming companies face issues in adopting Web3 data analytics tools, so we invested in Helika, a gaming analytics platform. Web3 AI products often face adoption challenges due to the fragmentation of the AI stack, so Sahara AI aims to create an all-in-one platform that allows permissionless contributions while maintaining a seamless Web2-like user experience.
Intent infrastructure is messy and order flow is fragmented, so Everclear standardizes the process by connecting all stakeholders. Integration of zkVM is complex, so Nexus uses modularity to cater to customers who only need part of the hyper-scalable layer. Building consumer applications faces the problem of attracting users, so we made our largest investment ever in TON, a blockchain that directly has Telegram’s 950 million monthly active users.
We enter 2025 on the back of possible regulatory clarity, continued mainstream interest, and rising cryptocurrency prices. Even after this summer’s lull, crypto users are entering the new year with a strong sense of optimism (or “greed”).
2024 Prediction Recap:
Before we dive into our 2025 predictions, let’s review how I predicted 2024. I rate myself with 1 being the least accurate and 5 being the most accurate.
Bitcoin’s resurgence and “Summer of DeFi 2.0”. Accuracy: 4/5
Tokenized social experiences for new consumer use cases. Accuracy: 2/5
Increase in TradFi-DeFi “bridges” such as stablecoins and mirror assets. Accuracy: 5/5
Crossover of modular blockchains and zero-knowledge proofs. Accuracy: 4/5
More computationally intensive applications move on-chain, such as AI and DePIN. Accuracy: 2/5
A “hub and spoke” model that integrates public blockchain ecosystems and application chains. Accuracy: 2/5
2025 Predictions
This year, I enlisted the help of investors from the Pantera team. I divided my predictions into two categories: uptrends and new ideas.
Uptrend:
RWAs (excluding stablecoins) will account for 30% of on-chain TVL by year end (currently 15%)
On-chain RWAs have grown over 60% this year to $13.7 billion. About 70% of RWAs are private credit, with most of the rest in Treasuries and commodities. Inflows into these categories are accelerating, and more sophisticated RWAs could be introduced by 2025.
First, private credit is accelerating due to infrastructure improvements.This number pretty much says it all, with nearly $4 billion more in asset value by 2024. As more companies enter the space, it is becoming easier to use private credit as a means of moving funds into crypto.
Second, there are trillions of dollars worth of Treasuries and commodities off-chain. On-chain Treasuries are worth only $2.67 billion, and their ability to generate yield (as opposed to stablecoins, which allow minters to earn interest) makes them a more attractive alternative to stablecoins. Blackrock’s BUIDL T-Bill fund has only $500 million on-chain, while it has tens of billions of dollars in government bills off-chain. Now that DeFi infrastructure has thoroughly embraced stablecoins and Treasury RWAs (integrating them into DeFi pools, lending markets, and Perps), the friction to adopting them has been greatly reduced. The same is true for commodities.
Finally, the scope of RWAs is currently limited to these basic products. The infrastructure for developing and maintaining RWA protocols has been greatly simplified, and operators have a better understanding of the risks and appropriate mitigations that come with on-chain operations. There are dedicated companies managing wallets, minting mechanisms, Sybil sensing, crypto neo-banks, etc., which means that introducing stocks, ETFs, bonds, and other more complex financial products on-chain may eventually be possible and feasible. These trends will only accelerate the use of RWAs until 2025.
Bitcoin-Fi
Last year, my prediction for Bitcoin Finance was strong, but it did not reach 1-2% of all Bitcoin TVL. This year, 1% of Bitcoin will participate in Bitcoin-Fi, driven by Bitcoin-native financial protocols that do not require bridging (such as Babylon), high returns, high Bitcoin prices, and increased demand for more BTC assets (Runes, Ordinals, BRC20).
Fintech Becomes Crypto Gateway
TON, Venmo, Paypal, Whatsapp have witnessed the growth of cryptocurrencies due to their neutrality. They are gateways through which users can interact with cryptocurrencies, but do not push specific applications or protocols; in fact, they can serve as simplified on-ramps for cryptocurrencies. They attract different users; TON has existing 950 million Telegram users, Venmo and Paypal have 500 million payment users each, and Whatsapp has 2.95 billion monthly active users.
Felix runs on Whatsapp and allows instant transfers via messaging, digital transfers, and cash pickup at partner locations like 7-11. Behind the scenes, they use stablecoins and Name on Stellar. Users can now buy crypto on Metamask using Venmo, Stripe acquired Bridge (a stablecoin company), and Robinhood acquired Bitstamp (a crypto exchange).
Whether intentionally or because of its ability to support third-party apps, every fintech will become a crypto gateway. Fintechs will become increasingly popular and may rival smaller centralized exchanges for crypto assets.
Unichain Becomes L2 Volume Leader
Uniswap has a TVL of nearly $6.5B, with 50-80K trades per day and $1-4B in daily volume. Arbitrum has ~$1.4B in daily volume (of which Uniswap accounts for a third), and Base has ~$1.5B in daily volume (of which Uniswap accounts for a quarter).
If Unichain only had half of Uniswap’s volume, it would easily surpass the largest L2 as the leading L2 by volume.
NFT Resurgence, but in an Application-Specific Way
NFTs are a tool in crypto, not a means to an end. NFTs are used as utilities in on-chain gaming, AI (trading model ownership), identity, and consumer applications.
Blackbird is a restaurant rewards app that integrates NFTs into customer recognition in its platform that connects Web3 to dining. By integrating an open, liquid, identifiable blockchain with restaurants, they can provide restaurants with consumer behavior data and easily create/create subscriptions, memberships, and discounts for customers.
Sofamon created web3 bitmojis (i.e. NFTs), called wearables, unlocking a financial layer for the emoji market. They recognize the growing relevance of on-chain IP and are willing to work with top KOLs and K-pop stars, for example, to combat digital counterfeiting. Story Protocol recently raised $80 million at a $2.25 billion valuation, with the broader goal of tokenizing the world's IP to put originality back at the heart of creative exploration and creators. IWC (Swiss luxury watch brand) has membership NFTs that can be used to purchase access to exclusive communities and events.
NFTs can be integrated into ID transactions, transfers, ownership, memberships, but can also be used to represent and value assets, leading to monetary and perhaps even speculative growth. With this flexibility comes the power of NFTs. The use cases will only increase.
Re-staking
By 2025, restaking protocols like Eigenlayer, Symbiotic, and Karak will finally launch their mainnets, which will pay AVS and slashing fees to operators.
Restaking attracts power as more networks use it. If a protocol uses infrastructure backed by a specific restaking protocol, it draws value from that connection, even if it’s not direct. It is through this power that protocols can lose relevance but still have huge valuations. We believe restaking remains a multi-billion dollar market, as more applications become appchains that leverage the restaking protocol or other protocols built on top of it.
New Idea:
zkTLS Brings Off-Chain Data On-Chain
zkTLS uses zero-knowledge proofs to prove the validity of data from the Web2 world. This new technology is not yet fully implemented, but when it is (hopefully) fully implemented this year, it will enable new types of data.
For example, zkTLS can be used to prove to other websites that data came from a certain website. Currently, there is no way to do this. The technology leverages advances in TEEs and MPCs, and can be further improved to allow certain data to remain confidential.
This is a new idea, but we predict that companies will step up to start building this idea and integrating it into on-chain services, such as verifiable oracles for non-financial data or cryptographically protected data oracles.
Regulatory Support
For the first time, the regulatory environment in the United States seems to be positive for cryptocurrencies. 278 pro-crypto House candidates were elected, while 122 anti-crypto candidates were elected. Anti-crypto SEC Chairman Gary Gensler announced that he would resign in January. Trump will reportedly nominate Paul Atkins to lead the SEC. He served as an SEC commissioner from 2002 to 2008, is an outspoken supporter of the crypto industry, and serves as an advisor to the Chamber of Digital Commerce, an organization dedicated to promoting cryptocurrency acceptance. Trump also appointed tech investor, former Yammer CEO, and PayPal COO David Sacks to lead the new role of "AI and Crypto Czar." Trump's statement said, "[David Sacks] will develop a legal framework so that the cryptocurrency industry gets the clarity it has been asking for."
We hope that the SEC litigation will end, and there will be a clear definition of cryptocurrency as a specific asset class, as well as tax considerations.
Brian
Alex
Kikyo