Author: Pantera Capital Managing Partner Paul Veradittkit, Coindesk; Compiled by Tao Zhu, Jinse Finance
Every year, both bulls and bears use short-term case studies to predict that cryptocurrencies will either face the apocalypse or experience exponential growth. Every year, both of these narratives turn out to be incorrect.
Some notable events this year: the Dencun upgrade of Ethereum; elections, crypto ETFs, Wyoming's DUNA, wBTC controversy, Robinhood's Wells notice, Hyperliquid's nearly $2 billion airdrop, Bitcoin reaching $100,000, and SEC Chairman Gary Gensler's resignation announcement in January.
2024 was a year without major shocks to the market. And while it did not bring an explosive influx 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 cap of all cryptocurrencies has doubled since the beginning of the year.
The diversification of cryptocurrencies has enhanced their ability to withstand shocks. Payment, DeFi, gaming, ZK, infrastructure, consumer, and other growing verticals. Now, each country has its own financing ecosystem, its own market, its own incentives, and its own bottlenecks.
This year, at Pantera, we invested in companies that address specific issues in these ecosystems. Crypto gaming companies face challenges when adopting Web3 data analytics tools, so we invested in the gaming analytics platform Helika. Due to the fragmentation of the AI stack, Web3 AI products often face adoption challenges, so Sahara AI aims to create an integrated platform that allows permissionless contributions while maintaining a seamless user experience similar to Web2.
Intent infrastructure is chaotic and order flow is fragmented, so Everclear is standardizing processes by connecting all stakeholders. The integration of zkVM is complex, so Nexus uses modularity to serve customers who only need part of the highly scalable layer. Building consumer applications faces the challenge of attracting users, so we made the largest investment ever in TON, a blockchain that directly owns Telegram's 950 million monthly active users.
We enter 2025 with the momentum of possible regulatory clarity, sustained mainstream interest, and rising cryptocurrency prices. Even after the slump of this past summer, cryptocurrency users are entering the new year with a strong sense of optimism (or "greed").
2024 Forecast Review:
Before delving into the 2025 forecast, let's review how I predicted 2024. I'll grade myself, with 1 being the least accurate and 5 being the most accurate.
The resurgence of Bitcoin and "DeFi Summer 2.0". Accuracy: 4/5
Tokenized social experiences for new consumer use cases. Accuracy: 2/5
The increase in TradFi-DeFi "bridges" like stablecoins and mirrored assets. Accuracy: 5/5
The cross-pollination of modular blockchains and zero-knowledge proofs. Accuracy: 4/5
More compute-intensive applications moving on-chain, such as AI and DePIN. Accuracy: 2/5
The "hub-and-spoke" model integrating public blockchain ecosystems and application chains. Accuracy: 2/5
2025 Forecast
This year, I've enlisted the help of the Pantera team of investor analysts. I've divided my forecast into two categories: Upward Trends and New Ideas.
Upward Trends:
By year-end, RWA (excluding stablecoins) will make up 30% of on-chain TVL (currently 15%)
This year, on-chain RWA grew by over 60%, reaching $13.7 billion. About 70% of the RWA is private credit, with the rest mostly being Treasuries and commodities. The inflows into these asset classes are accelerating, and by 2025 they may introduce more sophisticated RWA.
First, private credit is accelerating due to infrastructure improvements. The numbers almost tell the story, with the asset value increasing by nearly $4 billion by 2024. As more companies enter this space, using private credit as a means to move capital into cryptocurrencies is becoming increasingly easier.
Second, there are trillions of dollars' worth of Treasuries and off-chain commodities. The value of Treasuries on-chain is only $2.67 billion, and their ability to generate yield (unlike stablecoins, which allow minters to capture interest) makes them a more attractive alternative to stablecoins. Blackrock's BUIDL T-Bill fund has only $500 million on-chain, while it holds hundreds of billions of dollars in government bills off-chain. Now that DeFi infrastructure has fully embraced stablecoins and Treasury RWA (integrating them into DeFi pools, lending markets, and Perps), the friction in adopting them has greatly diminished. The same is true for commodities.
Finally, the current scope of RWA is limited to these basic products. The infrastructure for creating and maintaining RWA protocols has been greatly simplified, and operators have a better understanding of the risks and appropriate mitigations of on-chain operations. With specialized companies managing wallets, minting mechanisms, oracle feeds, crypto-native banks, and more, the introduction of stocks, ETFs, bonds, and other more complex financial products on-chain may ultimately be possible and feasible. These trends will only accelerate the use of RWA until 2025.
Bitcoin-Fi
Last year, my prediction for Bitcoin-Fi was quite strong, but it did not reach 1-2% of all Bitcoin TVL. This year, driven by Bitcoin-native financial protocols (like Babylon) that don't require bridges, high yields, high Bitcoin prices, and increased demand for more BTC assets (Runes, Ordinals, BRC20), 1% of Bitcoin will participate in Bitcoin-Fi.
Fintech Becomes the Gateway to Cryptocurrencies
TON, Venmo, Paypal, Whatsapp have witnessed the growth of cryptocurrencies due to their neutrality. They are gateways for users to interact with cryptocurrencies, but they don't push specific applications or protocols; in fact, they can serve as simplified entry points for cryptocurrencies. They attract different users; TON has the existing 950 million Telegram users, Venmo and Paypal have their own 500 million payment users, and Whatsapp has 2.95 billion monthly active users.
Felix runs on Whatsapp, allowing instant transfers via messages, enabling digital transfers as well as cash withdrawals at partner locations (like 7-11). Under the hood, they use stablecoins and Name on Stellar. Users can now use Venmo to buy cryptocurrencies on Metamask, Stripe acquired Bridge (a stablecoin company), and Robinhood acquired Bitstamp (a cryptocurrency exchange).
Whether intentionally or due to their support for third-party applications, every fintech will become a gateway to cryptocurrencies. Fintechs will become increasingly popular and may rival smaller centralized exchanges in terms of cryptocurrency asset scale.
Unichain Becomes the L2 Leader in Transaction Volume
Uniswap's TVL is close to $6.5 billion, with 50-80k transactions per day and $1-4 billion in daily trading volume. Arbitrum has around $1.4 billion in daily trading volume (with Uniswap accounting for a third of it), and Base has around $1.5 billion in daily trading volume (with Uniswap accounting for a quarter of it).
If Unichain only captures half of Uniswap's trading volume, it will easily surpass the largest L2 and become the leader in transaction volume.
NFTs Rebound, but in Specific Applications
NFTs are a tool in cryptocurrencies, not a means to an end. NFTs are being used as utilities in on-chain gaming, artificial intelligence (ownership of trading models), identity, and consumer applications.
Blackbird is a restaurant rewards app that integrates NFTs into its platform, which connects Web3 to the dining industry. By integrating the open, fluid, and identifiable blockchain with restaurants, they can provide consumer behavior data to restaurants and easily create/manage subscriptions, memberships, and discounts for customers.
Sofamon created web3 bitmojis (i.e. Non-Fungible Tokens), known as wearables, unlocking the financial layer of the emoji market. They recognized the growing relevance of on-chain intellectual property rights and are willing to collaborate with top KOLs and Korean pop stars, such as combating digital counterfeiting. Story Protocol recently raised $80 million at a $2.25 billion valuation, with its broader goal of tokenizing the world's intellectual property, making originality the core of creative exploration and creation again. IWC (Swiss luxury watch brand) has member Non-Fungible Tokens that can be used to purchase exclusive community and event access.
Non-Fungible Tokens can be integrated into ID transactions, transfers, ownership, and memberships, but can also be used to represent and appraise assets, leading to monetary growth, and potentially speculative growth. This flexibility is the power of Non-Fungible Tokens. Use cases will only increase.
Restaking
By 2025, restaking protocols like Eigenlayer, Symbiotic, and Karak will eventually launch their mainnet, which will pay operators in AVS and reduce fees.
As more networks use it, restaking will attract power. If a protocol uses infrastructure supported by a specific restaking protocol, it will extract value from that connection, even if it is not direct. It is through this power that protocols may lose relevance but still maintain massive valuations. We believe restaking remains a multi-billion dollar market as more applications become application chains and leverage restaking protocols or other protocols built on top of restaking.
New Ideas:
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 (hopefully) when it is fully deployed this year, it will bring new types of data.
For example, zkTLS can be used to prove to other websites that data comes from a certain website. Currently, there is no way to do this. The technology leverages advances in TEE and MPC, and can be further improved to allow for some data confidentiality.
This is a new idea, but we predict companies will start to aggressively build on this idea and integrate it into on-chain services, such as verifiable oracles for non-financial data or privacy-preserving data oracles.
Regulatory Support
The regulatory environment in the US seems to be taking a positive stance on cryptocurrencies for the first time. 278 pro-crypto House candidates were elected, while 122 anti-crypto candidates were elected. The anti-crypto SEC Chair Gary Gensler announced he will resign in January. It is reported that Trump will nominate Paul Atkins to lead the US Securities and Exchange Commission. He served as an SEC Commissioner from 2002 to 2008, outspokenly supporting the crypto industry, and has served as an advisor to the Digital Chamber, which is dedicated to promoting crypto adoption. Trump also appointed tech investor, former Yammer CEO, and former PayPal COO David Sacks to the new role of "AI and Crypto Czar". Trump's statement said, "[David Sacks] will develop a legal framework to provide the clarity the crypto industry has long demanded."
We hope the SEC's lawsuits can be resolved, leading to clear definitions of cryptocurrencies as a distinct asset class and considerations around taxation.
