Coinbase Report: Outlook for the entire crypto market in 2025

Оригинальный автор: Кинбейс

Оригинальный перевод: Феликс, PANews

Looking ahead to 2025, the криптовалюта market is poised for transformative growth. The maturity of the asset class continues to gain momentum as institutional adoption increases and use cases expand across sectors. Just in the past year, spot ETFs were approved in the U.S., the tokenization of financial products increased significantly, and stablecoins grew significantly and became further integrated into global payment frameworks.

Getting there was no easy task, and while it’s easy to view these successes as the culmination of years of hard work, there’s a growing consensus that they’re actually just the beginning of a much bigger journey.

Cryptocurrency’s progress is even more impressive considering that just a year ago, the asset class was reeling from rising interest rates, regulatory crackdowns, and an uncertain path forward. Despite all of these challenges, cryptocurrencies have emerged as a solid alternative asset, a testament to their resilience.

From a market perspective, however, the 2024 uptrend does present some notable differences from previous bull cycles. Some of these are superficial: “Web3” has been replaced by the more appropriate “onchain.” Others are more profound: the need for fundamentals has begun to replace the influence of narrative-driven investment strategies, in part due to increased institutional participation.

Furthermore, not only has Bitcoin’s dominance surged, but innovations in DeFi are pushing the boundaries of blockchain—making the foundations of a new financial ecosystem within reach. Central banks and major financial institutions around the world are discussing how crypto can make asset issuance, trading, and record-keeping more efficient.

Looking ahead, the current crypto space presents many promising developments. At the forefront of disruption, we focus on decentralized peer-to-peer exchanges, decentralized prediction markets, and artificial intelligence (AI) agents equipped with crypto wallets. On the institutional side, there is great potential in stablecoins and payments (bringing crypto and fiat banking solutions closer together), low-collateral on-chain lending (facilitated by on-chain credit scoring), and compliant on-chain capital formation.

Despite the high level of cryptocurrency awareness, the technology remains obscure to many due to its novel technical structure. But technological innovation is expected to change this as more and more projects focus on improving the user experience by abstracting blockchain complexity and enhancing smart contract functionality. Success in this regard could expand the accessibility of cryptocurrency to new users.

Meanwhile, the U.S. has laid clearer regulatory groundwork in 2024, well before the November election. This sets the stage for greater progress in 2025, potentially cementing digital assets’ place in mainstream finance.

As the regulatory and technological landscape evolves, the crypto ecosystem is expected to see substantial growth as wider adoption drives the industry closer to achieving its full potential. 2025 will be a pivotal year, with breakthroughs and advancements likely to help shape the long-term trajectory of the crypto industry for decades to come.

Theme 1: Macro Roadmap to 2025

What the Fed Wants and What the Fed Needs

Trump’s victory in the 2024 U.S. presidential election was the most significant crypto market catalyst in Q4 24, driving Bitcoin up 4-5 standard deviations (compared to the three-month average). But looking ahead, the short-term fiscal policy response will not be as meaningful as the long-term direction of monetary policy, especially with a critical moment approaching for the Federal Reserve. However, separating the two may not be so easy. The Federal Reserve is expected to continue to ease monetary policy in 2025, but the pace may depend on the expansionary nature of the next set of fiscal policies. This is because tax cuts and tariffs are likely to push up inflation, and while the headline CPI has fallen to 2.7% year-on-year, the core CPI is still hovering around 3.3%, above the Fed’s target.

Regardless, the Fed wants to curb inflation from current levels, which means prices need to rise but slow from now on to help achieve its other mandate, full employment. Households, on the other hand, have been asking for lower prices after experiencing the pain of rising prices over the past two years. However, while falling prices may be politically expedient, they risk falling into a vicious cycle that eventually leads to a recession.

Nonetheless, a soft landing seems to be the base case for now, thanks to lower long-term interest rates and American Exceptionalism 2.0. At this point, the Fed’s rate cuts are just a formality, as credit conditions are already accommodative, which is a supportive backdrop for crypto performance over the next 1-2 quarters. At the same time, the next administration’s projected deficit spending (if realized) should translate into greater risk-taking (cryptocurrency purchases) as more dollars circulate in the economy.

The most crypto-friendly US Congress ever

After years of struggling with regulatory ambiguity, the next legislative session in the United States may bring greater regulatory clarity to the crypto industry. The election sent a strong message to Washington that the public is dissatisfied with the current financial system and wants change. From a market perspective, bipartisan support for cryptocurrencies in both the House of Representatives and the Senate means that U.S. regulation may shift from a headwind to a tailwind in 2025.

A new element of the discussion was the possibility of establishing a strategic Bitcoin reserve. After the Bitcoin Nashville conference, Senator Cynthia Lummis (WY) not only introduced the Bitcoin Act in July 2024, but also the Pennsylvania Bitcoin Strategic Reserve Act. If passed, the latter would allow the state treasurer to invest up to 10% of the general fund in Bitcoin or other crypto-based instruments. Michigan and Wisconsin already hold cryptocurrencies or cryptocurrency ETFs in their pension funds, and Florida is not far behind. But creating a strategic Bitcoin reserve may face some challenges, such as the legal limit on the amount of Bitcoin that can be held on the Feds balance sheet.

Meanwhile, the U.S. is not the only jurisdiction poised to make progress on regulation. The growth of global crypto demand is also changing the competitive landscape of regulation internationally. The European Union’s Рынок for Crypto-Assets Regulation (or MiCA) is being implemented in phases, providing a clear framework for the industry. Many G20 countries and major financial centers such as the UK, UAE, Hong Kong, and Singapore are also actively developing rules to accommodate digital assets to create a more favorable environment for innovation and growth.

Crypto ETF 2.0

The U.S. approval of spot Bitcoin and Ethereum exchange-traded products and funds (ETPs and ETFs) was a watershed moment for the crypto economy, with net inflows of $30.7 billion since inception (about 11 months). This far exceeds the $4.8 billion (adjusted for inflation) that the SPDR Gold Shares ETF (GLD) attracted in its first year after its launch in October 2004. According to Bloomberg, this puts these instruments in the top 0.1% of the approximately 5,500 new ETFs launched in the past 30 years.

ETFs have reshaped the market dynamics of BTC and ETH by establishing new demand anchors, driving Bitcoin’s dominance from 52% at the start of the year to 62% by November 2024. According to the latest 13-F filings, almost every type of institution is now a holder of these products, including endowments, pension funds, hedge funds, investment advisors, and family offices. At the same time, the introduction of US-regulated options on these products (November 2024) may enhance risk management and improve the cost-effectiveness of these assets.

Looking ahead, the industry is focused on the possibility that issuers will expand the range of exchange-traded products to include other tokens such as XRP, SOL, LTC, and HBAR, although potential approvals may only have a positive impact on a limited group of assets in the short term. But of greater concern is what would happen if the US SEC allowed collateralized ETFs or removed the mandate for the creation and redemption of ETF shares in cash rather than in-kind. The latter mandate introduces a settlement delay between when an authorized participant (AP) receives a buy or sell order and when the issuer can create or redeem the corresponding shares. This delay, in turn, creates a misalignment between the on-screen ETF share price and the actual net asset value (NAV).

Introducing physical creation and redemption will not only improve price consistency between share price and NAV, but also help narrow the spread of ETF shares. That is, participants (APs) do not need to quote cash above the trading price of Bitcoin, thereby reducing costs and improving efficiency. The current cash-based model also brings other effects related to the continuous buying and selling of BTC and ETH, such as increased price volatility and triggering taxable results, which do not apply to physical transactions.

Stablecoins, the “killer app” of cryptocurrency

Stablecoins have seen massive growth in 2024, with the total market cap increasing by 48% to $193 billion (as of December 1). Some market analysts believe that based on the current trajectory, the industry could grow to nearly $3 trillion in the next five years. While that may seem high, considering that this valuation is comparable to the size of the entire cryptocurrency today, this valuation only represents about 14% of the total U.S. M2 supply of $21 trillion.

The next real wave of cryptocurrency adoption may come from stablecoins and payments, which could explain the surge in interest in the space over the past 18 months. Their ability to facilitate faster and cheaper transactions compared to traditional methods has led more and more payment companies to look to expand their stablecoin infrastructure, leading to increased utilization of digital payments and remittances. In fact, we may soon see the main use case for stablecoins not just in transactions, but in global capital flows and commerce. Beyond broader financial applications, however, stablecoins’ ability to address the U.S. debt burden has also sparked political interest.

As of November 30, 2024, the stablecoin market has completed nearly $27.1 trillion in transactions, almost three times the $9.3 trillion in the same 11 months of 2023. This includes a large number of peer-to-peer (P2P) transfers and cross-border business-to-business (B2B) payments. Businesses and individuals are increasingly using stablecoins like USDC to meet regulatory requirements and integrate widely with payment platforms such as Visa and Stripe. Stripe acquired stablecoin infrastructure company Bridge for $1.1 billion in October 2024, the largest deal in the crypto industry to date.

The Токенization Revolution

According to rwa.xyz, tokenization continues to make significant progress in 2024, with tokenized real-world assets (RWA) growing from $8.4 billion at the end of 2023 to $13.5 billion (excluding stablecoins) as of December 1, 2024, an increase of more than 60%. Multiple analyst forecasts suggest that the industry could grow to at least $2 trillion and as much as $30 trillion over the next five years — a potential nearly 50-fold increase. Asset managers and traditional financial institutions such as BlackRock and Franklin Templeton are increasingly embracing the tokenization of government securities and other traditional assets on permissioned and public blockchains, enabling near-instant cross-border settlement and 24/7 trading.

Institutions are experimenting with using such tokenized assets as collateral for other financial transactions, such as those involving derivatives, which can simplify operations (such as margin calls) and reduce risk. In addition, the RWA trend is expanding beyond assets such as U.S. Treasuries and money market funds, gaining traction in private credit, commodities, corporate bonds, real estate, and insurance. Ultimately, tokenization could simplify the entire portfolio construction and investment process by bringing it on-chain, although this may still be a few years away.

Of course, these efforts face a unique set of challenges, including fragmented liquidity across multiple chains and ongoing regulatory hurdles — though significant progress has been made on both fronts. Tokenization is expected to be a gradual and ongoing process; however, recognition of its advantages is clear. This period is the perfect time to experiment, ensuring that businesses remain at the forefront of technological advancements.

DeFi renaissance

DeFi is dead. Long live DeFi. DeFi took a big hit in the last cycle as some applications used token incentives to bootstrap liquidity, providing unsustainable returns. However, a more sustainable financial system has emerged that combines real-world use cases with transparent governance structures.

A shift in the U.S. regulatory landscape could reinvigorate DeFi’s prospects. This could include the creation of a framework for governing stablecoins, as well as avenues for traditional institutional investors to participate in DeFi, especially seeing growing synergies between off-chain and on-chain capital markets. In fact, DEXs now account for about 14% of CEX volume, up from 8% in January 2023. In the face of a friendlier regulatory environment, it’s increasingly likely that even decentralized applications (dApps) will share protocol revenues with token holders.

In addition, the role of cryptocurrencies in disrupting financial services has also been recognized by key figures. In October 2024, Federal Reserve Governor Christoper Waller discussed how DeFi can largely complement centralized finance (CeFi), arguing that distributed ledger technology (DLT) can make CeFis record keeping faster and more efficient, while smart contracts can improve CeFis capabilities. He also believes that stablecoins may be beneficial for payments and can be used as safe assets on trading platforms, although they require reserves to mitigate risks such as runs and illegal financing. All of this suggests that DeFi may soon expand beyond the crypto user base and begin to participate more in traditional finance (TradFi).

Theme 2: Subverting the paradigm

Telegram trading bots: Cryptocurrency’s hidden profit center

After stablecoins and native L1 transaction fees, Telegram trading bots became the most profitable space in 2024, even surpassing major DeFi protocols such as Aave and MakerDAO (now Sky) in terms of protocol net revenue. This is largely the result of increased trading and memecoin activity. In fact, meme tokens have been the best performing crypto space in 2024 (measured by total market capitalization growth), and trading activity for meme tokens (on Solana DEXs) has been surging throughout Q4 of 2024.

Telegram bots are a chat-based interface for trading these tokens. Custodial wallets are created directly in the chat window and can then be funded and managed via buttons and text commands. As of December 1, 2024, bot users are primarily interested in Solana tokens (87%), followed by Ethereum (8%), and then Base (4%).

Like most trading interfaces, Telegram bots earn a percentage of each trade in fees, up to 1% of the trade amount. However, due to the volatility of the underlying assets they trade, users may not be deterred by high fees. As of December 1, the top-earning bot, Photon, has accumulated $210 million in fees year-to-date, close to Solanas largest memecoin emitter Pumps $227 million. Other major bots, such as Trojan and BONKbot, have also made considerable profits of $105 million and $99 million, respectively. In comparison, after deducting fees, Aaves protocol revenue for the entire year of 2024 is $74 million.

The appeal of these applications stems from their ease of use in DEX trading, especially for tokens that are not yet listed on an exchange. Many bots also offer additional features, such as sniping tokens at launch, and integrated price alerts. The Telegram trading experience is quite attractive to users, with nearly 50% of Trojan users staying for four days or more (only 29% of users stop using after one day), generating a high average revenue of $188 per user. While increasing competition among Telegram trading bots may eventually reduce trading fees, Telegram bots (and other core interfaces discussed below) will remain major profit centers through 2025.

Prediction Markets: Betting

Prediction markets could be one of the biggest winners of the 2024 US election, as platforms like Polymarket outperform polling data that predicted races that were much closer than the final results. This is a win for crypto more broadly, as prediction markets using blockchain show significant advantages over traditional polling data and demonstrate potential differentiated use cases for the technology. Not only do prediction markets demonstrate the transparency, speed, and global access that crypto offers, but their blockchain foundation also allows for decentralized dispute resolution and automated payment settlement based on outcomes.

While many believe the relevance of these dapps may fade after the election, their use has expanded to other sectors such as sports and entertainment. In the financial sector, they have proven to be more accurate indicators of sentiment than traditional surveys of economic data releases such as inflation and non-farm payrolls, which may continue to play a role and relevance after the election.

Игры

Gaming has long been a core theme in the crypto space due to the potentially transformative impact of on-chain assets and markets. However, attracting a loyal user base for crypto games (a hallmark of most traditional successful games) has been a challenge so far, as many crypto game users are profit-driven and may not play for fun. Additionally, many crypto games are based on web browsers, often limiting the audience to cryptocurrency enthusiasts rather than the general public of gamers.

However, games that have integrated cryptocurrencies have come a long way since the last cycle. At the heart of this trend is a shift away from the early cypherpunk ethos of “owning your game entirely on-chain” to selectively placing assets on-chain, unlocking new features without affecting the gameplay itself. In fact, many prominent game developers now view blockchain technology more as a convenience tool than a marketing tool.

The first-person shooter and battle royale game Off the Grid is a prime example of this trend. At launch, the game’s core blockchain component (the Avalanche subnet) was still in testnet, despite having become the number one free-to-play game on Epic Games. Its core appeal lies in its unique gameplay mechanics, rather than its blockchain token or item trading рынок. Crucially, the game also paved the way for crypto-integrated games to expand their distribution channels for wider market appeal, and is available on Xbox, Playstation, and PC (via the Epic Games Store).

Mobile devices are also an important distribution channel for crypto games, both native apps and embedded apps (such as Telegram mini-games). Many mobile games also selectively integrate blockchain components, with most activities actually running on centralized servers. Generally speaking, these games can be played without setting up any external wallets, reducing entry barriers and allowing those who are not familiar with crypto to play these games.

The lines between crypto and traditional gaming are likely to continue to blur. Upcoming mainstream “crypto games” will likely integrate with crypto rather than focus on crypto, emphasizing polished gameplay and distribution rather than game-earning mechanics. That said, while this could lead to wider adoption of cryptocurrency as a technology, it’s less clear how this will directly translate into demand for liquid tokens. In-game currencies will likely remain segregated across different games.

Decentralizing the real world

Decentralized physical infrastructure networks (DePINs) can potentially change “real world” allocation problems by bootstrapping the creation of networks of resources. That is, DePINs can theoretically overcome the initial economies of scale typically associated with such projects. DePIN projects range from computing power to cell towers to energy, and are creating a more resilient and cost-effective way to aggregate these resources.

The most notable example is Helium, which distributes tokens to individuals who provide local cellular hotspots. By issuing tokens to hotspot providers, Helium is able to launch coverage maps in large urban areas in the United States, Europe, and Asia without the overhead of building and distributing cell towers and without having to spend a lot of upfront capital. Instead, the incentive for early adopters is to gain early exposure and equity in the network itself through tokens.

The long-term revenue and sustainability of these networks should be evaluated on a case-by-case basis. DePIN is not a panacea for resource allocation, as industry pain points can vary widely. For example, pursuing a decentralization strategy may not be applicable to a certain industry, or it may only solve a small subset of problems in that industry. This space may have wide variations between network adoption, token utility, and revenue generated – all of which may be related to the underlying industries they target rather than the underlying technology networks they use.

Artificial Intelligence, Real Value

Artificial Intelligence (AI) has been a major focus for investors in both traditional and crypto markets. However, the impact of AI on cryptocurrencies is multifaceted and its narrative changes frequently. In its early stages, blockchain technology was designed to address the data provenance issues (i.e., tracking the authenticity of data) for AI-generated content and users. AI-driven intent-driven architectures were also considered as potential improvements to the crypto user experience. Later, the focus shifted to decentralized training and computational networks for AI models, as well as crypto-driven data generation and collection. More recently, attention has focused on autonomous AI agents that can control crypto wallets and communicate via social media.

The full impact of AI on cryptocurrencies is unclear, as evidenced by the rapid cycling of various narratives. However, this uncertainty does not diminish the potential transformation that AI could bring to cryptocurrencies, as AI technology continues to make new breakthroughs. AI applications are also becoming increasingly accessible to non-technical users, which will further accelerate the development of creative use cases.

The big question is determining how these shifts manifest themselves as lasting value accrual in tokens versus company equity. For example, many AI agents run on legacy technology, and short-term “value accrual” (i.e., market attention) flows to memecoins rather than any underlying infrastructure. While tokens associated with the infrastructure layer have also seen price increases, their usage growth has generally lagged behind price increases over the same period. The pace of price increases relative to network metrics reflects the lack of a strong consensus among investors on how to capture AI growth in crypto.

Theme 3: Blockchain Metagame

A multi-chain future or a zero-sum game?

A big theme returning from the last bull cycle is the popularity of L1s networks. Newer networks are increasingly competing with lower transaction costs, redesigned execution environments, and minimized latency. Even as premium blockspace remains scarce, L1 space has expanded to the point where general purpose blockspace is now in excess.

Additional block space itself is not necessarily more valuable. However, a vibrant protocol ecosystem, coupled with an active community and dynamic crypto assets, can still enable certain blockchains to earn additional fees. For example, Ethereum remains a center of high-value DeFi activity despite no improvement in its mainnet execution since 2021.

Still, investors are attracted to the potential for differentiated ecosystems on these new networks, even if the bar for differentiation is rising. High-performing chains like Sui, Aptos, and Sei are competing with Solana for market share.

Historically, trading on DEXs has been the largest driver of on-chain fees, which requires strong user onboarding, wallets, interfaces, and capital — creating a cycle of increasing activity and liquidity. This concentration of activity often leads to a winner-take-all situation across different chains. However, the future may still be multi-chain, as different blockchain architectures offer unique advantages that can meet a variety of needs. While application chains and L2s solutions can provide tailored optimizations and lower costs for specific use cases, a multi-chain ecosystem allows for specialization while still benefiting from broader network effects and innovation across the entire blockchain space.

Upgrading L2s

Despite the exponential growth in the scaling capabilities of L2s, the debate around Ethereum’s rollup-centric roadmap continues. Criticisms include L2s’ “extraction” of L1 activities, as well as their fragmented liquidity and user experience. In particular, L2s are considered the root cause of the decline in Ethereum network fees and the demise of the “ultrasonic money” narrative. New focuses of the L2 debate are also gradually emerging, including the trade-offs of decentralization, different virtual machine environments (potential fragmentation of the EVM), etc.

Nonetheless, L2s have been somewhat successful from the perspective of increasing block space and reducing costs. The introduction of blob transactions in the Ethereum Dencun (Deneb+Cancun) upgrade in March 2024 reduced average L2 costs by more than 90% and increased Ethereum L2s activity by 10x. In addition, multiple execution environments and architectures are able to be experimented with in an ETH-based environment, which is a long-term advantage of an L2-centric approach.

However, this roadmap also has some downsides in the short term. Cross-rollup interoperability and general user experience become more difficult to navigate, especially for newcomers who may not fully understand the differences between ETHs different L2s, or how to build bridges between them. In fact, while bridging speeds and costs have improved, the fact that users first need to interact with a cross-chain bridge degrades the overall on-chain experience.

While this is a real problem, the community is pursuing many different solutions, such as superchain interoperability in the Optimism ecosystem, real-time proofs and super transactions for zkRollups, resource locks, sorter networks, etc. Many of these challenges are being addressed at the infrastructure and network layers, and these improvements may take time to be reflected in the user interface.

Meanwhile, the growing Bitcoin L2 ecosystem is more difficult to navigate because there are no unified security standards and roadmaps. In contrast, Solanas network extensions tend to be more application-specific and may be less disruptive to current user workflows. Overall, L2s are being implemented in most major crypto ecosystems, although their forms vary greatly.

Everyone has a chain

The increasing ease of custom network deployments has prompted more and more applications and companies to build chains over which they have more control. Mainstream DeFi protocols such as Aave and Sky have clear goals to release blockchains as part of their long-term roadmaps, and the Uniswap team has announced plans for a DeFi-focused L2 chain. Even more traditional companies are getting involved. Sony announced plans for a new chain, Soneium.

As the blockchain infrastructure stack matures and becomes increasingly commoditized, owning block space is considered increasingly attractive — especially for regulated entities or applications with specific use cases. The technology stack that enables this is also changing. In previous cycles, application-centric chains primarily leveraged Cosmos or Polkadot Substrate SDKs. In addition, the growing RaaS industry represented by companies such as Caldera and Conduit is driving more projects to release L2. These platforms facilitate easy integration with other services through their marketplaces. Similarly, Avalanche subnets may increase adoption due to its managed blockchain service AvaCloud, which simplifies the launch of custom subnets.

The growth of modular chains will likely have a corresponding impact on demand for Ethereum blob space, as well as other data availability solutions such as Celestia, EigenDA, or Avail. Ethereum blob usage has reached saturation (3 blobs per block) since early November, up over 50% since mid-September. Demand does not appear to be slowing down as existing L2s such as Base continue to scale throughput and new L2s are launched on mainnet, although the upcoming Pectra upgrade in Q1’25 will likely increase the target blob count from 3 to 6.

Theme 4: User Experience

Улучшения пользовательского опыта

Simple user experience is one of the most important drivers of mass adoption. While cryptocurrencies have historically focused on deep technology, the focus is now rapidly shifting to simplified user experience. In particular, there is a push across the industry to abstract the technical aspects of cryptocurrencies into the background of applications. Many recent technological breakthroughs have made this shift possible, such as the adoption of account abstraction to simplify onboarding and the use of session keys to reduce signing friction.

The adoption of these technologies will make the security components of crypto wallets (such as mnemonics and recovery keys) invisible to most end users – similar to the seamless security experience of todays Internet (such as https, OAuth, and keys). Expect to see more key logins and in-app wallet integrations in 2025. Early signs include key logins for Coinbase Smart Wallet and Google integrations for Tiplink and Sui Wallet.

Abstraction in cross-chain architectures will likely continue to pose the greatest challenge to the crypto experience in the near term. Cross-chain abstraction, while still a focus of research at the network and infrastructure level (e.g., ERC-7683), remains far from front-end applications. Improvements in this area require enhancements at both the smart contract application level and the wallet level. Protocol upgrades are necessary to unify liquidity, while wallet improvements are necessary to provide a clearer experience for users. The latter will ultimately be more important to broadening adoption, although current research efforts and industry debates are focused on the former.

Own interface

The most critical shift to the crypto user experience will come from efforts to “own” the user relationship through better interfaces. This will happen in two ways. The first is improvements to the standalone wallet experience as described above. The onboarding process is becoming increasingly streamlined to meet the needs of users. Integrating applications directly within the wallet (such as trading and lending) may also lock users into a familiar ecosystem.

At the same time, applications are also increasingly competing for user relationships by abstracting blockchain technology components into the background through integrated wallets. This includes trading tools, games, on-chain social and membership applications that automatically provide wallets to users who sign up through familiar means such as Google or Apple OAuth. Once logged in, on-chain transactions are funded through payers, whose costs are ultimately borne by the application owner. This creates a unique dynamic in which the revenue per user needs to be aligned with the cost of paying for its on-chain operations. Although the latter cost continues to decrease as blockchains scale, it also forces crypto applications to consider which data components are submitted on-chain.

Overall, there will be intense competition to attract and retain users in the crypto space. As shown by the average revenue per user (ARPU) of the aforementioned Telegram trading bot, many retail crypto traders tend to be relatively price insensitive compared to existing TradFi entities. In the coming year, it is expected that building user relationships will also become a focus for protocols outside of the trading space.

Decentralized Identity

As regulatory clarity continues to improve and more assets are tokenized off-chain, streamlining KYC and Anti-Money Laundering (AML) processes becomes increasingly important. For example, certain assets are only available to accredited investors located in certain regions, making identity and authentication a core pillar of the long-term on-chain experience.

There are two key components to this. The first is creating the on-chain identity itself. The Ethereum Name Service (ENS) provides a standard for resolving a human-readable “.eth” name to one or more wallets across chains. Variations of this now exist in networks like Basenames and the Solana Name Service. With major traditional payment providers like PayPal and Venmo now supporting ENS address resolution, adoption of these core on-chain identity services has accelerated.

The second core component is building attributes for on-chain identities. This includes confirming jurisdictional data that KYC verification and other protocols can then look at to ensure compliance. At the heart of this technology is the Ethereum Attestation Service, a flexible service that entities can use to attribute other wallets. These attributes are not limited to KYC, they can be freely extended to meet the needs of the attestor. For example, Coinbases on-chain verification uses this service to confirm that a wallet is associated with a user who has a Coinbase trading account and is located in certain jurisdictions. Some of the new permissioned lending markets on Base for real-world assets will use these verifications to control usage.

This article is sourced from the internet: Coinbase Report: Outlook for the entire crypto market in 2025

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