Economic growth, corporate adoption, and regulatory clarity make the outlook for the crypto market bright.
Author: Coinbase
Translated by: Blockchain in Plain Language
Monthly Outlook for the Second Half of 2025 - Three Major Themes on June 12, 2024
● The outlook for the crypto market in the second half of 2025 is positive, driven by better-than-expected economic growth, corporate adoption of crypto assets, and regulatory clarity.
● Corporate leverage financing for purchasing crypto assets may pose systemic risks, such as forced or voluntary selling pressure, but we believe this issue is not significant in the short term.
● Changes in the U.S. regulatory environment are favorable for the crypto market, with progress in stablecoin legislation and discussions on crypto market structure bills.
Our optimistic outlook for the crypto market in the second half of 2025 is driven by several key factors: a more optimistic outlook for U.S. economic growth, potential Federal Reserve interest rate cuts, increased corporate treasury adoption of crypto assets, and progress in regulatory clarity in the U.S. Despite some potential risks, such as a steepening U.S. Treasury yield curve and potential forced selling pressure on publicly traded crypto asset instruments, we believe these risks are manageable in the short term.
We believe the three key themes for the crypto market in the second half of 2025 are as follows:
Macroeconomic outlook better than expected. The shadow of recession is fading, and the U.S. economy shows stronger signs of growth. While an economic slowdown is still possible, asset prices are unlikely to retreat to 2024 levels.
- Corporate treasury adoption of crypto assets is an important source of demand, but there may be concerns about systemic risks in the medium to long term.
- Significant progress in the U.S. regulatory environment, particularly in advancing stablecoin and crypto market structure legislation, could significantly shape the landscape of the U.S. crypto market.
Despite the risks, we expect the upward trend of Bitcoin to continue, but the performance of other crypto assets (altcoins) may depend more on their specific factors. For example, the Securities and Exchange Commission (SEC) is handling a large number of ETF applications, involving potential decisions on physical creation and redemption, staking inclusion, multi-asset funds, and single crypto asset ETFs, which are expected to be made by the end of 2025. These proposals and their related decisions may impact market dynamics.
Constructive Outlook for the Second Half of 2025
We maintain a positive outlook for the market in 2025. A few months ago, we predicted that the crypto market would bottom out in the first half of 2025 and reach new highs in the second half. Despite a rebound in Bitcoin prices at the end of May, we still believe in this prediction, indicating that there is still upside potential in the next 3-6 months.
We believe the peak of macroeconomic disturbances caused by tariff issues has passed. Looking ahead, risk sentiment should generally benefit from the U.S. government's shift towards more market-friendly policies, with new legislative fiscal plans expected to be completed by the end of summer.
Chart 1: The Proportion of Total Market Capitalization to Global Liquidity is Rising in Crypto
Note: The total market capitalization of the crypto market does not include stablecoins. G6 central bank liquidity includes the Federal Reserve, European Central Bank, Bank of Japan, Bank of Canada, Bank of England, and People's Bank of China. Source: Bloomberg, Coinbase.
However, one significant risk to our outlook is that the passage of government spending bills could lead to a steepening of the U.S. Treasury yield curve, particularly in the 10 to 30-year range. In May, the yield on U.S. 30-year Treasuries reached 5%.
15%, the highest level in twenty years, is due to market concerns about the U.S. deficit. If long-term yields rise too quickly, it could lead to volatility in the stock and credit markets, especially if investors begin to doubt the U.S.'s ability to sustain high deficits. This could trigger a reassessment of risk assets, particularly if economic data or Federal Reserve policies do not meet market growth expectations.
On the other hand, this situation could improve the outlook for value storage assets like gold and Bitcoin, while the performance of other crypto assets may be weaker, as Bitcoin continues to benefit from the decline of the dollar's dominance.
Three Major Themes for the Second Half of 2025
Theme 1: The Shadow of Economic Recession Fades
Trade disruptions in early 2025 raised concerns about the U.S. potentially entering a technical recession (two consecutive quarters of negative real GDP growth). For example, headlines from The Economist and The Wall Street Journal included "Trump's Trade War Threatens Global Recession" and "Trump's Reciprocal Tariffs Could Trigger U.S. Recession." However, we maintained an optimistic outlook for the second half of 2025, as we believed the severity of the recession was crucial. A technical recession could affect investor confidence, but unless negative macro momentum worsens, it would not become a significant event causing extreme consequences for the market. The recession in 2008 (U.S. stock market down 53%) was a true recession, while those in 2015 and 2022 were relatively mild (see Table 1).
The GDPNow estimate from the Atlanta Federal Reserve recently surged from 1.0% (seasonally adjusted) in early May to 3.8% on June 5, reflecting significant changes in economic data. Therefore, we believe the worst-case scenario this year may be an economic slowdown or mild recession, rather than a severe recession or stagflation scenario. In the case of a slowdown, the market impact may be more moderate, potentially affecting specific industries rather than causing a broad decline across all asset classes. Given the rise in liquidity indicators such as the increase in the U.S. M2 money supply and global central bank balance sheets, asset prices are unlikely to fall back to 2024 levels, and the upward trend in Bitcoin may continue. Additionally, the peak impact of tariffs may have passed, even if investors remain tense ahead of the July 9 deadline (for most countries to suspend reciprocal tariffs) and August 12 (for China).
Table 1: Performance Changes of Asset Classes Over Different Periods (From Peak to Trough)
| Asset | 2008 | 2015 | 2022 | Today (Feb-Apr 2025) | |---------------------------|--------------------------|--------------------------|--------------------------|--------------------------| | BTC/USD | N/A | -26% (-5.2 standard deviations) | -59% (-2.8 standard deviations) | -22% (-0.1 standard deviations) | | COIN50 | N/A | N/A | -65% (-2.8 standard deviations) | -29% (-2.1 standard deviations) | | S&P 500 | -53% (-15.5 standard deviations) | -13% (-7.6 standard deviations) | -25% (-7.0 standard deviations) | -19% (-5.0 standard deviations) | | U.S. Investment Grade Bonds | +3% (-6.7 standard deviations) | +3% (-2.6 standard deviations) | -15% (-29.1 standard deviations) | +1.2% (-0.6 standard deviations) |
Note: Standard deviations are based on the average of the 180 days prior to the recession. U.S. investment-grade bonds are measured by the unhedged Bloomberg U.S. Aggregate Index. Source: Bloomberg, CoinMetrics, Coinbase.
Theme 2: Corporate Adoption… Clone Attacks?
Approximately 228 publicly traded companies hold a total of 820,000 BTC on their balance sheets. According to Galaxy Digital, about 20 of these companies, along with another 8 that hold ETH, SOL, and XRP, have adopted a leveraged financing approach similar to that pioneered by Strategy (formerly MicroStrategy). The new crypto accounting rules (FASB update) effective December 15, 2024, have driven this trend. Previously, under U.S. Generally Accepted Accounting Principles (GAAP), companies could only record impairment losses on crypto assets and could not record asset appreciation unless they sold the assets. The new rules allow companies to report digital assets at fair market value, eliminating accounting complexities.
While this explains why more companies have announced holdings of crypto assets this year, an emerging trend is the focus on publicly traded companies accumulating crypto assets. Unlike the investment strategies of early adopters like Strategy and Tesla, emerging entities aim to accumulate BTC or other crypto assets as their primary goal, raising funds through equity and debt (often convertible bonds), with many trading at a premium to their net asset value.
Chart 2: Surge in BTC Wallets with Balances ≥ $1 Million
Source: Glassnode, Coinbase.
These publicly traded crypto asset vehicles (PTCVs) have a significant impact on the market, bringing both potential demand and systemic risk. Systemic risks mainly include two aspects:
Forced selling pressure: Many PTCVs raise funds to purchase crypto assets by issuing convertible bonds at low cost. If crypto assets appreciate, bondholders may profit; otherwise, companies must repay the debt and may be forced to sell crypto assets to service the debt, leading to market liquidation and price declines.
Proactive selling pressure: If a company suddenly sells crypto assets due to cash flow management or other business needs, it may trigger price declines and market instability, causing other entities to rush to sell, further exacerbating market volatility.
Chart 3: Distribution of Unsecured Debt by Maturity Date for Certain Companies
