Author | David Duong, CFA, Global Research Director

The outlook for the cryptocurrency market in the second half of 2025 is positive, mainly driven by better-than-expected economic growth, corporate adoption of cryptocurrencies, and clearer regulations.

Key Points Summary:

The trend of corporations purchasing cryptocurrencies with leveraged financing may pose systemic risks in the medium to long term, such as forced sales or motivated selling, but we believe the risks are still manageable in the short term.

The regulatory environment in the United States is undergoing positive changes, with stablecoin legislation moving forward and discussions on cryptocurrency market structure bills ongoing.

Our constructive outlook for the cryptocurrency market in the second half of 2025 is based on several core factors: a more optimistic outlook for U.S. economic growth, potential interest rate cuts by the Federal Reserve, increased corporate adoption of cryptocurrencies, and clearer U.S. regulations.

Although there are still some potential risks, such as a steepening U.S. Treasury yield curve and selling pressure from listed cryptocurrency instruments, we believe these risks are manageable in the short term.

We believe there are three key themes for the cryptocurrency market in the second half of the year:

Improved macro outlook: The risk of a U.S. recession has significantly decreased, and overall growth momentum has strengthened;

Corporate adoption of cryptocurrencies as an asset allocation strategy: While it may pose systemic risks in the long term, it creates strong demand in the short term;

Regulatory pathways becoming clearer: Particularly the progress of stablecoin and cryptocurrency market structure legislation, which will profoundly impact the development of the cryptocurrency ecosystem.

Despite the risks, we still expect Bitcoin to maintain an upward trend, while the performance of altcoins may depend more on individual factors.
For example, the SEC is reviewing multiple ETF applications involving 'physical creation and redemption', staking, fund combinations, and single altcoin ETFs, with decisions expected by the end of 2025, which may reshape market structures.

Market Outlook: Second Half of 2025

We maintain our previous forecast—that the first half of 2025 will be the bottom for the cryptocurrency market, with the second half potentially reaching historic highs.
Despite Bitcoin rebounding at the end of May, we still believe there is potential for further upward movement in the next 3-6 months.
In our view, macro disturbances triggered by trade tariffs are nearing their end. Looking ahead, as the government promotes more market-friendly fiscal legislation (expected to be completed by late summer), risk appetite is likely to recover.



However, one notable risk is that this fiscal spending bill may lead to a steepening of the U.S. Treasury yield curve, especially in the 10-30 year segment.
In fact, due to deficit concerns, the yield on 30-year U.S. Treasury bonds rose to 5.15% in May, reaching a 20-year high. This may exacerbate financial tightening, increase financing costs for businesses and consumers, thereby weakening the growth foundation and affecting market confidence.

If long-term yields rise too quickly, it could trigger volatility in the stock and credit markets, especially when investors begin to doubt the U.S.'s ability to sustain high deficits without triggering systemic risks.

This developmental path will challenge the current narrative of 'front-loaded fiscal stimulus' or force the market to reassess risk assets prematurely, especially if economic data or Federal Reserve policies do not meet expectations.

But at the same time, we believe this may also benefit value-storing assets like gold and Bitcoin, especially in the context of a weakening dollar dominance.

Three Key Themes

Theme One: The Shadow of Recession Has Significantly Weakened

Early in the year, trade disturbances raised concerns that the U.S. would fall into a technical recession, especially after a 0.2% quarter-on-quarter decline in GDP in the first quarter of 2025.
At that time, mainstream media, including The Economist and The Wall Street Journal, issued warnings such as 'Trump's tariff war could trigger a global recession' and 'Trump's reciprocity tariffs may ignite a U.S. recession.'

However, we have always maintained a relatively optimistic outlook for the second half of the year. We believe that the 'degree' of recession is key; a technical recession may not have profound impacts on the market unless macro momentum continues to deteriorate.
For example, during the 2008 financial crisis, U.S. stocks fell by 53%, while the 'recessions' in 2015 and 2022 were much milder (see table below). Additionally, the Atlanta Fed's GDPNow forecasting model has been significantly upgraded from a 1.0% quarter-on-quarter growth rate in early May to 3.8% on June 5, reflecting improving economic data.

Therefore, we judge that even if there is a slowdown in 2025, it is more likely to be a mild recession or a 'soft landing', rather than a severe recession or stagflation scenario.
Even so, the market impact may be limited to specific sectors rather than a broad sell-off. Coupled with the expansion of the U.S. M2 money supply and global central bank balance sheets, we believe the probability of asset prices returning to 2024 levels is low. The upward trend of Bitcoin is expected to continue. Furthermore, most 'tariff impacts' have been absorbed by the market, and while there are still some pending policies (such as the expiration of the reciprocity tariff suspension on July 9), overall risk margins are diminishing.

Comparative Analysis of Asset Price Cycles (from peak to trough):



Theme Two: A Wave of Corporate Adoption of Cryptocurrency Assets — Is a 'Replica Strategy' Coming?

Currently, there are about 228 publicly traded companies globally holding a total of 820,000 BTC. Among them, about 20 companies (and another 8 holding ETH, SOL, XRP) are using leveraged financing similar to 'Strategy (formerly MicroStrategy)'.

The new FASB accounting standards effective from December 15, 2024, significantly promote the inclusion of cryptocurrency assets on corporate balance sheets.
Previously, U.S. Generally Accepted Accounting Principles (GAAP) only allowed companies to account for impairments of crypto assets on their balance sheets, while gains could only be reflected upon sale.
The new rules allow for fair value disclosures, making financial statements more comparable and providing greater transparency for CFOs and auditors.



However, we observe a new trend forming—more and more publicly traded companies are becoming 'crypto-holding machines', with their core business being the purchase of cryptocurrency assets.

They finance their purchases through issuing stocks or convertible bonds, with market capitalizations far exceeding their net assets. A representative case is Strategy, but now more imitators have emerged.

Two Potential Systemic Risks:

Forced Selling:
Many PTCVs (publicly traded cryptocurrency vehicles) rely on convertible bond financing. If the price of their underlying cryptocurrencies declines, or if the market environment worsens and refinancing fails, these companies may have to sell their held crypto assets to repay debts.

Motivated Selling:
If a particular PTCV suddenly sells assets due to operational or cash flow management needs, it may trigger a chain reaction, spreading market panic and causing price collapses.

Despite this, we believe that such risks are currently insufficient to pose a significant shock to the market in the short term. First, most debts will not mature until 2029-2030 (for example, Strategy's $3 billion convertible bond first redeemable period is at the end of 2026, and it officially matures at the end of 2029), making short-term selling risks relatively low. Second, the current loan-to-value (LTV) ratios are still healthy, and some large companies have the ability to avoid forced sales through refinancing.



Of course, as more companies adopt this strategy and debt maturities concentrate, systemic risks remain worth monitoring in the long term. The 'corporate holding model' of Strategy is also attracting more 'curious' executive teams to join, indicating that the trend of corporate accumulation of cryptocurrency will continue into the second half of 2025.

Theme Three: A New Era of Regulation Begins

In the first half of 2025, U.S. cryptocurrency policy underwent unprecedented changes. The White House abandoned the old path of 'regulation by enforcement' and shifted to fully supporting the development of the cryptocurrency industry.

We believe that stablecoin legislation is most likely to be implemented first. Currently, the House of Representatives is advancing the STABLE Act, while the Senate is advancing the GENIUS Act, both of which have received bipartisan support.
On June 11, the Senate passed the GENIUS Act, sending it to the House for review. Both bills set reserve requirements, anti-money laundering compliance, bankruptcy protection, and consumer rights provisions.

The main differences lie in:

How to handle non-U.S. stablecoin issuers

How to set regulatory thresholds

The White House is expected to complete the unified version of the bill for submission to the president for signing before Congress adjourns on August 4, laying the groundwork for subsequent market structure legislation.

Cryptocurrency Market Structure Bill (CLARITY Act)

On May 29, 2025, the U.S. House Financial Services Committee officially proposed the draft of the Digital Asset Market Clarity Act (CLARITY Act), which is considered the most transformative legislation of the year.

The bill aims to clarify the regulatory boundaries of the SEC and CFTC regarding cryptocurrency assets and to classify them based on asset attributes (such as 'digital goods' or 'investment contracts'). The bill builds on the FIT21 Act passed last year and requires the SEC and CFTC to jointly define key terms and continue rulemaking, indicating that there is still room for evolution in regulatory division of labor.

We believe this will serve as the foundation for future negotiations between the two chambers, but its complexity and uncertainty will be higher than that of stablecoin legislation.

ETF Progress Timeline

In 2025, the SEC is facing around 80 cryptocurrency ETF proposals, covering:

Multi-asset cryptocurrency index funds (Bitwise, Franklin, Grayscale, etc.): Decisions as early as July 2;

Physical creation/redemption (in-kind) mechanism: Results possible in July, but at the latest by October;

Staking inclusion: SEC may make an early decision due to transparency limitations under Rule 6c-11;

Single altcoin ETFs: Most applications have deadlines in October, and the SEC is expected to utilize the entire review period.

Conclusion

We are optimistic about the cryptocurrency market outlook in the third quarter of 2025, thanks to the relatively optimistic U.S. economic growth outlook, potential interest rate cuts by the Federal Reserve, increasing corporate adoption of cryptocurrencies, and enhanced transparency in U.S. regulations.

Although there are risks such as a steepening U.S. Treasury yield curve and potential selling pressure from PTCVs, these remain within manageable limits in the short term. We believe the upward trend of Bitcoin will continue, although the performance of altcoins will need to be assessed based on individual projects.

#BTC #SEC #ETF #XRP #ETH