Summary of Key Points:
The trend of companies using leveraged financing to purchase crypto assets may lead to systemic risks in the medium to long term, such as forced selling or motivated selling, but we believe the risks are manageable in the short term.
The U.S. regulatory environment is undergoing positive changes, with stablecoin legislation being advanced and discussions ongoing about crypto market structure legislation.
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, the potential for interest rate cuts by the Federal Reserve, the growth of corporate finance adopting 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 triggered by listed crypto instruments, we believe these risks are manageable in the short term.
We believe there are three key themes for the crypto market in the second half of the year:
Overall Economic Outlook Improves: The risk of U.S. recession has significantly decreased, and overall growth momentum is strengthening;
Corporate Adoption of Crypto as an Asset Allocation Tool: Although it may pose systemic risks in the long term, it forms a strong demand side in the short term;
Regulatory Pathways Becoming Clearer: Especially the progress of stablecoin and crypto market structure legislation will profoundly impact the development of the crypto ecosystem.
Despite the risks, we still expect Bitcoin to maintain its upward trend. The performance of altcoins may rely more on individual factors. For instance, the SEC is reviewing multiple ETF applications involving 'physical purchase/redemption', staking, pooled funds, and single altcoin ETFs, which are expected to be decided by the end of 2025, and these decisions may reshape the market structure.
Market Outlook: Second Half of 2025
We maintain our previous forecast - that the first half of 2025 will be the bottom for the crypto market, and the second half may create historical highs. Although Bitcoin rebounded at the end of May, we still believe there is potential for further increases in the next 3-6 months. In our view, the overall economic disruptions triggered by trade tariffs are nearing their end. Looking ahead, as the government advances market-friendly fiscal legislation plans (expected to be completed by late summer), risk appetite is expected to warm.
However, one risk worth noting is that the fiscal spending bill could lead to a steepening of the U.S. Treasury yield curve, especially in the 10-year to 30-year segment. In fact, due to deficit concerns, the yield on U.S. 30-year Treasury bonds rose to 5.15% in May, a 20-year high. This could exacerbate financial tightening, increasing borrowing costs for corporations and consumers, thus weakening the growth foundation and affecting market confidence.
If long-term yields rise too quickly, it may trigger volatility in the stock and credit markets, especially when investors begin to question whether the U.S. can sustain high deficits without triggering systemic risks. This development trajectory will challenge the current narrative of 'front-loaded fiscal stimulus' or force the market to reassess risk assets early, especially if economic data or Federal Reserve policies fall short of expectations.
But at the same time, we believe this could also be beneficial for value-storing assets like gold and Bitcoin, especially against the backdrop of a weakening dollar dominance.
Three Major Themes
Theme One: The Shadow of Recession Has Significantly Weakened
The trade disruptions at the beginning of the year raised concerns that the U.S. could fall into a technical recession, especially after the annualized quarter-on-quarter GDP fell by 0.2% 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 reciprocal tariffs could ignite a U.S. recession'.
However, we remain relatively optimistic about the outlook for the second half of the year. We believe: the 'degree' of recession is the key, and a technical recession may not have a deep impact on the market unless overall economic 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 the table below for details). Additionally, the GDPNow forecasting model from the Atlanta Fed has been significantly revised upward from a quarter-on-quarter growth rate of 1.0% in early May to 3.8% on June 5, reflecting improving economic data.
We therefore 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, market impacts 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 shocks' have been absorbed by the market, although there are still individual policies (such as the expiration of the reciprocal tariff suspension period on July 9) pending, but the overall risk margins are weakening.
Comparative Analysis of Periodic Declines in Various Assets (from peak to trough):
Theme Two: The Wave of Corporate Adoption of Crypto Assets - Is the 'Replica Strategy' Here?
Currently, around 228 listed companies globally hold a total of 820,000 BTC. Among them, about 20 (and another 8 holding ETH, SOL, XRP) adopt a leveraged financing approach similar to 'Strategy (formerly MicroStrategy)'. The new FASB accounting standards, effective December 15, 2024, significantly promote the inclusion of crypto assets on balance sheets.
Previously, U.S. Generally Accepted Accounting Principles (GAAP) only allowed companies to record impairments of crypto assets on their balance sheets, while gains could only be realized upon sale. The new regulation allows for disclosure at fair value, making financial statements more comparable and bringing greater transparency for CFOs and accountants.
But we observe that a new trend is forming - an increasing number of listed companies themselves are 'currency-holding machines', with their core business being the purchase of crypto assets. They finance their purchases through issuing stocks or convertible bonds, with market values far exceeding their net assets. A representative example is Strategy, but now more imitators have emerged.
Two Potential Systemic Risks:
Forced selling: Many PTCVs (listed crypto asset vehicles) rely on convertible bond financing, and if the underlying asset price falls, or if market conditions deteriorate and refinancing fails, these companies may have to sell their held crypto assets to repay debts.
Motivated selling: If a certain PTCV suddenly sells assets due to operational or cash flow management needs, it may trigger a chain reaction, spreading market panic and causing a price crash.
Nevertheless, we believe such risks are currently not sufficient to pose a significant impact on the market in the short term. First, most of the debt will not mature until 2029-2030 (for instance, Strategy's $3 billion convertible bond has a first redemption period at the end of 2026 and a final maturity at the end of 2029), so the short-term risk of sell-off is low. Secondly, the current loan-to-value (LTV) ratios are overall still healthy, with some large companies capable of avoiding forced sales through refinancing.
Of course, as more companies adopt this strategy and debt matures, systemic risks remain worth monitoring in the long term. The 'corporate holding model' of Strategy is also attracting an increasing number of 'curious' senior management teams, indicating that the trend of companies accumulating currencies will continue in the second half of 2025.
Theme Three: Opening a New Era of Regulation
In the first half of 2025, U.S. crypto policy experienced unprecedented change. The White House abandoned the old path of 'enforcement over regulation' and fully turned to support the development of the crypto industry. We believe that stablecoin legislation is most likely to be implemented first. Currently, the House is advancing the STABLE Act, and the Senate is pushing 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 consideration. Both set reserve requirements, anti-money laundering compliance, bankruptcy protection, and consumer rights provisions.
The main divergence is:
How to Handle Non-U.S. Stablecoin Issuers
How to Set Regulatory Thresholds
The White House is expected to complete the submission of a unified version of the bill to the president for signature before Congress recesses on August 4, which may lay the groundwork for subsequent market structure legislation.
Crypto Market Structure Act (CLARITY Act)
On May 29, 2025, the U.S. House Financial Services Committee officially proposed the (Digital Asset Market Clarity Act (CLARITY Act)) draft, which is considered the most transformative legislation of the year.
This bill aims to clarify the regulatory boundaries of the SEC and CFTC regarding crypto assets, and to regulate based on asset attributes (such as 'digital goods' or 'investment contracts'). The bill builds on the FIT21 Act passed last year, and also requires the SEC and CFTC to jointly define key terms and continue rule-making, indicating that there is still room for evolution in regulatory division of labor. We believe this will become the basis for future negotiations in both houses, but its complexity and uncertainty will be higher than that of stablecoin legislation.
ETF Progress Timeline
The SEC is facing about 80 cryptocurrency ETF proposals in 2025, covering:
Multi-asset crypto index funds (Bitwise, Franklin, Grayscale, etc.): Decision by July 2 at the earliest;
Physical purchase/redemption (in-kind) mechanism: Possible results in July, if delayed, by October at the latest;
Staking inclusion mechanism: Subject to transparency under Section 6c-11, the SEC may decide early;
Single altcoin ETF: Most application deadlines are in October, and the SEC is expected to use the entire review period.
Conclusion
We are optimistic about the cryptocurrency market outlook for the third quarter of 2025, thanks to a relatively optimistic outlook for U.S. economic growth, interest rate cuts by the Federal Reserve, rising corporate adoption of cryptocurrencies, and increased transparency in U.S. regulations. While there are risks such as a steepening Treasury yield curve and potential selling pressure from PTCVs, these remain manageable in the short term. We believe the upward trend of Bitcoin will continue, although altcoin performance will need to be judged based on the performance of individual projects.
This article is republished with permission from: (BlockBeats)
Original Title: (Monthly Outlook: Three Themes for 2H25)
Original Author: David Duong, CFA Coinbase
Translation: Bitpush
The article 'Coinbase is bullish on Bitcoin's continued rise! Reveals 3 key drivers, but also 2 potential risks' was first published in 'Crypto City'
