The second half of 2025 is about to begin, and regarding the overall trend of the cryptocurrency market, Coinbase has provided a rather positive forecast in its recent report, with the following key points:
● The outlook for the cryptocurrency market in the second half of 2025 is positive, driven by better-than-expected economic growth, increased corporate adoption of cryptocurrencies, and improved regulatory clarity.
● Corporate leveraged financing to purchase cryptocurrencies may pose systemic risks involving forced or spontaneous selling, but we believe this issue is not significant in the short term.
● Changes in the U.S. regulatory environment support cryptocurrencies, with progress in stablecoin legislation and discussions on cryptocurrency market structure bills.
The following is the main text:
Our constructive outlook for the cryptocurrency 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 rate cuts, increased corporate adoption of cryptocurrencies, and progress in regulatory clarity in the U.S. Despite potential risks, such as a steepening U.S. Treasury yield curve and the forced selling pressure that publicly traded cryptocurrency vehicles may face, we believe these risks are manageable in the short term.
We believe there are three key themes in the cryptocurrency market. First, the macroeconomic outlook is more favorable than previously expected. The shadow of recession has faded, and the U.S. economy shows stronger signs of growth. While an economic slowdown is still possible, market conditions are less likely to lead asset prices to retreat to 2024 levels. Secondly, corporate treasury adoption of cryptocurrencies is an important source of demand, but there may be reasonable concerns about systemic risks in the medium to long term. Thirdly, significant regulatory progress is being made on stablecoin and cryptocurrency market structure legislation, which could significantly shape the U.S. cryptocurrency landscape.
Despite the risks, we expect the upward trend of Bitcoin to continue, but the performance of altcoins may depend more on their specific factors. For example, the SEC is handling numerous ETF applications, which may involve decisions related to physical creation and redemption, staking inclusion, multi-asset funds, and single altcoin ETFs, with decisions expected to be made by the end of 2025. These pending proposals and their related decisions may influence market dynamics.
01
Constructive outlook for the second half of 2025
We maintain a constructive outlook for the 2025 market. A few months ago, we indicated that the cryptocurrency market would bottom out in the first half of 2025 and reach historic highs in the second half. We still believe in this forecast, despite the rebound in Bitcoin prices at the end of May. That said, we believe there is still upward potential in the next 3-6 months.
In our view, the peak of macro disturbances triggered 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 share of the cryptocurrency market's total market capitalization in global liquidity is on the rise
Note: The total market capitalization of the cryptocurrency 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 facing our viewpoint is that the passage of government spending legislation could lead to a steeper U.S. Treasury yield curve, especially in the 10-30 year bond sector. In fact, due to concerns over the U.S. deficit, the yield on 30-year U.S. Treasury bonds reached 5.15% in May, the highest in twenty years. This could result in financial conditions tightening beyond expectations, increasing borrowing costs for businesses and consumers, and potentially undermining the growth that supports our optimistic market outlook. If long-term yields rise too quickly, it could trigger volatility in the stock and credit markets, particularly if investors begin to doubt the U.S.'s ability to maintain a high deficit without adverse consequences.
This development could challenge the widespread expectation of fiscal expansion and could lead to a reassessment of risk assets before long-term fiscal risks fully materialize, especially if economic data or Federal Reserve policies fail to meet market expectations for growth. On the other hand, we believe that this situation could improve the outlook for value storage assets such as gold and Bitcoin, while the performance of altcoins may be weaker as Bitcoin continues to benefit from the decline of the dollar's dominance.
Overall, we believe there are three key themes in the cryptocurrency market in the second half of 2025:
The macro outlook for the remaining time in 2025 is more optimistic than before, especially regarding U.S. growth expectations.
Corporate treasury adoption of cryptocurrencies is an important source of demand, but investors may worry about potential systemic risks.
U.S. regulatory barriers for cryptocurrencies have eased, but what does the future path look like?
02
The shadow of recession fades
Trade disruptions at the beginning of 2025 initially sparked concerns over the possibility of a technical recession in the U.S. this year, especially after the economy contracted at an annualized rate of 0.2% in the first quarter. (Refer to headlines from The Economist and The Wall Street Journal, such as 'Trump's Trade War Threatens Global Recession' and 'Trump's Reciprocity Tariffs Could Trigger U.S. Recession.') A technical recession is defined as two consecutive quarters of negative real GDP growth.
However, we maintained a constructive view for the second half of 2025 at that time because we believe the severity of the recession is crucial. While a technical recession may weaken investor confidence, it does not necessarily become a significant disruptive event for the market unless negative macro momentum intensifies. In fact, the real recession of 2008 (with a 53% drop in the U.S. stock market) had a significantly different impact compared to the relatively mild situations in 2015 and 2022 (see Table 1). Additionally, the GDPNow estimate from the Atlanta Federal Reserve has recently surged from 1.0% (seasonally adjusted) in early May to 3.8% on June 5, reflecting a significant shift in economic data.
Therefore, we believe the worst-case scenario this year may be an economic slowdown or mild recession - or possibly even avoiding a recession altogether - rather than a severe recession or stagflation scenario. In a slowdown scenario, the market impact may be more moderate, potentially causing damage in specific sectors rather than a broad downturn across all asset classes. However, given the rise in liquidity indicators such as the U.S. M2 money supply and the general expansion of global central bank balance sheets, we believe market conditions are unlikely to lead asset prices to retreat to 2024 levels, indicating that Bitcoin's upward trend may continue. Furthermore, we may have passed the peak of tariff impacts, indicating that the market has entered a new normal, although investors may still remain tense before July 9 (the deadline for most countries to suspend reciprocal tariffs, with August 12 being the date for China).
Table 1. Performance changes across asset classes (from peak to trough)
Note: The standard deviation is based on the average of the previous 180 days. U.S. investment-grade bonds are measured by the unhedged Bloomberg U.S. Aggregate Bond Index. Source: Bloomberg, CoinMetrics, Coinbase.
03
Adopting... imitators on the way?
Globally, about 228 publicly traded companies hold a total of 820,000 Bitcoins on their balance sheets. According to Galaxy Digital, around 20 of these companies have adopted a leveraged financing method pioneered by Strategy (formerly MicroStrategy) on Bitcoin, Ethereum, Solana, and XRP. We believe many companies have recently begun to adopt this method, partly due to the cryptocurrency accounting rules that will come into effect on December 15, 2024. Previously, under U.S. Generally Accepted Accounting Principles (GAAP), the Financial Accounting Standards Board (FASB) only allowed companies to record impairment losses on their cryptocurrency holdings. However, in December 2023, the FASB updated its guidance to allow companies to report their digital asset holdings at fair market value.
In simple terms, previous FASB rules prevented many companies from adopting cryptocurrencies because these rules only allowed recording losses and could not reflect gains until assets were sold. The revised FASB guidance eliminates much of the accounting complexity faced by many CFOs and auditors by providing a clearer description of financial conditions.
While this explains why more companies have announced holding cryptocurrencies this year, an increasingly growing trend is the focus on publicly traded companies accumulating cryptocurrencies. Early adopters like Strategy and Tesla initially treated Bitcoin as an investment outside their core operations, while these emerging entities aim primarily to accumulate Bitcoin or other cryptocurrency assets. They finance acquisitions by issuing equity and debt (often convertible bonds), with many companies trading at prices above their net asset values.
Chart 2. The number of Bitcoin wallets with balances of $1 million or more has surged
Source: Glassnode, Coinbase.
The rise of publicly traded cryptocurrency vehicles (PTCVs) has significant implications for the market, involving both potential demand for cryptocurrencies and systemic risks within the crypto ecosystem. Systemic risks can be divided into two parts: (1) forced selling pressure and (2) spontaneous selling.
Forced selling pressure: Many PTCVs raise low-cost funds to purchase crypto assets through the issuance of convertible bonds. If a company's stock price rises due to the appreciation of cryptocurrencies, bondholders may profit. If the situation deteriorates and the company needs to repay its debt, it may be forced to sell off cryptocurrency holdings, potentially leading to losses. Unless refinancing is possible, such collective selling may trigger market liquidation and broader cryptocurrency sell-offs.
Spontaneous selling: A more subtle risk is that this situation may shake investors' confidence in the crypto ecosystem. For example, if one or more entities suddenly need to sell off part of their cryptocurrency holdings due to regular cash flow management or business operations, it could trigger a sudden drop in prices and market liquidation. If prices begin to fall, other entities may rush to sell out of concern for reduced exit opportunities, thereby destabilizing the market before debt repayment issues arise.
Chart 3. Distribution of outstanding debt of some companies by final maturity date
Including debts issued by Classover, Gamestop, H100, Janover, MARA Holdings, Metaplanet, Riot, Semler Scientific, and Strategy. Source: SEC filings, CoinDesk, CoinTelegraph, Nasdaq, press releases, Coinbase.
Nevertheless, we believe that the downward pressure from these two types of risks is unlikely to replicate the consequences of some past failed crypto projects. First, according to our review of the outstanding debts of nine entities, most of the debts are set to mature between the end of 2029 and early 2030, indicating that forced selling pressure is not an immediate concern. (Note: Strategy's $3 billion convertible bonds mature in December 2029, with an optional early redemption date in December 2026.) See Chart 3. Additionally, as long as the loan-to-value ratio (LTV) remains reasonable, the largest companies may have refinancing options to avoid liquidating their reserve assets.
Of course, as debts mature or more companies adopt these strategies, our assessments may change depending on risk levels and repayment timelines. Currently, the financing methods for PTCVs lack consistency, making it difficult to track capital structures. It is evident that Strategy's pioneering efforts have caught the attention of other corporate executives interested in cryptocurrencies, who may wish to further explore their investment logic. We believe the market has not yet reached saturation, and the trend of corporate accumulation in the second half of 2025 may continue.
04
Opening up new regulatory paths
The U.S. regulatory environment underwent unprecedented changes in the first half of 2025, laying the groundwork for what could be the most transformative period for digital asset policy. This stands in stark contrast to the previous administration's 'regulation by enforcement' approach. We believe that the second half of 2025 is poised to redefine the U.S.'s position as a global cryptocurrency hub, supported by the White House's decisive shift towards cryptocurrency-friendly policies and Congress's urgent efforts to establish a comprehensive framework for this asset class.
We believe that stablecoin legislation is the most likely to become the first major cryptocurrency-related legislation in the U.S., with strong bipartisan support. Both chambers of Congress have shown significant progress, with the House advancing the (STABLE Act) and the Senate moving forward with the (GENIUS Act). The Senate has fully approved the (GENIUS Act) and sent it to the House for consideration. Both bills stipulate reserve requirements for stablecoin issuers, anti-money laundering compliance parameters, as well as consumer protection and bankruptcy priority provisions for stablecoin holders.
The two main differences between the two bills lie in the treatment of non-U.S. stablecoin issuers and the scale threshold for federal regulatory transition, which Congressional negotiators need to resolve in the coming months. Government officials are confident that the unified bill will be submitted to President Trump for signature before Congress recesses on August 4, 2025. This could pave the way for the development of a cryptocurrency market structure bill.
The cryptocurrency market structure bill could be the most significant long-term development this year, especially as the House Financial Services Committee introduced the bipartisan (Digital Asset Market Clarification Act of 2025) (CLARITY Act) on May 29. This bill will delineate the regulatory responsibilities between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) based on whether digital assets are classified as 'digital commodities' or 'investment contract assets.'
This bill builds on last year's House-passed (21st Century Financial Innovation and Technology Act) (FIT21), but there are some key differences. Most importantly, the bill requires the CFTC and SEC to jointly define key terms such as 'digital commodities' and to address gaps through future rulemaking, indicating that the precise boundaries of regulatory authority may continue to evolve. We believe this bill aims to lay the groundwork for future bipartisan discussions, but these negotiations may be much more complex than those for the stablecoin bill.
ETF approval timeline: The SEC faces a complex situation with about 80 cryptocurrency ETF applications in 2025, involving physical creation/redemption, staking features, index funds, and single altcoin ETFs:
Several ETF issuers (Bitwise, Franklin Templeton, Grayscale, Hashdex) have applied to track multi-asset funds that cover broad cryptocurrency indices. These funds are weighted 90% towards BTC and ETH, and the SEC already has a framework for cryptocurrency index ETFs, with a decision likely to be made by July 2.
Physical creation/redemption proposals are under formal review by the SEC. Physical creation/redemption can improve the price consistency between stock prices and net asset value (NAV), narrowing the ETF price gap. We believe a decision could be made in July 2025, but the SEC may extend it to October.
The SEC needs to decide on the inclusion of staking proposals before October, as there are pending issues regarding whether certain fund structures meet the definition of 'investment companies.' However, Bloomberg Intelligence believes the SEC may be forced to act sooner due to the customized basket provisions and transparency standards of Rule 6c-11.
The final statutory deadline for a single altcoin ETF application is in October, and we believe the SEC may fully utilize the review time.
05
Summary
Our outlook for the cryptocurrency market in the third quarter of 2025 is constructive, supported by a relatively optimistic U.S. growth outlook, potential Federal Reserve rate cuts, increased corporate adoption of cryptocurrencies, and progress in regulatory clarity in the U.S. Despite the risks of a steepening yield curve and forced selling pressure from publicly traded cryptocurrency vehicles, we believe these risks are manageable in the short term. While we are confident about Bitcoin's upward trajectory, we believe that only specific altcoins may perform well due to their unique circumstances.
