2024 has already been a watershed year for the crypto industry, thanks to the launch of the new spot Bitcoin (BTC 1.20%) ETFs in January. For the first time ever, both individual and institutional investors have a quick, easy, and regulator-approved way to get direct exposure to Bitcoin without entering the cryptocurrency market through a crypto-trading brokerage.
But there could be even bigger changes ahead in 2025. Many, of course, will be the result of the 2024 presidential election, which has seen crypto introduced as a political campaign issue for the first time ever. Here are three big changes on the horizon, ranked from most likely to least likely to occur.
More crypto ETFs
The new spot Bitcoin ETFs have surpassed all expectations, bringing in more than $30 billion of investor capital. Yes, there was a brief rough patch in August, when it looked like investor inflows would dry up. But inflows are now back on a bullish pace, and these ETFs are being accepted by everyone from the smallest retail investor to the biggest billionaire hedge fund manager.
CRYPTO: BTC
Key Data Points
Thus, the introduction of more crypto ETFs in 2025 is almost a no-brainer. July saw the launch of new spot Ethereum (ETH 3.11%) ETFs, and the current expectation is that a handful of other large market-cap cryptocurrencies could be next. The most likely prospects include Solana and XRP, both of which rank among the top 10 largest cryptocurrencies.
A change in how crypto is regulated
Currently, the United States lacks a comprehensive regulatory framework for crypto, but that could be changing in 2025. Both Republicans and Democrats agree that such a framework is needed, and political momentum seems to be building for an overhaul next year.
Right now, the system for regulating crypto is unclear and, at times, unfair. This is a point that cryptocurrency exchange Coinbase Global (COIN 1.27%) has argued over and over again, as it has been pulled into regulatory battles with the SEC. Keep in mind: The current system for regulating crypto is based on a 1946 Supreme Court case that was originally designed to settle a dispute over Florida citrus groves. It's getting harder and harder to see how these ancient rules apply to modern business issues.
Thus, 2025 could see the introduction of new legislation that clearly spells out how crypto should be regulated, as well as who should be regulating it. Right now, the SEC is the primary regulator, but the current thinking among pro-crypto advocates is that the Commodity Futures Trading Commission (CFTC) should be in charge. At the very least, look for the replacement of SEC head Gary Gensler in 2025 with someone with a more pro-crypto attitude.
Bitcoin as a national strategic imperative
Bitcoin could become a new strategic imperative for the U.S. government in 2025. Already, there are calls for greater government support for the Bitcoin mining industry, as well as suggestions that the U.S. might be pulled into a Bitcoin "arms race" with the likes of China and Russia.
Image source: Getty Images.
Some politicians have even suggested that Bitcoin could become part of a solution to the $35 trillion national debt problem. The logic here is very simple: As long as Bitcoin can increase in price faster than the national debt can grow in size, there might be a chance to pay off all this debt one day. Granted, it's going to be tough sledding, given that the U.S. debt is growing by $1 trillion every 100 days. By way of comparison, that's equivalent to the total market cap of Bitcoin right now.
As part of a potential solution, U.S. Senator Cynthia Lummis (R-Wyoming) has already introduced legislation for a strategic Bitcoin reserve that is based on the idea of buying 1 million BTC over a period of several years. Over time, part of that reserve could theoretically be used to pay down debt.
Granted, the chances of any of this happening are directly tied to the electoral success of Donald Trump, who claims to be the first pro-Bitcoin president in history. He has already said that he wants to make America the "crypto capital of the planet." For some people, this might sound terrifying. But for crypto investors, it could be a dream come true.
How to profit from changes to crypto
The big question facing investors in 2025 is how to position a portfolio to take advantage of these potential changes. The simplest solution, of course, is to load up on Bitcoin. Much of the political and regulatory focus seems to be on Bitcoin, which still accounts for more than one-half of the market cap of the entire crypto market. So any change to crypto is going to have an effect, first and foremost, on Bitcoin.
The real-world effect of any new crypto legislation is harder to predict. A clue here might come from other nations attempting to enact new crypto legislation. For example, the European Union's Markets in Crypto-Assets (MiCA) regulation will go into full effect in December. This will establish a comprehensive legal framework for the issuance, investment, and trading of crypto assets across the EU.
For now, keep an eye on the 2024 presidential election. The outcome there could have a huge effect on the crypto market for years to come. If there's a big post-election rally, you can be confident that big changes will be coming for crypto in 2025.
