Encryption ETF institutions get on board wave hits, the industry is expected to reach a new high again in 2025

Summary

Since the beginning of 2024, the approval of Bitcoin spot ETFs marks a new development stage for the encryption asset market. The continuous influx of institutional funds has enhanced market liquidity, driving Bitcoin and other encryption asset prices to new highs. Looking ahead to 2025, with potential interest rate cuts, the increase in institutional investors' allocation ratio, and the improvement of Web3 infrastructure, the encryption industry may welcome a new bull market. This article will analyze the impact of encryption ETFs on the market and explore the core driving forces that may trigger further market rises.

1. The impact of encryption ETFs on the market

The launch of the Bitcoin spot ETF is seen as an important milestone in the crypto market's move towards mainstream finance. This not only provides institutional investors with a compliant and secure investment channel, but also has a profound impact on market liquidity, price discovery mechanisms, volatility and market confidence.

1. The launch of Bitcoin spot ETF: opening a new era of institutional investment

Over the past decade, institutional investors' interest in Bitcoin has gradually increased, but many traditional financial institutions have struggled to invest directly in crypto assets due to regulatory restrictions and custody challenges. The launch of the Bitcoin ETF provides these institutions with a low-barrier, compliant way to invest. The approval of the ETF not only marks the loosening of the regulatory framework for Bitcoin but also paves the way for other cryptoasset ETFs in the future.

Compared to directly purchasing Bitcoin, ETFs have advantages in compliance, security, liquidity, and tax treatment, making them more suitable for institutional investors' needs. These advantages make Bitcoin ETFs the preferred tool for institutional investors to allocate encryption assets.

2. ETF inflows and their impact on the market

Since its launch, the Bitcoin spot ETF has continued to attract a large amount of capital inflows, which has had a profound impact on market prices and structure. As of Q4 2024, institutional investor interest in spot Ethereum ETFs has increased significantly, with institutional holdings of Ethereum ETFs jumping from 4.8% to 14.5%. At the same time, spot bitcoin ETFs held 25.4% of assets under management (AUM) by institutional investors, totaling $26.8 billion. Their holdings increased by 113% from the third quarter to the fourth quarter of 2024, and total assets under management jumped 69% to $78.8 billion.

After the launch of the ETF, institutional investors gradually increased their holdings in Bitcoin, changing the supply and demand dynamics of Bitcoin. In December 2024, the price of Bitcoin once broke through $100,000, reaching a historic high, and in January 2025, it broke through $109,000 again. The inflow of funds into the ETF belongs to long-term holding funds, and this flow of funds reduces the selling pressure on Bitcoin, creating sustained buying support. If the trend of inflow into the ETF continues, Bitcoin may experience a larger increase in 2025.

3. How do ETFs change the structure of the market?

The launch of the Bitcoin ETF has profoundly changed the overall structure of the encryption market:

• Enhanced market liquidity: ETFs provide standardized investment tools, enabling more traditional financial institutions to get on board quickly, improving market liquidity. This means reduced price manipulation space and increased trading depth.

• Bitcoin volatility is decreasing: Institutional long positions have reduced frequent trading, and the ETF arbitrage mechanism has made prices more stable. Data shows that since the launch of the ETF, the 30-day historical volatility of Bitcoin has fallen from around 65% to about 50%.

• Development of the derivatives market: The success of ETFs has promoted the maturity of the derivatives market. Institutions using ETFs to get on board will increase liquidity in the options market, strengthen the linkage between the spot and derivatives markets, and ETF holdings will also become an important market sentiment indicator.

4. Will the success of the ETF be replicated in other encryption assets?

The success of the Bitcoin ETF has sparked market interest in other encryption asset ETFs, particularly the stakable Ethereum ETF and other mainstream token ETFs.

Currently, some Ethereum ETF issuers have submitted staking applications to regulators. The market expects that staking Ethereum ETFs will be approved in 2025. This may lead to accelerated institutional funds entering the ETH market, speeding up the development of the ETH ecosystem, and driving demand for ETH 2.0 staking.

Crypto asset ETFs that may be approved in the future also include multi-asset crypto ETFs, mainstream public chain ETFs, DeFi blue-chip ETFs, and RWA tokenized ETFs. The launch of these products will further expand the coverage of institutional funds and promote the long-term development of the crypto market.

2. Key Growth Factors in the Encryption Market in 2025

The growth of the crypto market in 2025 will be driven by multiple factors:

1. Macroeconomic Environment: Liquidity Turning Points and Global Monetary Policy

The Federal Reserve is expected to continue lowering interest rates in the mid to late 2025, which will reduce capital costs, promote the rise of risk assets, strengthen Bitcoin's "digital gold" property, and may drive increased leverage trading activity in the encryption market. Major central banks around the world may also enter a loosening cycle in sync, creating favorable conditions for the encryption market.

Geopolitical tensions have accelerated the global reallocation of funds. Emerging market investors have increased demand for Bitcoin, institutional recognition of Bitcoin as a non-sovereign asset has risen, and Web3 corporate financing and investment demand has grown.

2. Wave of institutional allocation

According to the latest disclosed data, 15 institutions hold Bitcoin/Ethereum spot ETF positions valued at over $13.98 billion in 2024, with several institutions holding positions worth billions of dollars. The allocation by institutions has significantly increased, and starting from the fourth quarter, many institutions have increased their investments in Ethereum ETF.

3. The double effect of the ETF+ halving

In 2025, Bitcoin will experience the dual impact of ETF institutional fund inflows and the halving event. The daily buying demand from ETFs may exceed the new issuance from miners, creating a supply squeeze and driving up prices. This imbalance in supply and demand could lead to a sharp reduction in the liquid Bitcoin supply on the market, accelerating price increases.

4. Ethereum Petra upgrade

The Ethereum Petra upgrade is scheduled for early April 2025, bringing significant changes such as improvements to the staking mechanism, optimization of interactions between the execution layer and the consensus layer, and enhancements to smart contract functionalities. This will have a substantial impact on aspects such as staking distribution, validator management, and user experience.

5. The explosion of tokenization of real-world assets (RWA)

RWA tokenization is becoming a new growth point in the blockchain industry. Assets that may be accelerated in 2025 include treasury bonds, stocks, real estate, carbon credits, artworks, etc. The combination of RWA and DeFi will drive the growth of decentralized financial markets.

3. 2025 Bull Market Strategy: Stability and Flexibility Go Hand in Hand, Seizing the New Cycle Dividend

The crypto market is at a critical inflection point in 2025, with factors such as institutional entry, liquidity recovery, and technological innovation jointly driving market growth. Investors need a systematic strategy to flexibly capture short-term trends on the basis of a steady layout of core assets.

1. The three core logic of the market in 2025

• The institutionalization process accelerates, with BTC and ETH becoming the "digital gold" and "on-chain finance" dual pillars.
• The innovation of the crypto ecosystem has accelerated, and AI Agent, RWA, and DeFAI have enabled a new round of growth
• Liquidity-driven cycle regression, the Federal Reserve's interest rate cuts and global funds returning to the encryption market.

2. Investment Strategy Summary: Long-term stability + short-term flexibility in parallel

• Hold BTC and ETH long-term as core allocation (60%-70%)
• Focus on growth tracks: DEPIN, RWA, Solana ecosystem, DeFAI (20%-30%)
• Flexibly grasp short-term trends: Meme, SocialFi, AI Agent (10%-20%)

3. Potential market risks and countermeasures in 2025

Despite the overall positive trend, it is still necessary to be vigilant about potential risks such as changes in regulatory policies, macroeconomic fluctuations, and geopolitical risks, and to implement corresponding risk management.

IV. Conclusion: Market Outlook for 2025

2025 is expected to be an important milestone in the development of the encryption market, characterized by accelerated institutionalization, technology-driven growth, liquidity recovery, and the rise of emerging sectors. This year may mark the time when the encryption market truly enters the mainstream financial system, with cyclical bull markets and structural growth coexisting, bringing unprecedented investment opportunities.

Through reasonable asset allocation and dynamic adjustment strategies, investors can enjoy the long-term growth dividends of the market while flexibly seizing opportunities amid short-term volatility, achieving the maximum appreciation of their assets. By 2025, the encryption market may no longer be just a game for "encryption native players," but will become an important part of the global capital market.