Coinbase: Interpretation of the Three Core Trends in the Crypto Market for the Second Half of 2025

Author: Coinbase

Compilation: Vernacular Blockchain

Monthly Outlook for the Second Half of 2025: Three Major Themes on June 12, 2024

● The outlook for the cryptocurrency market in the second half of 2025 is positive, driven by better-than-expected economic growth, corporate adoption of crypto assets, and regulatory clarity.

● Leverage financing by enterprises to purchase cryptocurrency assets may bring systemic risks, such as the pressure to sell forced or voluntarily, but we believe this issue is not significant in the short term.

● The changes in the U.S. regulatory environment are beneficial for the crypto market, progress has been made on stablecoin legislation, and discussions are also underway regarding the crypto market structure bill.

Our optimistic outlook for the cryptocurrency market in the second half of 2025 is driven by several key factors: a more optimistic expectation for U.S. economic growth, potential Federal Reserve interest rate cuts, increased adoption of crypto assets by corporate treasury pools, and progress in regulatory clarity in the U.S. Despite some potential risks, such as a steepening U.S. Treasury yield curve and the forced selling pressure that publicly traded crypto asset instruments may face, we believe these risks are manageable in the short term.

We believe that the three key themes of the crypto market in the second half of 2025 are as follows:

• The macroeconomic outlook is better than expected. The shadow of recession is fading, and the U.S. economy is showing stronger signs of growth. While a slowdown is still possible, asset prices are less likely to fall back to 2024 levels.
• The adoption of corporate capital pools for crypto assets is an important source of demand, but there may be concerns about systemic risks in the medium to long term.
• Significant progress in the U.S. regulatory environment, particularly the advancement of legislation regarding stablecoins and the structure of the cryptocurrency market, may significantly shape the landscape of the U.S. crypto market.

Despite the risks, we expect the upward trend of Bitcoin to continue, but the performance of other crypto assets ( altcoins ) may depend more on their unique factors. For example, the Securities and Exchange Commission ( SEC ) is processing a large number of ETF applications, involving potential decisions on physical creation and redemption, staking inclusion, multi-asset funds, and single crypto asset ETFs, which are expected to be made by the end of 2025. These proposals and their related decisions may affect market dynamics.

Constructive Outlook for the Second Half of 2025

We maintain a positive outlook for the market in 2025. A few months ago, we predicted that the crypto market would hit bottom in the first half of 2025 and reach new highs in the second half. Despite the rebound in Bitcoin prices at the end of May, we still believe in this prediction, that there is still upward potential in the next 3-6 months.

We believe that the peak of macroeconomic disturbances caused 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 a new legislative fiscal plan expected to be completed by the end of summer.

Chart 1: The proportion of total market capitalization to global liquidity is rising in cryptocurrency.

Note: The total market capitalization of the crypto 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, a significant risk our viewpoint faces is that the passage of the government spending bill could lead to a steeper U.S. Treasury yield curve, particularly in the 10 to 30-year range. In May, the yield on the 30-year U.S. Treasury reached 5.15%, the highest level in twenty years, due to market concerns about the U.S. deficit. If long-term yields rise too quickly, it could cause volatility in the stock and credit markets, especially if investors begin to doubt the U.S.'s ability to sustain a high deficit. This could trigger a reassessment of risk assets, particularly if economic data or Federal Reserve policy falls short of market growth expectations.

On the other hand, this situation may improve the prospects for value storage assets such as gold and Bitcoin, while the performance of other cryptocurrencies might be weaker, as Bitcoin continues to benefit from the decline of the dollar's dominance.

Three Major Themes in the Second Half of 2025

Topic 1: Shadow of Economic Recession Fades

The trade disruptions at the beginning of 2025 raised concerns about the possibility of the U.S. entering a technical recession ( with two consecutive quarters of negative real GDP growth ). For example, headlines from The Economist and The Wall Street Journal such as "Trump's trade war threatens global recession" and "Trump's reciprocal tariffs could trigger a U.S. recession" reflected this concern. However, we maintained an optimistic outlook for the second half of 2025 at that time because we believed that the severity of the recession was crucial. A technical recession could affect investor confidence, but unless negative macro momentum intensifies, it will not become a significant event causing extreme consequences for the market. The 2008 recession ( saw the U.S. stock market drop by 53% ), which was a real recession, while those in 2015 and 2022 were relatively mild ( (see Table 1)).

The GDPNow estimate from the Atlanta Federal Reserve Bank recently surged from 1.0%( seasonally adjusted) at the beginning of May to 3.8% as of June 5, reflecting significant changes in economic data. Therefore, we believe that the worst-case scenario this year may be an economic slowdown or mild recession, rather than a severe recession or stagflation scenario. In the case of a slowdown, the market impact may be relatively mild, potentially affecting specific industries rather than causing a broad decline across all asset classes. Given the rise in liquidity indicators such as the increase in the U.S. M2 money supply and global central bank balance sheets, asset prices are unlikely to revert to 2024 levels, and the upward trend of Bitcoin may continue. Furthermore, the peak impact of tariffs may have passed, even as investors remain tense ahead of the July 9 deadline( for suspending reciprocal tariffs on most countries) and the August 12 deadline( concerning China).

Table 1: Performance changes of various asset classes over different periods ( from peak to trough )

| Assets | 2008 | 2015 | 2022 | Today (February-April 2025) | | --- | --- | --- | --- | --- | | BTC/USD | N/A | -26% (-5.2 standard deviations) | -59% (-2.8 standard deviations) | -22% (-0.1 standard deviations) | | COIN50 | N/A | N/A | -65% (-2.8 standard deviation) | -29% (-2.1 standard deviation) | | S&P 500 | -53% (-15.5 standard deviations) | -13% (-7.6 standard deviations) | -25% (-7.0 standard deviations) | -19% (-5.0 standard deviations) | | US Investment Grade Bonds | +3% (-6.7 standard deviations) | +3% (-2.6 standard deviations) | -15% (-29.1 standard deviations) | +1.2% (-0.6 standard deviations) | | Note: The standard deviation is based on the average value of the 180 days before the recession. US investment-grade bonds are measured by the unhedged Bloomberg U.S. Aggregate Index. Source: Bloomberg, CoinMetrics, Coinbase. | | | | |

Topic 2: Corporate Adoption... Cloning Attacks?

Approximately 228 publicly traded companies hold a total of 820,000 BTC on their balance sheets. According to data from Galaxy Digital, about 20 companies, along with 8 others that hold ETH, SOL, and XRP, have adopted a leveraged financing method similar to the one pioneered by MicroStrategy before Strategy(. The new cryptocurrency accounting rules effective December 15, 2024, updated by FASB, have driven this trend. Previously, under US Generally Accepted Accounting Principles (GAAP), companies could only record impairment losses on crypto assets and could not recognize asset appreciation unless they sold the assets. The new rules allow companies to report digital assets at fair market value, eliminating accounting complexities.

While this explains why more companies have announced holding cryptocurrency assets this year, an emerging trend is the focus on publicly traded companies that accumulate cryptocurrency assets. Unlike the investment approaches of early adopters such as Strategy and Tesla, these emerging entities aim to accumulate BTC or other cryptocurrency assets as their primary goal, raising funds typically through the issuance of equity and debt ), often in the form of convertible bonds (, with many trading at a premium above their net asset value.

Chart 2: The number of BTC wallets with a balance of ≥ 1 million USD surges

Source: Glassnode, Coinbase.

These publicly traded crypto asset tools ) PTCVs ( have a significant impact on the market, bringing both potential demand and systemic risk. Systemic risks mainly include two aspects:

Forced Selling Pressure: Many PTCVs raise funds at low cost by issuing convertible bonds to purchase crypto assets. If the crypto assets appreciate, bondholders may profit; otherwise, the company must repay its debts and may be forced to sell crypto assets to settle debts, leading to market liquidation and price declines.

Selling pressure: If a company suddenly sells its crypto assets due to cash flow management or other business needs, it may trigger a price drop and market instability, leading other entities to rush to sell, further exacerbating market volatility.

Chart 3: Distribution of Unpaid Debts of Some Enterprises by Final Maturity Date

Source: SEC filings, CoinDesk, CoinTelegraph, Nasdaq, press releases, Coinbase

However, we believe that these risks are unlikely to reproduce the downward pressure of past failed crypto projects. Firstly, based on our list of outstanding debts for nine entities, most of the debts will mature between the end of 2029 and the beginning of 2030, so there is not much pressure to sell off in the short term. For example, Strategy's $3 billion convertible bond will mature in December 2029, with an optional early redemption date in December 2026. As long as the loan-to-value ratio )LTV( remains reasonable, large enterprises may avoid liquidating their reserve assets through refinancing.

Of course, as debts mature or more companies adopt similar strategies, risks may increase. Due to the non-uniform funding methods of PTCVs, tracking their capital structure is relatively difficult. The pioneering efforts of Strategy have attracted the attention of other corporate executives, and the trend of companies accumulating crypto assets is expected to continue in the second half of 2025.

Theme 3: Exploring New Regulatory Pathways

In the first half of 2025, the regulatory environment in the United States underwent unprecedented changes, laying the groundwork for the most transformative period in digital asset policy. This stands in stark contrast to the previous administration's "enforcement-led regulation." We believe that the second half of 2025 will redefine the United States' status as a global crypto hub, supported by a decisive shift towards crypto-friendly policies from the White House and urgent efforts from Congress to establish a comprehensive framework.

Stablecoin legislation is expected to become the first significant crypto-related legislation passed in the United States, receiving strong bipartisan support. The House Bill ) STABLE and the Senate Bill ( GENIUS are both advancing related bills, with the Senate likely to approve the GENIUS bill next week and send it to the House for review. The two bills set reserve requirements for stablecoin issuers, anti-money laundering compliance parameters, as well as consumer protection and bankruptcy priority provisions. There are differences in how the bills handle non-U.S. stablecoin issuers and the federal regulatory transitional scale thresholds, which need to be resolved in the coming months. Government officials have expressed confidence in reaching a unified bill before Congress adjourns on August 4, 2025, to submit for President Trump’s signature. This could serve as a precursor for the passage of structural legislation for the crypto market.

The Crypto Market Structure Bill could be the most significant long-term development this year. On May 29, the House Financial Services Committee introduced the bipartisan 2025 Digital Asset Market Clarity Act )CLARITY Act(, which delineates the regulatory responsibilities of the Commodity Futures Trading Commission )CFTC( and the Securities and Exchange Commission )SEC( based on whether an asset is classified as a "digital commodity" or an "investment contract asset." This bill is based on the 21st Century Financial Innovation and Technology Act )FIT21( passed by the House last year, but it requires the CFTC and SEC to jointly define key terms, and the future regulatory boundaries may continue to evolve.

ETF Approval Timeline: The SEC will handle approximately 80 crypto ETF applications in 2025, involving physical creation/redemption, staking capabilities, index funds, and single crypto asset ETFs:

• Multi-Asset Funds: Funds submitted by Bitwise, Franklin Templeton, Grayscale, Hashdex, etc. may track broad cryptocurrency indices, and the SEC may make a decision before July 2.
• Creation/Redemption of Physical Assets: Currently under formal review by the SEC, a decision may be made in July or October 2025.
• Pledge Included in Proposal: The SEC needs to decide by October whether some fund structures qualify as "investment companies," and doubts remain.
• Single Cryptocurrency Asset ETF: The final legal deadline for multiple applications is in October, and the SEC may need a full review period.

Conclusion

We remain optimistic about the outlook for the cryptocurrency market in the third quarter of 2025, supported by the positive prospects for U.S. economic growth, the Federal Reserve's interest rate cuts, increased corporate adoption of crypto assets, and progress in regulatory clarity in the U.S. Although there are risks associated with a steepening yield curve and forced selling pressure on publicly traded crypto instruments, these risks are manageable in the short term. While we are confident in Bitcoin's upward trajectory, only a few other crypto assets may perform well due to their unique circumstances.

Source: Baihua Blockchain