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The Road to POL and Elections Excitement: What Happened in Crypto This Week?
• Crypto Recovers As U.S. Elections Excitement Escalates
• Realizing the “Internet of Blockchains” Vision with Polygon 2.0
Crypto Recovers As U.S. Elections Excitement Escalates
U.S. inflation cooled in June, with the Consumer Price Index (CPI) decreasing by 0.1% and the annual rate at 3%. Following this, Fed Chair Jerome Powell indicated that while they won’t wait for inflation to hit 2%, more confidence is needed before cutting rates. The CME FedWatch tool now shows a 90% probability of a 25-bps rate cut in September. Meanwhile, the excitement around the U.S. presidential elections has been the main market driver, overshadowing rate-cut hopes. On July 21, President Joe Biden announced he’d drop out of the elections, sparking a moderate rally in the crypto market.
On the other side of the aisle, Donald Trump has been turning heads with a series of moves deemed positive by the crypto market; the latest was naming JD Vance as a vice presidential nominee. When running for Senator in 2021, Vance disclosed he held $100K worth of Bitcoin. Additionally, Trump’s VP running mate has also been a big champion for crypto-friendly legislation as the Senator of Ohio, at times even defending decentralized protocols against the Securities and Exchanges Commission. After voicing his allegiance with the crypto industry and promising policies in its favor, it’s without a doubt that markets are excited about the prospects of Trump’s presidency, and the derivatives market confirms that. As shown in Figure 1, the Futures Open Interest (OI) on centralized exchanges picked up by 19% over the past week.
Figure 1 – Bitcoin Futures Open Interest
Source: Glassnode
Between July 14 and 21, Options OI increased by 28%, with more traders expecting prices to rise, as the put/call ratio stood at 0.45. Options traders are preparing for some heightened market movements; Trump is scheduled to speak on July 27 on the final day of the Bitcoin Conference in Nashville. There have been speculations that he could announce holding Bitcoin as a strategic reserve asset in his presidency. That is due to Bitcoin’s predetermined monetary policy with a fixed supply, bolstered by the fact that the U.S. government already holds 0.83% of Bitcoin’s circulating supply.
What else can we expect this week? Most importantly, the Core Personal Consumption Expenditure (PCE) will be released on Friday and will provide insights into consumer spending behavior. This will be crucial as PCE is a key indicator that influences the Fed’s outlook on inflation.
Finally, the SEC has approved ETH Spot ETFs for trading in the U.S. With over eight regulated products now available, investors have more options to get exposure to the second-largest crypto asset by market cap. This approval enhances the credibility, acceptance, and confidence in the digital asset industry, potentially directing significant inflows into ETH—expected to be around 20% of what BTC ETFs have secured at best. Moreover, this development is expected to boost interest in the Ethereum ecosystem’s application layer, which includes DeFi primitives and a variety of decentralized applications that form the next generation of the internet-native permissionless economy. On their first trading day, spot Ethereum ETFs collectively registered $1.1 billion in total value traded, which is nearly 20% of the volume recorded on the inaugural trading day of BTC ETFs in January, amounting to $4.4B.
Realizing the “Internet of Blockchains” Vision with Polygon 2.0
Polygon is set to initiate its token migration, transitioning from MATIC to POL on September 4, 2024. This pivotal move follows months of discussions surrounding the Polygon 2.0 upgrade, which transforms the network from a basic Ethereum scaling side-chain into a versatile, interoperable network of scaling solutions. A major aspect of this upgrade is the creation of an ecosystem of interconnected networks utilizing Zero-Knowledge technology, with Polygon acting as the central layer connecting them. Additionally, the new architecture introduces an AggLayer, which offers a unified liquidity layer across all networks developed using Polygon’s Chain Development Kit (CDK). Check out our previous coverage here to have a better understanding of AggLayer.
Figure 2 – How the AggLayer Unifies Liquidity
Source: Polygon
To prepare for Polygon 2.0, the network’s foundation announced that MATIC will get upgraded to POL last October. However, the timeline for this migration remained unclear until last week. With the recent announcement, September 4 is the target date. This upgrade will see POL become the gas currency for interacting with the ecosystem, akin to ETH, as well as the staking token for users contributing to the validation of Polygon and its associated CDK-based chains. According to the foundation’s plan, MATIC on Polygon POS will be converted to POL, combined with staked MATIC on Ethereum mainnet, which will also be converted into POL. Thus, we expect to see a surge in the total percentage of converted tokens, which will jump from the current estimate of around 0.5%, as seen below, up to 50% following September 4.
Figure 3 – The Migration Progress of MATIC to POL Conversion
Source: 21co at Dune
In that view, POL will serve as a hyperproductive token, enhancing its functionality beyond merely securing a single network. It will also act as a re-staking token, validating the security of multiple networks. This expanded role will enable holders to engage in various capacities within the network, allowing them to earn diverse rewards linked to different services. For example, POL will play a key role within the AggLayer, although the specific nature of its involvement is yet to be determined, pending a community governance vote. Consequently, rewards may be tied to the security validation of all networks within the Polygon ecosystem in conjunction with the operations of the AggLayer.
What stands out, though, is the long-term strategy for POL. The foundation highlighted the potential for the token to facilitate block and ZK-proof generation and participation in data availability committees (DAC). This innovative approach could serve as a valuable blueprint for other scaling solutions, demonstrating how to unlock greater utility. For instance, consider Arbitrum and Optimism; the tokens for both networks have sparked controversy due to their high valuations, especially as they’re primarily limited as governance tokens. However, if they were to adopt Polygon’s proposed model, we might see both networks allow their tokens to be staked. This approach could foster greater community participation in the centralized sequencer operations, allowing anyone who stakes their tokens to take part in the process. This not only decentralizes a vital aspect of the network’s infrastructure but also mitigates the risk of a single point of failure.
This Week’s Calendar
Source: Forex Factory, 21Shares
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
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2024 was a landmark year for bitcoin, solidifying its role as a fully institutionalised asset class.
Institutional inflows into physical bitcoin exchange-traded products (ETPs) reached nearly $35 billion globally, signalling a major shift in how traditional investors view crypto. As bitcoin continued to enhance portfolios’ risk-return profiles, more institutional investors followed suit, reshaping the financial landscape.
Looking ahead, 2025 promises to bring exciting developments across the crypto ecosystem. Here are the top five crypto trends to watch.
Fear of being left behind
The era of bitcoin as a niche investment is over. Institutional adoption is creating a ripple effect, forcing hesitant players to reconsider. Portfolios with bitcoin allocations are consistently outperforming those without, highlighting its growing importance.
Figure 1: Bitcoin in a multi-asset portfolio
| 60/40 Global Portfolio | 1% Bitcoin Portfolio | 3% Bitcoin Portfolio | 5% Bitcoin Portfolio | 10% Bitcoin Portfolio | MSCI AC World | Bloomberg Multiverse | Bitcoin | |
| Annualised Return | 5.77% | 6.46% | 7.83% | 9.20% | 12.57% | 9.07% | 0.56% | 56.24% |
| Volatility | 8.79% | 8.86% | 9.14% | 9.62% | 11.42% | 13.94% | 5.05% | 67.28% |
| Sharpe Ratio | 0.48 | 0.55 | 0.68 | 0.79 | 0.96 | 0.54 | -0.20 | 0.81 |
| Information Ratio | 1.01 | 1.01 | 1.01 | 1.00 | ||||
| Beta | 70% | 71% | 73% | 75% | 81% | 100% | 24% | 181% |
Source: Bloomberg, WisdomTree. From 31 December 2013 to 30 November 2024. In USD. Based on daily returns. The 60/40 Global Portfolio is composed of 60% MSCI All Country World and 40% Bloomberg Multiverse. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
With bitcoin’s ability to noticeably improve portfolios’ risk-return profiles, asset managers face a clear choice: integrate bitcoin into multi-asset portfolios or risk falling behind in a rapidly evolving financial landscape. In 2025, expect the competition to heat up as clients demand exposure to this powerhouse cryptocurrency.
Expanding crypto investment options
In 2024, regulatory breakthroughs opened the doors for physical bitcoin and ether ETPs in key developed markets. This marked a critical step towards making cryptocurrencies mainstream, providing seamless access to institutional and retail investors alike.
Figure 2: Global physical crypto ETP assets under management (AUM) and 2024 net flows
Source: Bloomberg, WisdomTree. 02 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
In 2025, this momentum is expected to accelerate as the crypto regulatory environment becomes more friendly in the United States and as key developed markets follow Europe’s lead and approve ETPs for altcoins such as Solana and XRP. With their clear utility and growing adoption, these altcoins are strong candidates for institutional investment vehicles.
This next wave of altcoin ETPs will expand the diversity of crypto investment opportunities and further integrate cryptocurrencies into the global financial system.
The maturing of Ethereum’s layer-2 ecosystem
Ethereum’s role as the backbone of decentralised finance (DeFi), non-fungible tokens (NFTs), and Web3 is unmatched, but its scalability challenges remain a hurdle. Layer-2 solutions—technologies such as Arbitrum and Optimism—are transforming Ethereum’s scalability and usability by enabling faster, cheaper transactions.
In 2025, Ethereum’s recent upgrades, such as Proto-Danksharding (introduced in the ‘Dencun’ upgrade), will drive layer-2 adoption even further. Innovations like Visa’s layer-2 payment platform leveraging Ethereum for instant cross-border transactions will underscore the platform’s evolution.
Expect Ethereum’s layer-2 ecosystem to power real-world use cases ranging from tokenized assets to decentralised gaming, positioning it as the infrastructure of a truly scalable digital economy.
Stablecoins: bridging finance and blockchain
Stablecoins are becoming indispensable to the global financial system, offering the stability of traditional assets with the efficiency of blockchain. Platforms such as Ethereum dominate the stablecoin landscape, hosting stablecoin giants Tether (USDT) and USD Coin (USDC), which facilitate billions in daily transactions.
Figure 3: Key stablecoin chains
Source: Artemis Terminal, WisdomTree. 05 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
As we move into 2025, stablecoins will increasingly interact with blockchain ecosystems such as Solana and XRP. Solana’s high-speed, low-cost infrastructure makes it ideal for stablecoin payments and remittances, while XRP Ledger’s focus on cross-border efficiency positions it as a leader in global settlements. With institutional adoption rising and DeFi applications booming, stablecoins will serve as the backbone of a seamless, interconnected financial ecosystem.
Tokenization: redefining ownership and revolutionising finance
Tokenization is set to redefine how we think about ownership and value. By converting tangible assets like real estate, commodities, stocks, and art into digital tokens, tokenization breaks down barriers to entry and creates unprecedented liquidity.
In 2025, tokenization will expand dramatically, empowering investors to own fractions of high-value assets. Platforms such as Paxos Gold and AspenCoin are already showcasing how tokenization can revolutionize markets for gold and luxury real estate. The integration of tokenized assets into DeFi will unlock new financial opportunities, such as using tokenized real estate as collateral for loans. As tokenization matures, it will transform industries ranging from private equity to venture capital, creating a more inclusive and efficient financial system.
For the avoidance of any doubt, tokenization complements crypto by expanding the use cases of blockchain to include real-world applications.
Looking ahead
2025 is set to be a defining year for crypto, as innovation, regulation, and adoption converge. Whether it is bitcoin cementing its position as a portfolio staple, Ethereum scaling for mainstream use, or tokenization unlocking liquidity in untapped markets, the crypto ecosystem is poised for explosive growth. For investors and institutions alike, the opportunities have never been clearer or more compelling.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
On January 20, 2025, bitcoin (BTC) reached a new all-time high, surpassing $109,000, and this milestone coincided with Donald Trump’s inauguration for his second term as U.S. President.
Historical trends show that BTC has performed exceptionally well in the 12 months following the past three U.S. elections. If history repeats, this could signal another bullish phase. With Trump’s pro-BTC stance and a U.S. Congress aligned on favorable digital regulation, the outlook for the coming months appears highly promising.
Source: Hashdex Research with data from Messari (from November 6, 2012 to January 19, 2025).
MARKET HIGHLIGHTS | Jan 13 2025 – Jan 19 2025
Bitcoin-backed loans enabled on Coinbase’s L2
• Now customers can borrow USDC in the new base’s lending protocol by using bitcoin as collateral.
• This underscores the importance of onchain innovations as the pillar for future adoption of blockchain technology, in this case enhancing personal finance to be more decentralized and intuitive in a permissionless etho..
ETF filings reiterate bullish regulatory tailwinds
• As Donald Trump’s inauguration approaches, several asset managers have filed applications for new crypto ETF products, including those focused on assets like LTC and XRP.
• This reflects optimism for 2025’s crypto regulations and their potential to transform the regulated products landscape.
Trump to make crypto top priority in US agenda
• U.S. President-elect Donald Trump allegedly plans to issue an executive order making crypto a national policy priority and establishing an advisory council.
• The announcement signals that crypto has gained political importance. Even if not all promises are met, crypto has already crossed the chasm.
MARKET METRICS
The Nasdaq Crypto Index™
This week saw a significant rise in digital assets as the market awaits Trump’s inauguration, with the NCI™ (+15.3%) outperforming all traditional asset classes. The NCI™ (+13.2%) also outperformed BTC (+12.1%), highlighting the value of diversification in a volatile market. The performance was positively impacted by SOL’s strong 46.3% gain, while ETH’s underwhelming 3.0% growth had a dampening effect.
Source: Hashdex Research with data from CF Benchmarks and Bloomberg (from December 31, 2024 to January 19, 2025).
It was a strong week for the NCI™ , with SOL leading the pack (among others, like XRP and LINK), surging 46.3%, while BTC (12.1%) and ETH (3.0%) lagged behind. This price action seems driven by excitement around Trump’s inauguration and the crypto-friendly environment his promises suggest.
Source: Hashdex Research with data from Messari (from January 12, 2025 to January 19, 2025).
Indices tracked by Hashdex
Source: Hashdex Research with data from CF Benchmarks and Vinter (from January 19, 2024 to January 19, 2025).
5 crypto trends to watch in 2025
FGLR ETF gör hållbara investeringar i hela världen
Trump’s inauguration day, BTC all-time high and the US election bullish effect
AXA IM antar SDR-märkningar för tre aktiefonder i Storbritannien
HSDD ETF köper aktier i hållbara företag från den utvecklade världen
De mest eftersökta ETFerna i december 2024
Post-election rally cools at year end
De bästa ETFerna för värdeaktier
BlackRock slår rekord med lanseringen av bitcoin ETF
Hector McNeil kommenterar Trumps krav på Natos försvarsutgifter
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Nyheter3 veckor sedanDe mest eftersökta ETFerna i december 2024
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Nyheter3 veckor sedanDe bästa ETFerna för värdeaktier
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Nyheter2 veckor sedanPost-election rally cools at year end
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Nyheter3 veckor sedanBlackRock slår rekord med lanseringen av bitcoin ETF
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Nyheter3 veckor sedanHector McNeil kommenterar Trumps krav på Natos försvarsutgifter
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Nyheter3 veckor sedanBuffertstrategin på Nasdaq-100 med december 2024/2025 som ny målperiod
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Nyheter4 veckor sedanValour PYTH SEK spårar priset på kryptovalutan PYTH
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Nyheter4 veckor sedanJREZ ETF investerar i företag från Eurozonen med höga ESG-betyg
