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Treasury Yields, Transaction Volumes, Flows at Year-Highs: What happened in crypto this week?
In this report, we walk you through the U.S. inflation data that came out last week and what they mean for crypto. We also explain the positive sentiments around Cardano and Polygon, who both have radical upgrades lined up.
Inflation Comes in Hot; Bitcoin Holds Steady at $52K
Consumer prices came in higher than expected and rose by 3.1% in the year through January. Stock prices plunged following the release. Over the past week, the S&P 500 and Nasdaq Composite declined by 0.42% and 1.28%, respectively. Often used to gauge future consumer prices, industrial indicators have also disappointed expectations. The Empire State Manufacturing Survey, conducted monthly by the Federal Reserve to give an outlook on general business conditions within the state, found that manufacturing activity in the state of New York shrank further to -2.4%; although shooting up by 41 points, the figure still indicates worsening conditions for manufacturers which often gets passed on to consumers. Measuring demand for goods and cost of services, the Producer Prices Index rose to 0.9% year-over-year, further dimming hopes for a rate cut in March.
In turn, the yields for two- and five-year treasury bills rose to year-to-date highs, indicating falling demand due to investors hedging their positions ahead of the upcoming FOMC meeting, whose minutes come out on Wednesday. Treasury yields are often used as a proxy for sentiment around alternative, risk-on investments, like crypto, which has been enjoying institutional flows thanks to the one-month-old spot Bitcoin ETFs trading in the U.S. Bitcoin moved tightly around the $52K over the weekend, while peaking in inflows to almost 18K BTC on February 14, as shown in Figure 1.
Figure 1: US Spot Bitcoin ETF Flows
Source: Glassnode
Cardano Aims at Further Decentralization and Higher Smart-Contract Functionality
After working on decentralization, smart contracts, and scaling, Cardano is finally preparing for its “Voltaire Era,” which focuses on governance. Landmarked by its Chang hard fork, Cardano’s Voltaire Era aims to fuel its further decentralization with new governance and treasury systems. Scheduled between Q1 and Q2 of 2024, the Chang hard fork will introduce the concept of minimum-viable community-run governance to the Cardano blockchain by instituting the capabilities for on-chain community consensus, governed by a constitution that is yet to be written and voted on by the end of this year.
In its current form, Cardano has a standard governance system where token holders simply have the right to vote on improvement proposals presented by the network’s management. However, with the Chang hard fork applied, token holders (now network participants) will also have the right to present improvement proposals – that’s the first feature. The second feature is full decentralization: the network participants will replace the management of Input Output HK (IOHK, the engineering company behind Cardano). To fund this evolution, a treasury system will extract a fraction of all transaction fees to provide funds for development activities undertaken following the voting process.
On the tech side, Cardano is currently trialing a third version of its programming language, Plutus, which is expected to boost smart contract functionality to facilitate governance controls, privacy-focused applications, and scaling solutions built on Cardano. That said, Plutus V3 is designed to make Cardano seamlessly interact with Ethereum and other blockchains as well as absorb an increasing volume of transactions, making the Cardano blockchain an even more attractive platform for developers. Excitement took Cardano by storm; ADA, Cardano’s native currency, jumped by 12.67% week-over-week. Transaction volume on Cardano has also almost reached its highest level this year, as shown in Figure 2.
Figure 2: Cardano’s Transaction Volume
Source: Messari, CoinMetrics
Polygon’s “AggLayer” Spurs Excitement, Rooting for Blockchain Interoperability
Similar to how the Internet Protocol, or TCP/IP, connects computer systems in a network, Polygon’s aggregation layer, or AggLayer, is an additional liquidity-focused layer that aims to unite a divided blockchain landscape of Zero-Knowledge-powered networks, providing a cohesive experience akin to a single chain, as illustrated in Figure 3. In theory, this move would ultimately improve interoperability between the chains connected to Polygon without taking a toll on each chain’s sovereignty.
Going live on mainnet on February 23, the AggLayer would set Polygon apart from other scaling solutions that have frameworks similar to Polygon’s Chain Development Kit (CDK), such as Optimism’s OP Stack and Arbitrum’s Orbit, which streamline building customizable networks connected to Ethereum. Chains plugged into Polygon’s AggLayer would be at an advantage due to the unified liquidity it brings, as opposed to the fragmented status quo. The AggLayer’s core objective is to combine the liquidity of various connected blockchains into an aggregated interface to improve capital efficiency and user experience with a more intuitive design, as well as boost network effects.
Figure 3: Diagram showing how the AggLayer unifies liquidity
Source: Polygon
The AggLayer’s interoperability mechanism can be broken down into two functions: aggregating Zero-Knowledge proofs of liquidity transfers from all connected chains while ensuring safety for near-instant, atomic cross-chain transactions. As shown in Figure 4, Polygon’s unique active addresses reached an all-time high on February 18 as its native currency, MATIC, surged by 12.88% week-over-week.
Although this new primitive has already generated excitement around Polygon before even launching, the technology’s success is yet to be battle-tested in the coming months.
Figure 4: Polygon’s Unique Active Addresses Reached an All-Time High
Source: Polygonscan
This Week’s Calendar
Source: Forex Factory
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
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
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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Nyheter2 veckor sedanPost-election rally cools at year end
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Nyheter3 veckor sedanDe bästa ETFerna för värdeaktier
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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
