Merry Christmas everyone. I hope everyone is getting into the festive spirit. Since this is the final Weekly Research issue of 2024, instead of our usual deep dive, let’s keep it short, powerful, and packed with value.
So here are 3 key adoption trends in digital assets from 2024 that are likely to continue and accelerate in 2025 and beyond.
TREND 1: Stablecoins Are Taking Over
Stablecoin is becoming the default front-end for digital assets and a battleground for fintechs looking for a sticky product and AUM growth
2024 Milestones:
Market Size: +56%, $204B in Nov 2024 vs $130B in Dec 2023
Transaction Volume (adjusted): +50%, $5.5T in 2024 vs $3.67T in 2023
Active Wallets: +47%, 34M in Nov 2024 vs 23M in Dec 2023
2025 Prediction: stablecoin is likely to maintain 50%+ growth across all above metrics as more established fintech and financial institutions enter the space with extensive distribution networks
Adoption Growth Challenges/Catalysts:
Stablecoin is becoming the default pricing unit for all transactions in the digital assets space. It is the most frequently used trading pair for both spot and derivatives trading.
You can learn more here.
The business model has proven to be insanely profitable. The biggest stablecoin issuer Tether is the single most profitable company in the world, beating the best of the best hedge funds. It earned more than $100M profit per employee. You can learn more here.
Banks, fintechs and crypto native startups are all coming for this market. But regulation remains a key hurdle. Figuring out distribution while staying compliant across a fragmented regulatory framework is a key challenge for regulated players. You can learn more here.
Major currencies outside the USD are likely to see significant growth as Europe’s MiCA kicks into play.
TREND 2: Tokenized MMF/US Treasuries are Emerging as a Foundational Onchain Money Layer
Tokenized MMF/US Treasuries could challenge stablecoin as the default money layer for onchain finance and a battleground for asset managers looking to take an early lead in a multi-trillion asset class.
2024 Milestones:
Market Size: +500%, $3.5B in Dec 2024 vs $0.76B in Dec 2023
Holders Count: +680%, 8.9k in Dec 2024 vs 1.3k in Dec 2023
DeFi Integrations: 100+ in Dec 2024 vs 0 in Dec 2023
2025 Prediction: tokenized MMF/US Treasuries are likely to outpace the growth in stablecoin with triple-digits growth as more users discover they can access an upgraded version of stablecoin with savings function built-in
Adoption Growth Challenges/Catalysts:
Tokenized MMF/US Treasuries is likely to be the first tokenization use case to reach meaningful scale for regulated institutions as a more capital-efficient collateral form than traditional Treasuries in OTC trading. You can learn more here.
Asset managers looking for growth opportunities will enter the space as this represents both a new untapped and rapidly growing capital pool as well as a more lucrative revenue stream vs traditional MMF business.
Understanding how the AUM flywheel works in digital assets will be a success determinant as traditional players adapt to the digital assets space. I have been fielding an increasing number of inquiries from AM. If you are an AM looking to enter the space and looking for GTM help, feel free to reach out.
The ratio of tokenized US Treasuries to stablecoin market size is likely to increase from current 1.5% to 5%-10% as secondary market liquidity improves and integration across applications give more utilities to holders. In turn, liquidity and integrations will be a moat for market leaders.
TREND 3: Institutionalization of Digital Assets are Accelerating
More and more financial institutions will look to develop a suite of digital assets product offerings to stake their claim to what many predicted to be multi-trillion market by 2030
2024 Milestones:
BlackRock’s Bitcoin ETF surpassed $50B AUM in less than a year while its Gold ETF took 22 years to reach $33B AUM
Citi and DBS joined JPMorgan in becoming the first few global banks in offering tokenized bank deposits and payment product to their clients
The Republic of Slovenia became the first country to issue tokenized sovereign debt with the UK government looking to become the first G7 country to issue digital sovereign debt
2025 Predictions: global financial institution and corporates will continue to broaden their digital assets offerings and capabilities
Adoption Growth Challenges/Catalysts:
As jurisdictions around the world provide more regulatory clarities on digital assets, institutions will have more confidence and comfort in entering the space. The US new government’s pivot will likely be the most impactful catalyst for the entire industry, led by the institutionalization of Bitcoin as an asset class looking to replace gold as a digital store of value.
But until there is legislative and regulatory clarity, banks are still likely to be constrained when it comes to what they can practically do. The growth is likely to be led by the buyside - particularly asset managers and institutions looking for new distribution channels.
More assets are likely to be tokenized and made available as tokenized MMF paves way for more asset variety. Liquid assets such as public US equities and debt are likely to be the next category to find traction.
Hope you enjoyed the Tokenization Insight Weekly Research’s coverage and analysis of the most important adoption trends in digital assets in 2024. See you soon in 2025.
Comments