Digital assets had another great year in 2024, led by strength in Bitcoin and ETF inflows, catalyzed further by the new administration. However, as we enter more volatility in February of 2025, the prospect of higher prices now appears to be in question. Bitcoin hovers around 22% below its all-time high, but other major digital assets are significantly lower. Ethereum, the second largest cryptocurrency by market cap, is nearly 56% below its all-time high, and Solana, the sixth largest and likely next to be seen in an ETF wrapper sits even further below highs. This newfound volatility will provide a real-time test to the infrastructure built by issuer firms to handle outflows from digital asset ETFs and the impact on the market, a trend we have yet to see play out with total assets at these levels.
Despite the drawdowns, there are a number of analysts and market strategists still very bullish on the cryptocurrency space. After all, despite more than a 100% gain the past two years in a row, Bitcoin saw corrections of 20-30% multiple times throughout 2023 and 2024. Those would be considered major declines in the stock market but are a feature, not a bug, of digital assets.
Sources: Carson Investment Research, Forbes, Saxo, Individual firm’s websites
As you can see in the chart above, there are not many firms that were willing to publish negative price predictions for Bitcoin this year. Many are also doubling down with the recent correction and reaffirming their higher views. We are not going to make a prediction either (sorry if you were expecting one!) but can point you to a number of resources from Bitwise, Van Eck, Franklin Templeton, and Fidelity to see a range of views.
Crypto ETF Filing Craze
The latest crypto ETF development following the election has been a surge in applications for ETFs beyond Bitcoin and Ethereum (or in some cases variations) that range from reasonable to hopeful, to hail Mary. There are at least 45 different applications for new ETFs since the new administration took office. These products include leverage, options, and tracking digital assets ranging from established (XRP, Solana, Cardano) to meme coins that have only recently been launched with near zero utility (Melania, BONK).
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While more tools via the ETF wrapper are generally a good thing for investors, at a certain point they can become a risk. The SEC went to great lengths to gauge liquidity, market manipulation potential, and security when analyzing Bitcoin and Ethereum ETFs. Many of these new proposed products have significantly lower liquidity, include futures trading, and have higher (typically offshore) exchange concentration than existing products, not to mention security issues. This will bring new risks to the ETF wrapper in the US that we generally have not seen yet, should they get the green light. With new risks comes an increased need for proper vetting and due diligence of these products and others, a challenge you can be assured we at Carson are up for.
For more content by Grant Engelbart, VP, Investment Strategist click here.
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