2025 Blockchain Predictions From Blockchain Coinvestors
2025 BLOCKCHAIN PREDICTIONS FROM BLOCKCHAIN COINVESTORS
Every year in November we publish our predictions for the year ahead. Last year we were mostly on point. In this week's newsletter we provide a brief summary of each of the 10 predictions for blockchain in 2025.
We held our 2025 Blockchain Predictions Webinar in November which you can watch at any time.
Blockchain Value Creation Dashboard and KPIs
Before launching into the predictions, we want to share a dashboard we have created to help track the value creation in the blockchain space. The intent being to create a handful of key performance indicators that will allow us to assess value accretion and momentum in the space.
The following exhibit illustrates our first draft of this dashboard, and also aligns with the ten 2025 predictions.
At the base layer, Growth Drivers, we identify foundational growth drivers which track the adoption and ramping up of blockchain and crypto innovation around the world. The four KPIs we are tracking are:
Crypto User Wallets
Monthly Active Accounts
Institutional Adoption
Legislation and Regulation
At the second layer, Stocks & Flows, we focus on metrics that define the rise and growth of 'killer use cases'. The four KPIs we developed for this layer are:
Stablecoin Usage
Bitcoin ETF AUM
Government Treasuries
DeFi Total Locked Value
At the highest most layer, Venture Value Accretion, we measure value creation in the private and public markets with two KPIs:
Number of Blockchain Unicorns (Enterprises and Projects)
Public Blockchain Value (Liquid Token Market Capitalization and Number of Public Blockchain Enterprises)
Our predictions focus on how these ten KPIs will change over the course of the coming year.
Each is discussed in turn.
Prediction # 1: Crypto Adoption will Exceed 750 million Users
The most simple way to track the adoption of an innovation through its diffusion curve might be to measure how many users there are from the 8 billion people alive today. This is our first KPI. We end 2024 with some 620 million crypto user wallets and predict we will pass 750 million by year end 2025.
There are issues with this metric, including some users may have many wallets, some wallets may be institutional, and some wallets may be inactive (although in crypto, many users chose to HODL in which case an inactive wallet is not an abandoned wallet in many cases).
So we added a second KPI to help measure activity as well as total penetration.
Prediction # 2: Monthly Average Users will Exceed 300 million
Our second KPI is therefore monthly average users. A16Z states that we are currently at about 220m monthly average users which makes it about the year 1998 or 1999 when compared to the ramping up of Internet monthly average users. Early days indeed.
We predict that by year end we will have more than 300 million monthly average users - this is the first prediction which others feel is too conservative. We hope so. From the perspective of a blockchain enterprise company, a 50% increase in monthly users would already be profound, since this is a driver of transactions, fees, spreads, and so on. The same can be said for protocols relying on transaction activity.
So more is better, and if we have been conservative, then all the better for the industry.
Prediction # 3: 45 of the Top 50 Asset Managers by AUM (90%) will Adopt Crypto
The first two KPIs and predictions are end user focused. However, in value terms, institutional segments drive most activity in finance and commerce typically. So we need to complement 1 and 2 with an institutionally focused measure of adoption.
Here we refer to our biannual report on Institutional Digital Asset Adoption which is available for you to watch and read.
We predict that by the end of 2025, 45 of the top 50 global asset managers by AUM will have adopted crypto products and offerings in at least some ways, beginning most probably with digital wallets, crypto custody, and the offering of products based upon public liquid tokens like Bitcoin, Ethereum, and Solana.
By the end of 2025, any top asset manager who has not done so will not only look like a laggard - their clients will start to lose faith in their ability to help drive investment returns for them.
Prediction # 4: 100% of the Top 25 Financial Centers will Approve Crypto Legislation
In addition to tracking institutional adoption we believe that government support of blockchain and crypto is important - not so much because governments drive innovation (they do not, the private sector does) but because governments can slow down innovation if they chose to do so, for whatever reason. The last four years have been witness to this in the US, where a confused and ill focused administration has badly damaged US competitiveness and leadership globally through misplaced and often illegal actions.
Here we refer to our biannual report on Global Regulatory Readiness which was updated in November for you to review.
We predict that by the end of 2025, 100% of the world's leading financial centers will have drafted and approved at least some pro innovation, pro blockchain, and crypto legislation.
Needless to say, most of the world has already done this. The laggard has been the US, and by the end of 2025, we predict this will have been resolved in favor of the industry and our investment thesis.
Prediction # 5: Stablecoins will Exceed $250 Billion Issued and $7 Trillion Adjusted Annual Volume
The next four predictions focus on KPIs that measure the ramping up of 'killer apps' built on top of blockchains.
First and foremost, stablecoins will grow from about $180 billion issued and around $4.5 trillion of adjusted annual volume, to more than $250 billion issued and over $7 trillion adjusted annual volume. This is driven by the leading US dollar backed stablecoins including Tether, Circle, and PYUSD, although many new stablecoins will join them.
This is the second prediction that some find much too conservative. We hope we are wrong and stablecoins ramp up even faster - they provide clear market fit, and bring benefits of low cost, high speed and easy access which is a trifecta of end user benefits that make them a vast improvement over anything provided to us today by our banks, payment companies and commerce network operators.
Prediction # 6: Bitcoin ETF AUM will Exceed $250 billion
It is easy to forget that at the end of 2023, the Chair of the SEC in the US believed there would be no demand for Bitcoin ETFs and sought to bar them from investors and asset management companies.
How absurd that view looks today.
The Bitcoin ETFs have been the most successful launch of an ETF family ever, capital continues to flow rapidly into them, and yet today perhaps more than 90% of sovereign wealth funds, pension funds, insurance companies, retirement systems, wealth advisors, and so on have yet to take any exposure into these crypto assets.
We are often asked, is it too late to invest in Bitcoin?
If you are one of the first 10% to do so, and if most of the world's largest asset managers have no exposure, we think the answer must be no it is not too late. Not investment advice however.
Prediction # 7: US Government will Hold > 400,000 Bitcoin in Strategic Reserve
Beyond the Bitcoin ETFs, another measure of the acceptance of the Bitcoin 'killer app' for value storage, would be the treasuries of the largest holders of assets in the world. These are the world's central banks, and foremost among them is the US Treasury.
So if the US decides to hold the Bitcoin it has, and if it goes further to create both a Federal strategic Bitcoin reserve, and also state level strategic Bitcoin reserves, then this really matters globally. It puts every other central banker on notice that the largest holder of assets disagrees with a zero Bitcoin allocation.
We predict that by the end of 2025, the US government will hold more than 400,000 Bitcoin at the Federal level, and maybe many more will be held at the state level. Whether a US Bitcoin strategic reserve bill passes is a secondary but important matter to track and we think the bill will pass at least by the end of 2025.
Prediction # 8: DeFi TVL will Exceed $200 Billion
Lest it appear that we only care about TradFi and its upgrading to blockchain rails, we also believe in distributed, decentralized use cases of blockchain technology, and eventually we think that DeFi will win as it refines its approaches to make disintermediation not only possible, but more secure and reliable than single point of failure legacy solutions.
So our eighth prediction focuses on DeFi total locked value (TVL). We think that by the end of 2025 this will pass $200 billion.
Prediction # 9: We Expect > 250 Blockchain Unicorns (Enterprises & Projects)
Now we turn to value creation. Foundational layer growth drivers, and the rise of killer apps are the most important key performance indicators for the global adoption and ramping up of blockchain, however, as early stage venture investors, we care about financial returns and these are measured by the next two KPIs.
First, we want to measure private sector value creation, and the proxy we use is the number of blockchain unicorns which we track in our biannual report on Meet the Blockchain Unicorns which was just updated for the end of the year.
We measure blockchain unicorns (Enterprises and projects) for two reasons. First because it is an indicator of how some blockchain teams are breaking out and creating massive financial value (more than $1 billion market capitalization is a lot since there are only some 1,250 unicorns in the world across all areas of technology).
Second so we can measure the success of our early stage investment focus. To the extent to which we have exposure to the blockchain unicorns in our funds, we are accomplishing our overall investment objective of being where the value is accruing in the early stage.
We predict that by the end of 2025 there will be more than 250 blockchain unicorns and we will be investors in more than half of them (we are currently investors in some 110 blockchain unicorns). To put this into context this means that blockchain will account for some 20% of all of the world's unicorns by year end 2025.
Prediction # 10: Public Liquid Tokens Market Capitalization will Exceed $5 Trillion, with more than 35 Public Companies
Finally, we also want to measure public market value driven by blockchain. Here we focus on pure play companies, although the Internet has already proven that powerful new ways of digitalization eventually move beyond pure play companies to all companies. Today, most of the world's most valuable companies are either natively Internet based (i.e. Amazon) or use it throughout their businesses even if those began in a paper based world (i.e. Walmart).
We predict that by year end 2025 the market capitalization of public liquid tokens will exceed $5 trillion driven by Bitcoin, and there will be more than 35 public pure play blockchain companies, as the US public markets open up to IPOs and DeSpac mergers and as the SEC stops blocking crypto innovators from reaching the public markets.
We recognise that in predictions #9 and #10 we have some overlap (since we count blockchain unicorn projects in the former, and count their market cap in the latter) but we are okay with this. The way in which private tokens become public and liquid is very different from how enterprises go public, and this has profound implications for investors which we will not discuss in this newsletter.
Conclusion
No sooner had we written and presented the above 10 predictions, than we started to get some feedback that perhaps we have not been sufficiently optimistic. Specifically, some other blockchain key opinion leaders told us they would take the 'over' on some of our predictions.
At the end of 2025 we will see whether we are being sufficiently bullish or not, however, suffice to say it bodes well for blockchain and crypto that as we wrap up 2024, there is broad sentiment the future has never looked so bright for our investment thesis and our investment strategies.
Please reach out to ir@blockchaincoinvestors.com if you would like to learn more about how we are investing into the next wave of blockchain and crypto innovation.
Thank you for reading.
The Blockchain Coinvestors Partners
About Blockchain Coinvestors
Blockchain Coinvestors is the best way to invest in blockchain businesses. Our vision is that digital monies, commodities, and assets are inevitable and all of the world’s financial infrastructure must be upgraded. Our mission is to provide broad coverage of early stage blockchain investments and access to emerging blockchain unicorns. Blockchain Coinvestors’ investment strategies are now in their 10th year and are backed by 400+ investors globally. To date we have invested in 40+ pure play blockchain venture capital funds in the Americas, Asia, and Europe and in a combined portfolio of 1,250+ blockchain companies and projects including 95 blockchain unicorns. Blockchain Coinvestors’ first fund of funds ranks in the top decile amongst all funds in its category on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in London, New York, Grand Cayman, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.
“The best way to invest in blockchain businesses”