Markets Daily Crypto Roundup: Crypto Update | Will 2025 Be the Year of More Custodians and More Competition?

Released on January 2, 2025 | Host: Jen Sanasi | Guest: Adam Morgan McCarthy, Kaiko Research Analyst

Introduction

In the latest episode of Markets Daily Crypto Roundup, hosted by Jen Sanasi from CoinDesk, the discussion centers around the current state and future prospects of the cryptocurrency market as we usher in 2025. Joined by Kaiko Research Analyst Adam Morgan McCarthy, the conversation delves into market movements, regulatory developments, the evolving landscape of custodians, and the potential trajectories for both major cryptocurrencies and altcoins in the coming year.

Market Performance: Bitcoin and Ethereum Rally

Jen opens the discussion by highlighting the recent market trends, noting that both Bitcoin (BTC) and Ethereum (ETH) have experienced gains of approximately 2% and 3% respectively at the time of recording.

Adam Morgan McCarthy elaborates on this rally, mentioning the tempered expectations around a "Santa rally" that saw Bitcoin briefly surge over $100k. He states:

"[01:48] Adam Morgan McCarthy: ... we thought there's better, less than 10% chance of that happening. And it kind of played out that way that things kind of pulled back a little bit."

He draws parallels to the previous year's market behavior, suggesting that a period of consolidation is typical during this season, especially following significant price increases and regulatory milestones.

January Forecast: Market Consolidation and Potential Catalysts

As January unfolds, Jen probes Adams's expectations for Bitcoin’s performance amid mixed analyst predictions surrounding the upcoming U.S. inauguration on January 20th.

Adam Morgan McCarthy responds by emphasizing both priced-in factors and emerging catalysts that could influence Bitcoin's trajectory:

"[03:30] Adam Morgan McCarthy: ... what isn't priced in, I think, is the follow through that we might see from President Trump... he’s promised to commute the sentence of Ross Ulbricht... maybe that could again cause another sort of push." [03:30]

He anticipates that regulatory actions, such as the potential repeal of SAB121—an accounting standard for custodians handling crypto assets—could significantly enhance competition within the custody sector. This, in turn, might bolster market liquidity and investor confidence.

Regulatory Developments: Custody and Stablecoins

A significant portion of the conversation revolves around regulatory changes anticipated in 2025, particularly regarding custodians and stablecoins.

Adam Morgan McCarthy notes the current state of the custody market:

"[07:52] Adam Morgan McCarthy: ... Coinbase had 100% of the custody market this time last year. I think now it's just below 80% maybe with Fidelity, BitGo, Anchorage, others coming in there." [07:52]

He underscores the importance of increased competition for fostering a healthier ecosystem, asserting that more custodians entering the market will drive innovation and reliability. Additionally, he highlights the potential impact of stablecoin regulations similar to Europe’s MiCA (Markets in Crypto-assets Regulation), which could stabilize and expand the use of USD-denominated stablecoins in the U.S.

"If that comes early this month or that'll probably be something that comes maybe February, March or later on. But once that does happen, it kind of increases competition." [03:30]

Adam believes that clear regulatory frameworks will not only enhance market stability but also encourage the development of new financial products and services within the crypto space.

Trends for 2025: Innovation and Use Cases

Looking ahead, Jen and Adam explore the broader trends that will shape the crypto industry in 2025. Adam advocates for a shift in focus from regulatory obstacles to actual use cases and product innovations that can drive mainstream adoption.

"[14:36] Adam Morgan McCarthy: The one thing for me is maybe focusing a little bit more on use cases and a little less on regulatory issues." [14:36]

He emphasizes the necessity for tangible applications and user-centric innovations to sustain growth and interest in crypto assets. Examples cited include the development of secure stablecoins like ITSD T USDT and platforms enhancing security and functionality, which are crucial for long-term viability and user trust.

Altcoins and Meme Coins: Navigating the Narrative

The discussion then shifts to the role of altcoins and meme coins within the crypto ecosystem. Jen references the significant influence of meme coins in the previous year and anticipates their continued presence, especially with the integration of AI technologies.

Adam Morgan McCarthy provides a nuanced perspective:

"[11:18] Adam Morgan McCarthy: ... meme coins that do stick around have a narrative and they have a community... you need to have a solid narrative and a kind of community there, almost cult-like followings." [11:18]

He acknowledges the persistent allure of meme coins but stresses that only those with strong narratives and dedicated communities will endure. Regarding altcoins, Adam expresses caution, noting that while institutional interest is growing, the willingness of large institutions to invest in less liquid, higher-risk assets remains uncertain. He suggests that clarity in regulation will be pivotal in determining which altcoins gain traction and investor confidence.

Hottest Take: Emphasizing Use Cases Over Regulatory Hurdles

As the episode concludes, Adam shares his "hottest take" on what the crypto community should prioritize in 2025.

"[14:36] Adam Morgan McCarthy: ... focusing a little bit more on use cases and a little less on regulatory issues... look a little bit more at what we can do to entice people to use the products and use the tokens and get involved in a healthy way." [14:36]

He advocates for a balanced approach where innovation and practical applications take precedence over continuous regulatory debates. By doing so, the crypto industry can foster sustainable growth and broader adoption.

Conclusion

Jen Sanasi wraps up the episode by thanking Adam Morgan McCarthy for his insights and reminds listeners to subscribe to the CoinDesk Podcast network for more updates. The episode underscores a pivotal moment for the crypto market in 2025, highlighting the interplay between regulatory developments, market dynamics, and the crucial role of innovation in shaping the future of digital assets.

Notable Quotes:

• Adam Morgan McCarthy [01:48]: “We thought there's better, less than 10% chance of that happening. And it kind of played out that way that things kind of pulled back a little bit.”

• Adam Morgan McCarthy [03:30]: “What isn't priced in, I think, is the follow through that we might see from President Trump... maybe that could again cause another sort of push.”

• Adam Morgan McCarthy [07:52]: “Coinbase had 100% of the custody market this time last year. I think now it's just below 80% maybe with Fidelity, BitGo, Anchorage, others coming in there.”

• Adam Morgan McCarthy [11:18]: “Meme coins that do stick around have a narrative and they have a community... you need to have a solid narrative and a kind of community there, almost cult-like followings.”

• Adam Morgan McCarthy [14:36]: “Focusing a little bit more on use cases and a little less on regulatory issues... entice people to use the products and use the tokens and get involved in a healthy way.”

This comprehensive summary encapsulates the key discussions from the episode, providing valuable insights for both active traders and enthusiasts eager to understand the evolving landscape of cryptocurrency in 2025.