Fidelity Digital Assets recently released its latest report, which discusses the rapidly changing crypto market and presents an optimistic outlook for the industry in 2025. The report emphasizes the importance of Bitcoin adoption, Ethereum upgrades, and the increasing global interest in digital assets.
The report warns that nations that do not engage with Bitcoin may face significant challenges in maintaining economic stability and competitiveness in the digital age.
According to Matt Hogan, there will be a shift in the acceptance and adoption of Bitcoin by nation-states, central banks, and other financial entities by 2025. He cites the success of Bhutan and El Salvador in establishing strategic Bitcoin positions as inspiration for other countries. El Salvador made headlines in 2021 by becoming the first country to adopt Bitcoin as legal tender, setting an example for other nations.
Hogan further states that not allocating any Bitcoin could become a greater risk to nations than making an allocation, especially considering challenges such as inflation, currency debasement, and fiscal deficits.
There are global shifts happening, with Russia using Bitcoin for international transactions but hesitating to adopt it as a reserve asset. Japan, on the other hand, is concerned about Bitcoin’s liquidity and market volatility. Hogan suggests that these nations may face further challenges as they try to protect themselves from Bitcoin’s volatility.
Hogan also mentions the support from President-elect Donald Trump and Senator Cynthia Lummis for establishing a strategic Bitcoin reserve in the U.S. Senator Lummis introduced the Bitcoin Act of 2024 to the Senate in July 2024. If passed, this bill could potentially pressure other nations to adopt similar strategies, creating a ripple effect in global economic policy.
The report from Fidelity aligns with economist Carlota Perez’s view of the shift from speculative investment booms to the widespread adoption of new technologies. Just as the railroad and oil industries reshaped economies in the past, Bitcoin and digital assets have the potential to transform various sectors, including finance and communications.
Fidelity also explores Bitcoin’s potential role in a stagflationary environment, where there is stagnation and inflation occurring simultaneously. The report draws comparisons to gold’s performance during the 1970s and early 1980s when stagflation affected the global economy. Bitcoin’s limited supply and decentralized nature could make it a strong hedge against inflation and a store of value during periods of economic stagnation.
Martha Reyes, a Research Analyst at Fidelity, highlights the emergence of stablecoins as a leading use case for blockchain technology. Stablecoins offer liquidity and access to tokens pegged to the USD, which is crucial in a dollar-driven global economy. With $12 trillion in transfer value in December 2024, stablecoins facilitate faster and cheaper global payments and play a significant role in remittances, cross-border payments, and as a stable store of value.
The demand for USD-pegged stablecoins is driven by the Eurodollar market, reflecting the dollar’s status as a global reserve currency. Stablecoins like Tether are expected to complement this market and drive global funding. The report emphasizes that stablecoins provide a more efficient payment system, reducing transaction costs and enabling Layer 2 solutions for broader blockchain use cases. With the EU’s 2024 regulations offering legal protections, stablecoins are predicted to integrate further with traditional financial systems, reinforcing the dominance of the dollar in global trade in 2025.