Crypto tokens climb as investors hopeful for friendlier U.S. regulation in 2025: CNBC Crypto World

Today, Bitcoin climbs to the $97,000 level as investors are optimistic about U.S. crypto regulation in the new year. And Chris Kuiper of Fidelity Digital Assets shares his crypto market's outlook for 2025. Welcome to CNBC's Crypto World, I'm Ryan Baker. Crypto markets are kicking off the new year in the green. As of noon Eastern, Bitcoin gained 3.5%, Ether rose 4% to $34.67, and Solana jumped 9% to $207. Investors welcome the year holding a favorable outlook for crypto in 2025. President-elect Trump, who campaigned on crypto as an issue, will re-enter D.C. later this month, this time with more crypto-friendly lawmakers, driving hope that Congress will soon pass new crypto legislation, focused either on stablecoin or market structure regulation. Taking a look at how crypto-focused stocks are performing so far on the first trading day of the year, MicroStrategy, Coinbase, and Mera Holdings jumped around 4.5% each, while Robinhood gained around 5.5%. That's outperforming broader markets, with the S&P 500 index up a third of a percent. Alright, for our main story today, we spoke with Chris Kuiper, Director of Research at Fidelity Digital Assets. We asked about his outlook for Bitcoin and Ether in 2025. Alright, Chris, thank you so much for being here. I want to start with the story for Bitcoin in 2025. Obviously, there were a lot of strong catalysts happening in crypto broadly this year, especially on the regulatory front. We're talking about a more friendly Congress, potential for rulemaking, but Bitcoin sort of seems above the fray a bit on that point, because a lot of people see it as a commodity. It's pretty widely accepted as such. And so I question is, what is the driving factor for Bitcoin in 2025, if it's not in the regulatory fray, if we're not worried about how the government is going to view it? Is this really just about adoption this year? Yeah, I think that's exactly right. Bitcoin is apolitical. It's the most neutral commodity or form of money, however you want to think of it, out there. And so I think that's exactly right. It's above all of this. It has lasted through many different regulatory cycles and regimes, and it will in the future. And I think that's what we need to focus on. And I would also agree with you that the main story is adoption. We're just finishing our 2025 look-ahead piece. It's going to be out next week. And that is one of the key themes there, that we believe we are entering a new era, a new chapter in this of mass adoption and diffusion. So Bitcoin has now risen to this $2 trillion asset class. It is on the radar of almost every investor. Every average person knows about it, has heard about it. And now you're going to start to see it work into all different industries, not just finance industries, but different industries completely, energy industries, insurance industries. We've seen it accelerate as part of corporations' treasury strategies. And so as this diffuses and permeates through all the different areas of society, we think that's going to be the major factor. But of course, that's not just a 2025 story. That's likely a multi-year, maybe even multi-decade story. But we do think that 2025 could be the year where people look back on and say, ah, this was the turning point or this was the start of that new era. Is volatility still something you're concerned about when you're talking about crypto or Bitcoin specifically, talking about Bitcoin? Volatility was one of the reasons among many that people were talking about, we're still not sure about this asset class. We're still trying to figure it out. And if you're talking about that adoption story and more places that maybe you haven't traditionally seen crypto being held now taking on Bitcoin, are you worried about that in 2025? Is that something you're still watching for Bitcoin? What's the story there? I'm sure it's still going to be a factor and still it's going to be around. We've done an annual survey now of even institutional investors, not retail. And every year, the number one barrier has been cited volatility. The other ones have all changed. They've come and gone. But volatility stays up there as the number one most cited reasons as to why people either don't invest or their biggest concern. And to me, this is a bit of a pet peeve of mine. I think it's somewhat of an excuse or a distraction, especially for institutional investors who, quite frankly, should know better. It's their job and our job to handle volatility. Volatility is not a reason not to invest or just disregard something. It's a reason to manage it, to take it on. And really, people are finally, I think, coming around to this idea that volatility is part of Bitcoin's DNA, or at least for the foreseeable future, because it's absolutely linked to its greatest value proposition. Bitcoin is valuable because it's volatile. And that's because it has that hard cap of 21 million coins. And so because the supply can't change, any change in demand is going to have to be reflected with a change in price. And so you can't take out the volatility of Bitcoin without taking out that core value proposition. And I think people are finally getting comfortable with that and saying, okay, if it's volatile, if it's a little too volatile for me, I can manage it through the size of my position, or I can manage it through other ways, or I can now invest in it with different vehicles. And so I think, or at least I'm hopeful, this may be the year people finally disregard that one, and I'm sure they'll move on to something else. But the other thing, too, is you look at the research, and we've done a lot of this as well, Bitcoin is no more volatile than a lot of the magnificent seven stocks out there. So if people have these stocks in their portfolio, and almost everybody does, given the size of these companies, they're holding something that's just as volatile at times. So I think people need to look at the data as well as they're operating on some of this old data when Bitcoin was multiple times more volatile than it is today at a $2 trillion asset class. Let's talk about Ether and Ethereum. It was a laggard among its cohort in 2024. There were people sort of looking for its use case when that was a foregone conclusion in the past. It seems like people were asking those questions more last year. What's your expectation for Ether in 2025, and if it will manage to move away from some of those questions and that narrative it was building last year? Yeah, you hit on the underperformance that we saw. At one point, Ether was actually flat year to date. And then, of course, it did surge post-election and has recovered a lot of those gains. So it's no slouch. It's outperformed any other traditional finance asset out there. But, of course, it has underperformed Bitcoin quite significantly, and it continues to underperform in the last two to three-year trend, if you look at that. And one of the things that's been going on lately with Ethereum, and we have an analyst or a team who follows this very closely, is the focus on layer twos. So the community said, to scale this, we're going to have this roll-up-centric roadmap, where we focus on moving activities to layer twos. That's going to drive down fees. That's going to bring in more users and developers. Now, of course, the problem with that is that it took away a lot of the revenue on the base layer. And so people are looking at that, and I think that was part of the reason for the underperformance. But our analyst who covers this has been very firm in saying, this was the plan all along, to sacrifice that short-term revenue for larger network effects down the road, to keep people on the Ethereum network, keep them building, keep the fees low. And so there's always this balance of what's good for users isn't the best, at least in the short-term, for the holders of the token, because they've given up some of that near-term revenue for this scalability. Now, going into 2025, we'll see if this all works out, if they can pull this off. There's another upgrade expected in early part or Q2 of 2025. And so the Prague Electra upgrade is what it's called. We'll see if that also improves it. It was going to be one of the largest upgrades in history. They've scaled that back. It's just going to focus on cleaning up some of the code from the merge, and then also focus on these layer twos and giving some short-term solutions there. So that's really the big question and story for Ethereum, in my mind, whether the market likes this, this trade-off of short-term gains for a longer-term plan, and then whether or not they can pull that off. What about stablecoins? I mean, we've heard from lawmakers that have told us stablecoin bills seem like low-hanging fruit for the new Congress, that they could likely pass. We've also heard from lots of Wall Street firms that are serious about tokenization and usage of stablecoins. What are you watching in the stablecoin and tokenization space in 2025? Yeah, the stablecoin space has been absolutely on fire. The perfect product market fit out of all these things for a number of reasons, both on the payment and remittance side. Also, this is one of the things we touch on as well in our report, the demand for US dollars. A lot of that is going to help support stablecoin volumes, too. The dollar right now is ripping higher this morning. It's 109. So that's certainly going to help as well. And I think you'll see the regulatory environment get more clarity on this as well, because a lot of people do want to support this. So I don't have any specific details there, but something we'll certainly be watching. And then the other part is the tokenization. So it's very, very small that we see other tokenization outside of stablecoins. We've seen some treasuries, a few other things. But we expect and wouldn't be surprised to see that small and nascent market grow quite a bit in 2025 as well. Because again, it just makes sense to put a lot of these assets on chain to benefit from all the efficiencies that they get. Okay, that's all for Crypto World today. We'll be back again tomorrow and we'll see you then.