Merkle Capital, a Thai digital asset management firm, expects broader adoption of cryptocurrencies this year, with Bitcoin a cornerstone given its institutional appeal.
Bitcoin dominated the investment landscape in 2024, with prices skyrocketing from US$40,000 to $107,000 -- an impressive 160% increase, Merkle said in a research note.
The surge was driven by several pivotal factors, starting with regulatory approval of spot Bitcoin exchange-traded funds (ETFs) that began trading in January. The Bitcoin halving also reduced supply, while spot Ethereum ETFs were launched.
Other factors included the first US interest rate cut in four years and Donald Trump's victory in the US presidential election in November, offering a boost to crypto investments.
"These developments not only strengthened Bitcoin's fundamentals, but also reshaped the broader digital asset ecosystem, setting the stage for continued growth into 2025," Merkle noted.
"With a strong foundation laid in 2024, including a record-breaking Bitcoin performance and increased institutional adoption, the stage is set for a new wave of growth, particularly for alternative coins [altcoins]."
The market value-to-realised value (MVRV) ratio suggests the average cost for Bitcoin holders is $39,000. Historically Bitcoin's price peaked at around 3.7 times its MVRV, implying a potential high of $145,000.
However, the approval of spot ETFs attracted new institutional players, creating potential deviations in Bitcoin's valuation metrics, according to the research.
"While short-term predictions remain challenging, the influx of institutional money through ETFs and acquisitions signals robust long-term support," noted the research.
Ethereum benefited from the approval of spot ETFs last year, attracting new institutional investments. With advancements to its ecosystem, Ethereum stands as a high-potential asset for 2025, noted Merkle.
Altcoins could also benefit amid institutional inflows and Trump's pro-Bitcoin policies. Historical trends suggest as Bitcoin dominance declines, often following a Bitcoin price peak, investment flows into altcoins, noted the research.
Bitcoin's dominance is at 57.7%, but previous cycles suggest it could drop to around 40%, sparking a 50% increase in altcoin market value.
"Altcoins are expected to gain traction as investors diversify their portfolios. This shift, combined with continued regulatory clarity, innovation and institutional inflows, could lead to significant market expansion," noted the research.
"However, past performance is not indicative of future results. Investors should carefully assess their risk tolerance and conduct thorough research before investing in the crypto market."
