Graphing Digital Assets
Month in Review — January 2025
A New Era of Digital Asset Regulation in the U.S.
Total cryptocurrency market capitalization grew 117% YoY (as of January 31, 2025), spurred by the results of the U.S. Presidential election. Since November, the digital asset community eagerly awaited the inauguration of the new administration with the promise this would bring positive change to the digital asset ecosystem in the U.S.
Within the first week of his presidency, Trump laid a foundation for a pro-crypto regulatory environment:
January 20: Gary Gensler stepped down as SEC Chair and Commissioner Mark Uyeda, known for his flexible and supportive approach toward digital assets, was designated Acting Chair. | Caroline Pham, a recognized leader on digital asset issues, was appointed Acting Chair of the CFTC.
January 21: The SEC launched a Crypto Task Force aimed at developing a “comprehensive and clear” regulatory framework for digital assets.
January 23: The SEC repealed Staff Accounting Bulletin (SAB) 121, which had imposed significant restrictions on financial institutions seeking to custody digital assets. | The White House issued an Executive Order focused on strengthening the U.S. as a leader in digital financial technology. It includes an initiative to evaluate the potential for a national digital asset reserve—a notable move given the U.S. government’s current holdings of approximately 198,000 bitcoin (top graph). | Senator Cynthia Lummis, a well-known crypto advocate, was appointed Chair of the new banking subcommittee on digital assets.
These actions reflect a significant shift in U.S. government policy towards digital assets. As of June 2024, the U.S. ranked fourth globally in grassroots crypto adoption (bottom graph), signifying strong retail demand for digital assets despite lack of support by U.S. government. Under the previous administration, major U.S. digital asset firms—including Coinbase (exchange), Ripple (payment protocol), and Consensys (DeFi pioneer)—faced significant regulatory challenges and remain in ongoing legal battles with the SEC. Moreover, U.S. citizens are restricted from using many offshore exchanges and DeFi protocols, pushing several digital asset businesses to move offshore.
A crypto-friendly U.S. government that encourages a transparent and supportive regulatory environment is likely to foster widespread adoption. An ecosystem in which both retail and institutional investors have confidence in the space can position the U.S. as a global leader in digital asset innovation.
Source: U.S. Government Bitcoin Holdings from Arkham Intelligence https://intel.arkm.com/explorer/entity/usg and Grassroot Crypto Adoption from Chainalysis 2024 Global Adoption Index https://www.chainalysis.com/blog/2024-global-crypto-adoption-index/ .
Digital Assets Dominate at Davos
In January, world leaders gathered in Davos, Switzerland, for the annual World Economic Forum. For the first time since 2021, digital assets dominated the conversation, with top financial executives expressing support for the asset class and blockchain technology.
BlackRock CEO Larry Fink highlighted growing institutional interest in bitcoin, reflecting on a meeting with a sovereign wealth fund that is considering a 2% to 5% allocation to digital assets. He noted that if this trend was widely adopted, bitcoin’s price could reach up to $700,000.
Bank of America CEO Brian Moynihan suggested that regulatory clarity would accelerate banking sector adoption of blockchain technology. He noted that major financial institutions, including his own, have already secured hundreds of blockchain-related patents and are prepared to enter the space once regulations allow for broader integration.
Morgan Stanley Chairman & CEO Ted Pick looks forward to working with lawmakers to determine how this regulated financial institution can “act as transactor” and offer crypto products to its customers in a safe way. As one of the first major U.S. banks to offer digital assets on its HNW platform, Morgan Stanley has recognized the demand for this asset class among its investors.
Coinbase CEO Brian Armstrong compared the crypto adoption curve to the early days of the internet, predicting that digital assets could reach half the global population within 10 to 15 years. Historical adoption trends support Armstrong’s outlook.
The growth trajectory of digital asset users over the eight-year period from 2017 to 2025 largely corresponds to that of internet users over the eight-year period from 1995 to 2003 (top graph). If this parallel holds, the current stage of digital asset adoption is equivalent to the internet’s development in 2003—still in its early days, with substantial expansion ahead (bottom graph).
The prospect of growing institutional interest, regulatory progress, and increasing mainstream integration position digital assets to continue their rapid adoption curve. The momentum from Davos signals that what was once a niche market is now a central topic in economic discussions, with far-reaching implications for investors and institutions alike.
Source: Crypto Users from Statista https://www.statista.com/statistics/1202503/global-cryptocurrency-user-base/ and Internet Users from Our World in Data (https://ourworldindata.org/grapher/number-of-internet-users). Years shown represent data available for comparison.
DeFi’s Ongoing Momentum
Recent months have demonstrated strong performance for market-neutral decentralized finance (DeFi) strategies. DeFi is continuing to gain momentum, driven by increasing adoption, protocol innovation, and evolving yield opportunities.
Monthly DeFi revenue has remained elevated, with the last three months posting the highest figures in history (top graph).
Key Drivers of Growth
Increased Adoption: The number of unique monthly DeFi users grew from 5.02 million in January 2024 to 20.81 million by December 2024, underscoring sustained demand for decentralized financial services.
Protocol Innovation: New DeFi protocols are launching at an unprecedented pace, offering users novel opportunities to engage with decentralized finance. These protocols continue to refine capital efficiency, expand yield generation mechanisms, and enhance risk-adjusted returns for participants.
DeFi Advancements
Liquid Restaking: Since December 2023, Ethereum-based liquid restaking protocols have gained significant traction, jumping from near zero to approximately $10 billion by January 2025 (bottom graph). These protocols build on the staking ecosystem, allowing users to earn additional yield by restaking ETH while maintaining liquidity.
Bitcoin DeFi and Yield Products: The emergence of Bitcoin-native DeFi solutions is unlocking new yield opportunities, with platforms introducing lending, borrowing, and staking mechanisms designed specifically for BTC.
L1 Competition: Layer-1 competition remains intense, with Solana gaining market share due to its high-speed transactions and lower fees. This renewed momentum has spurred innovation across ecosystems, with Ethereum and alternative L1s refining their value propositions to stay competitive.
As adoption and innovation accelerate, market-neutral DeFi strategies are poised to deliver strong performance throughout the year. Yet while these developments reflect growth, risks remain. The January depeg of Usual Protocol’s USD0++ token highlights the importance of ongoing risk management. While innovation presents lucrative opportunities, risk awareness remains crucial in navigating this rapidly evolving space.
Source: Monthly DeFi Revenue and Ethereum Liquid Restaking Total Value Locked – The Block