bitcoin 4 (Credits: Unsplash – Michael Förtsch)
Have you never heard of meme coin, MiCA (and not the famous chocolate brand), stable coin or ETF? At a time when the European regulation on cryptoasset markets gradually comes into force on December 30, 2024 and the price of bitcoin is soaring, an overview of the challenges of cryptocurrency in 2025.
The election of Donald Trump as President of the United States in November 2024 marked a turning point for Bitcoin. Between September and December 2024, Bitcoin doubled its value, going from $52,000 to more than $100,000. This year, it posted a performance of 124% with an all-time high of $108,000.
Performance well above the Nasdaq index (30%), gold (27%) or the CAC 40 (-2%), places it in 7th position among the best valued financial assets. The cryptocurrency market as a whole is not to be outdone with a performance close to 100% over the year 2024.
In 2024, Bitcoin will be the 7th most valued financial asset. 8marketcap, Provided by the author
This prolific year for investors follows a year 2023 which saw the price of Bitcoin recover after the lows reached in 2022 around $15,000.
Rise of ETFs, supported by BlackRock
The reasons for such success are multiple. The first? The launch of the first ETFs (traded index funds or Trackers) on the market after the green light in early January 2024 from the SEC, the stock market watchdog in the United States. These exchange traded funds track the performance of an underlying (reference) asset like Bitcoin, gold or the CAC 40. They replicate the performance of the asset and they can be bought and sold like stocks directly , without having to hold the asset itself. This process makes transactions and holding easier, as there is no physical storage.
BlackRock, the largest asset manager, wants to be the standard bearer. IBIT, its ETF, has been particularly successful, contributing half of the $100 billion amassed by the 11 approved Bitcoin ETFs. Larry Fink, the powerful boss of BlackRock, has become an ardent promoter, now calling the asset “digital gold”. This radical change of position on the part of one of the most influential asset managers has considerably strengthened the legitimacy of Bitcoin among institutional investors.
Halving: from 900 to 450 bitcoins issued per day
The second? The halving. This process of halving the creation of new bitcoins occurs approximately every four years or more precisely every 210,000 blocks validated on its blockchain by miners. The latter provide the service to the blockchain by making available the computing power of their computers to validate transactions and secure the network. Halving automatically makes supply scarce on the market, thus creating the conditions for price appreciation.
From now on, it is no longer 900 bitcoins that will be issued per day, but 450 on average. The protocol that governs the queen of cryptocurrencies is in fact a precision mechanism with a maximum supply of 21 million bitcoins which will not be reached before 2,140 and of which 90% have already been mined.
Even digital corners and ambushes
This digital gold rush is not going smoothly and, like the conquest of the West, there are numerous traps and ambushes. Cryptocurrency operations remain exposed to technical errors – wrong wallet address or selected network – or scams.
The craze for the same coins is akin to a giant casino. Players galvanized by the promise of multiplying their investment by 100 or 1,000. Up more than 300% over the year, this market represented in particular by Dogecoin, Shiba Inu or Pepe tokens, peaks at more than 100 billion dollars. These cryptocurrencies, initially created as a reference to an Internet meme, may be currencies with purely speculative purposes. And anyone can create them. All it takes is a simple connection, an illustrative image and the name of the token and its ticker – a unique code with a combination of letters and numbers – to put it on the market.
Some projects may be useful but, by definition, the same corners are at best for humorous purposes. At worst, there to attract capital and to better divert it. And when a schoolboy manages to defraud investors out of $30,000, it is legitimate to ask the question of the regulation of this type of platform to protect investors.
Regulation of cryptocurrencies: United States VS France
The European Union, with the MiCA (Markets in Crypto-Assets Regulation) in force since yesterday, now offers a uniform legal framework for crypto-asset markets. These operations are now traced in the same way as traditional money transfers. Cryptocurrency service providers are placed under authorization, strengthening consumer protection. This regulation probably goes against the American trend. The arrival in the United States of the second Trump administration, in particular under the influence of Elon Musk, aims to simplify the standards on cryptocurrency.
MiCa is already making some players in the cryptocurrency ecosystem cringe. Tether, the issuer of the USDT stablecoin, refused to comply with the rules for obtaining the approval required by MiCA. Stablecoins are cryptocurrencies whose value is indexed to that of a reference asset, generally the US dollar. They play a crucial role in providing necessary stability for trading and serving as a safe haven during periods of volatility.
Tether's USDT, with its capitalization of more than $130 billion, has become an essential pillar of the crypto market. It represents the third largest capitalization behind bitcoin and ethereum. USDT has often been identified as a potential cause of systemic risk given its current valuation.
Outlook for 2025
Many other stablecoins are still not delisted and platforms for rampant speculation on the same coins remain open. We can therefore ask the question of the relevance of European regulation and its impact on the development of the cryptocurrency industry in Europe.
The year following the halving is generally favorable for cryptocurrencies, especially during the first three quarters. We can expect that this year will be no exception to the rule. On the other hand, if the market were to correct strongly as in 2021, the flaws in the industry could have consequences similar to those of subprimes in 2008.
It is therefore important that rules of good management, rather than unilateral regulations, impose themselves on players in decentralized and traditional finance in the years to come.
Jean-Philippe Serbera
Professor of Accounting and Finance, Associate Dean for Research, ESC Pau
This article comes from The Conversation website.
