Source: Intensive Reading of Research Reports

It's not yet dawn, but the skyline of Manhattan, New York, is already lit up by countless lights. Wall Street traders came to the office early as usual, but the atmosphere today was decidedly different. On the big screen, in addition to the familiar Dow Jones Index and Nasdaq Index, the price chart of Bitcoin is beating in real time. This "alternative asset" that was once scorned by Wall Street elites has now become a must-see trading target for them every day.

1. Trump’s crypto bull market and the wave of new funds

"This is the most volatile cryptocurrency I have ever seen in my 25 years in the industry. "A significant shift in capital flows," said James Carlton, head of Morgan Stanley's digital assets department, sitting in his office on Fifth Avenue, pointing to the large data screen in front of him. The screen shows that since Trump won the election in November 2024, more than $80 billion in institutional funds have poured into the cryptocurrency market in just two months.

On the morning when the price of Bitcoin exceeded the $100,000 mark, the entire Wall Street was boiling. But what really caught the market’s attention was not the price itself, but the fundamental change in the capital structure behind it.

"Bull markets in the past have been driven primarily by retail investors, but this one is completely different." Sarah, senior investment strategist at BlackRock Mitchell analyzed this, "What we are seeing now is that pension funds, university endowments, family offices, and even sovereign wealth funds are building positions. These are 'smart money' who have never been involved in cryptocurrency in the past."

< p>The specific data is shocking:

BlackRock’s IBIT Bitcoin ETF raised more than US$5 billion in its first month, breaking the E TF issuance history

Fidelity’s digital asset department report shows that more than 60% of institutional clients have begun to incorporate cryptocurrencies into their asset allocation

Among the world’s top ten sovereign wealth funds, there are Six companies began to allocate Bitcoin, with a total allocation of more than 20 billion US dollars

"The most interesting thing is the source of funds," said Tom, head of Goldman Sachs' digital asset trading department. Zhang pointed out, "According to our statistics, nearly 70% of funds come from traditional markets, and these are real incremental funds."

Trump's Orientation also pays attention to the marketInjected a cardiotonic drug. The "Digital Dollar Reserve" plan proposed by the new Treasury Secretary, as well as the proposal to support the allocation of part of the reserve in Bitcoin, have given the market hope that cryptocurrencies will gain official recognition.

"This reminds me of the historical moment in 1971 when the U.S. dollar came off the gold standard," said Professor Robert Williams, a famous economist. "Few people realized it at the time. How that decision would change the world's financial system. Today, we may be standing at another similar historical turning point. "

However, there are also voices of reason lurking behind the market excitement. Linda Chen, a senior investment consultant, reminded: "Yes, the entry of institutional funds has made the market more mature, but this does not mean that risks disappear. On the contrary, we need a more professional risk management system."

2. U.S. cryptocurrency regulation is coming

December 18, 2024, Washington, DC, Capitol Hill.

"The purpose of regulation is not to set limits, but to protect." The firm voice of Paul Atkins, the new SEC chairman candidate, echoed in the conference hall. The lawmakers in the audience nodded frequently. This scene was in sharp contrast to the hearing after the FTX incident in late 2022. The U.S. regulatory environment at the end of 2024 is undergoing a profound transformation.

The turning point begins in September 2024. The Ministry of Finance announced the establishment of the Office of Financial Innovation and appointed a unique head. Sarah Mitchell, a technology and finance expert who has worked in Silicon Valley for fifteen years, said: "We are not here to be the 'policeman', but to be the 'guide' for innovation."

October 15 , SEC issued landmark digital asset classification guidelines. The 108-page document brings unprecedented clarity to the market. A week later, the CFTC also released a package, and the two major regulatory agencies reached a high degree of agreement in the field of digital assets for the first time.

On November 1, the "Regulatory Sandbox" plan was officially launched. This two-year pilot project provides innovative companies with a valuable experimental environment. Among the first batch of 25 selected companies, 18 have completed compliance transformation before the end of the year.

Investor protection measures were fully rolled out after Thanksgiving. Starting from December 1, all licensed exchanges must complete three guarantees:

Purchase insurance for no less than 5% of total custody assets

Implement separate storage of hot and cold wallets< /p>

Reserve certificates audited by the Big Four accounting firms are released monthly

States have also responded very quickly. In the fourth quarter of 2024, the battleground turns local:

Texas inThe Digital Asset Innovation Act was passed on October 26, attracting 87 crypto companies to register that month. Houston's energy district became "Crypto Valley" overnight. As of December, more than 200 companies have settled there.

On November 8, the city of Miami completed its first Bitcoin tax payment, and the mayor immediately announced: "By 2029, every American city will plan its own digital currency future."

On December 5, the Digital Asset Association released the first industry self-regulatory framework, which was recognized by federal regulators. The 76-page document covers every aspect from trading specifications to risk control.

International cooperation is also accelerating. On December 12, the U.S. Department of the Treasury signed the "Memorandum of Cooperation on Digital Asset Supervision" with seven major economies including the European Union, Japan, and Singapore, committing to establishing a unified cross-border regulatory framework by 2025.

"The changes in these three months exceed the total of the past three years." Professor Emily White of Harvard University commented at the annual Financial Technology Forum on December 20.

A senior lawyer used a vivid metaphor: "In the last quarter of 2024, we finally see the arrival of the 'infrastructure era' of the digital asset market. It is like paving a highway in the wilderness. Once it is repaired, the car can run fast and steadily. "

3. Stablecoins accelerate development as a bridge between the U.S. dollar and cryptocurrencies

In the cryptocurrency market, U.S. dollar stablecoins are a type of digital assets anchored 1:1 with the U.S. dollar. Price stability is maintained through legal currency reserves, over-collateralization of crypto assets, or algorithmic mechanisms. It is equivalent to the "digital dollar" in cryptocurrency and has become an important bridge connecting the legal currency U.S. dollar and cryptocurrency. This unique positioning allows stablecoins to maintain the convenience and programmability of cryptocurrencies while avoiding the violent fluctuations of assets such as Bitcoin, making them an important infrastructure for the digital economy.

In the fourth quarter of 2024, the stablecoin market will usher in a turning point. Following Trump’s victory, the total market value of stablecoins exceeded the $200 billion mark for the first time, an increase of 13% from the previous month. Among them, the three major stablecoins USDT, USDC and BUSD occupy a dominant position, with a total market value of more than 180 billion US dollars, providing sufficient liquidity for digital payments.

The market landscape is undergoing profound changes. The market share of traditional leader Tether (USDT) has dropped from more than 50% at the beginning of the year to 45%, while innovative stablecoins have risen rapidly. Ethena La powered by BlackRockbs launched a new stablecoin, and Ripple released the first RLUSD, demonstrating the confidence of institutional players in this field. These new products often incorporate more transparent reserve management and stricter compliance standards, driving the entire industry to mature.

The expansion of payment scenarios is particularly significant. According to Goldman Sachs data, the transaction volume settled using stablecoins will reach $10.8 trillion in 2023. Visa has partnered with Coinbase to enable real-time account recharge, and Mastercard has teamed up with Mercuryo to launch a Euro crypto debit card that supports self-hosted wallets, making digital payments closer to daily life.

In the field of cross-border payments, the cooperation between Circle and Thunes has unleashed the potential of USDC. "Stablecoins are reshaping the global payment system," Circle CEO said, "especially bringing revolutionary changes in efficiency and cost." This trend has been recognized by traditional payment giants, Stripe restarted crypto payment support and acquired stablecoins Platform Bridge marks the payment industry’s re-embracement of digital assets.

Regulatory attitudes are also turning positive. According to a JPMorgan research report, with the new administration in the United States, it is expected that a clearer stable currency regulatory framework will be introduced. At the same time, countries such as Singapore and Japan have begun to promote stable currency-related legislation to inject institutional confidence into the market.

"We are witnessing the reconfiguration of payment infrastructure," analysts at JPMorgan Chase pointed out. "Stablecoins are transforming from a mere cryptocurrency transaction medium to an important part of the global payment system."

p>4. Traditional financial giants are accelerating their embrace of cryptocurrency

As the cryptocurrency market matures, global financial giants are deploying digital assets at an unprecedented speed. Traditional financial institutions represented by BlackRock, Visa, Mastercard and Stripe are reshaping the application scenarios of crypto assets through product innovation and strategic cooperation.

In the field of payments, Visa takes the lead in providing real-time account recharge functions for US and European users through its strategic cooperation with Coinbase. This innovation significantly improves the efficiency of fund flow - traditional ACH transfers take 3-5 working days, SEPA transfers take 2-3 working days, and Visa's solution achieves instant payment, helping users to grasp the market more flexibly Chance. According to Coinspeaker data, in the week after the U.S. midterm elections alone, the net inflow of funds into the crypto market reached US$2.2 billion, and the full-year capital inflow in 2024 has exceeded US$33 billion.

Mastercard has cooperated with Mercuryo to launch a Euro crypto debit card that supports self-hosted wallets, allowing users to directly use cryptocurrency consumption at more than 100 million Mastercard merchants around the world. This innovation solves the problem of encryptionThe problem of currency "realization" lowers the threshold for users to use it. The global transaction volume using cryptocurrency payments has reached 10.8 billion US dollars in 2023, showing huge market potential.

Payment giant Stripe restarted its crypto payment business after a six-year hiatus and spent $1.1 billion to acquire stablecoin platform Bridge, demonstrating its confidence in the future of crypto payments. The new feature supports businesses to accept USDC payments from more than 150 countries, with a single transaction limit of US$10,000 and a monthly limit of US$100,000.

"This is not just a simple product innovation," Citibank analysts pointed out, "traditional financial institutions are building an ecosystem that deeply integrates crypto assets with the existing financial system. They no longer integrate crypto assets with the existing financial system." See currency as a threat, but as an opportunity to expand business boundaries. "

This shift has been responded positively by the market. Since Trump’s election, nearly $10 billion has poured into U.S. Bitcoin ETFs, pushing total assets in related products to about $113 billion. ETF products issued by institutions such as BlackRock performed particularly well, showing investors' trust in well-known financial institutions.

"We are at a turning point," JPMorgan Chase said in its latest research report. "The addition of traditional financial institutions not only brings funds and credibility, but more importantly, brings a professional risk management system. and mature operational experience, which is crucial to the long-term healthy development of the entire industry. "

5. How to rationally incorporate cryptocurrency into asset allocation strategies

Bitcoin. The long-term investment performance is impressive. Data shows that Bitcoin’s annualized return reached 75.6%, not only significantly ahead of the 11.6% of the S&P 500 Index, but even more than the 73.5% of technology stock leader NVIDIA. This significant excess return has made it the focus of investors' attention.

However, high returns come with significant volatility risk. Bitcoin’s annualized volatility is as high as 57.9%, far exceeding the S&P 500’s 11.6%. Since its birth in 2009, the Bitcoin market has experienced significant retracements of 70% to 80% on many occasions. Such violent fluctuations remind investors that they must pay full attention to risk management while pursuing high returns.

Faced with this risk-return characteristic, BlackRock Investment Research Institute provides pragmatic allocation suggestions for institutional investors. Research shows that it is a "reasonable range" to allocate 1% to 2% of Bitcoin in a traditional 60/40 stock and bond portfolio. This allocation can effectively control risks while seizing investment opportunities. If the allocation exceeds 2%, the risk level of the overall portfolio will increase significantly - for example, a 5% allocation to Bitcoin will increase the risk contributionThe contribution rises from 0% to more than 10%, and an allocation of 10% will cause the volatility contribution to climb to 36%.

The launch of Bitcoin ETF provides institutional investors with a more convenient allocation channel. Since Trump won the election, U.S. Bitcoin ETFs have attracted nearly $10 billion in capital inflows, with total assets reaching approximately $113 billion. ETF products not only provide higher liquidity and lower operating thresholds, but also provide standardized tools for introducing Bitcoin exposure to traditional investment portfolios.

What is even more noteworthy is that traditional pension institutions have begun to cautiously try Bitcoin investments. Australian pension giant AMP took the lead in allocating about 0.5% of total pension assets (approximately $17.2 million) to Bitcoin futures through its dynamic asset allocation plan. Anna Shelley, chief investment officer of AMP, pointed out that this decision reflects "structural changes" in the digital asset industry, especially after mainstream asset management institutions launched ETF products, institutional investors' acceptance of crypto assets has increased significantly.

"We are witnessing an evolution in investment philosophy," JPMorgan analysts said. "Cryptoassets are transforming from a speculative tool into an important asset allocation option. But the key to success is to exercise caution and restraint in using them." As a complementary element within a larger portfolio, investors need to establish a dynamic risk management framework," JP Morgan emphasized, "While enjoying the diversification benefits brought by crypto-assets, always put risk control first. The determination of the allocation ratio must be based on the investor's risk tolerance and investment goals, rather than simply pursuing short-term gains."< /p>