Original title: HEADWINDS BECOMING TAILWINDS

Author: Cosmos Jiang, General Partner of Pantera Capital; Translated by: 0xjs@Golden Finance

The cryptocurrency market may be like a whirlwind, but If you look closely, you will find that each of these years has a different story. 2021 is a period of prosperity and innovation. In 2022, we see the inevitable burst of the speculative bubble. The narrative of 2023 naturally turned into a headwind: deleveraging, capital outflows, user shifts elsewhere, and strengthening regulatory scrutiny. However, with the arrival of 2024, these headwinds are beginning to turn into signs of tailwinds. Now, as we look to 2025, this year could be a year when many tailwinds drive the industry into an accelerated growth phase.

The and regulatory landscape of digital assets is undergoing a paradigm shift. Cryptocurrencies have become a key force in the United States, and we believe that “crypto voting” plays a decisive role in shaping election results. Judging from the data, the digital asset industry can be said to be swing votes, just like the "fulcrum security" in the capital stack, it may have a disproportionate impact on future development. This transformation is more than just the stage; in just a few weeks it has proven substantial, paving the way for clearer rules that promote innovation and entrepreneurship.

This kind of regulatory clarity should have been achieved long ago. The industry has been asking for clear rules and welcomes reasonable regulation. Without it, the industry would be trapped in a paradoxical situation: projects like memecoin that cannot create value have little resistance, while those aimed at creating meaningful products and bringing real value are often suppressed . We believe that the new integrated legislative framework will reverse this dynamic and create a system that rewards innovation and value creation.

Bitcoin ETFs have achieved great success, attracting more than $35 billion in net inflows and over $100 billion in assets under management, becoming the most successful ETF ever. It is worth noting that last year, the inflow of Bitcoin ETFs even exceeded the second-largest stock index, Nasdaq QQQ.

We think this is just the beginning and expect a range of new ETF launches, including staking-enabled Ethereum, Solana and multi-asset products. The capital market is also opening up, and Wall Street banks are actively promoting cryptocurrency companies, looking forward to a series of active activities. This new capital flow and investor education will continue to drive the industry.

The fundamentals of the crypto industry are strong. The actual economic value capture of the L1 blockchain (equivalent to revenue, transaction fees) is now $6 billion per year. The total annualized revenue generated by on-chain applications reached US$10 billion. User participation also hit a new high this cycle, with daily active addresses hovering around 17 million.As we have emphasized in the past, stablecoins are becoming a “killer application” of crypto, with on-chain transfers and supply reaching new peaks, demonstrating its practicality as a payment and savings solution.

We believe that fundamentals will ultimately drive prices, and improvements in these indicators, both at the macro level and at the project-specific level, should lay the foundation for sustained growth.

Increased regulatory transparency may unlock long-term restricted entrepreneurial potential. The industry has been in this vague zone: if you issue a token that obviously has no value, it is legal. But if you try to create value and peg it to your tokens, you'll be shut down. This runs contrary to a normal-functioning society. Capitalism is built on the right incentive mechanism and we believe we are returning to rational business practices.

Our new president says he wants the United States to become the "global cryptocurrency capital." This is significant because over the past few years we have seen talent, capital and innovation in the industry flow to other jurisdictions. Innovation follows entrepreneurs, and we are now talking to many people who have left the United States before, who now say they are ready to return home.

The establishment of the White House’s AI and cryptocurrency Tsar’s post is particularly important. The appointment will take cryptocurrency alongside artificial intelligence. It makes sense when you realize that these will be the two of the fastest and most exciting industries around the world in the coming years.

Although concerns about interest rates and macro data continue to exist, it is important to take a step back and see the overall situation. The U.S. economy remains strong, and although interest rates may last longer in the short term, the overall trend is declining. Meanwhile, both the U.S. and fiscal treasury are relaxing, increasing global liquidity.

As these macro trends are consistent with the structural tailwinds of the crypto industry, we believe the industry is ready for a lasting period of growth.

We may be moving out of the early speculative boom and bust cycles and are now entering the stage of large-scale adoption and dissemination. The next chapter may reflect more sustainable and meaningful growth, providing attractive opportunities for long-term investors.

2025 will be a key year for the crypto industry. With the upwind of , regulation and macroeconomics combined with strong industry fundamentals and accelerated innovation, we believe the future of the crypto industry will remain bright as ever.