Pro Crypto: 2025 Market Outlook by Coinbase ft. David Duong
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Welcome back to Pro Crypto, I'm Ash Bennington. Today, we're going to do a deep dive into the crypto markets with Coinbase. Every quarter, we go through their latest market outlook report, but this is the big one, the 2025 annual report. I'm joined by one of its authors, David Duong. He's the head of research at Coinbase Institutional. David, welcome to Real Vision. Thanks for having me, Ash.

Listen, so much to go through before we start, but I want to touch on tickets for the Real Vision Crypto Gathering, our in-person event in Miami at the end of this month. They're still on sale, but VIP tickets are now sold out. But there are some general admission tickets left, so grab one while they still last and join Real Vision and me in Miami on January 30th. Details at realvision.com forward slash tickets.

CG2025. That's realvision.com forward slash CG2025. With that said, let's jump right in. David, I'm always so excited when you join us for unique insights on digital asset crypto markets. Listen, you and Coinbase sit on top of a mountain of data, a mountain of order flow. It's

Always great to get your insights about what's happening. Here we are. Let's kick it off. 2025 annual outlook, 50,000 foot view, big picture. David, what are you seeing happening in digital asset markets right now?

Yeah, I guess I'm going to try not to bury the lead. So I'm going to start off saying that I am constructive for the first quarter of 2025. And that's as much visibility, to be honest with you, that I actually have into this market. I think that things are going to shift as we get further into the year. But the challenge we have for this market at the moment is that even though we are familiar with what the catalysts are in terms of a change of the regulatory environment, perhaps

perhaps a shift in how internationally it's perceived. I think the timeline is a little less well-defined than some of these catalysts were in 2024, because back then we were anticipating what was going to happen with the launch of ETFs in the US, for example. But the rally over the last few months has really been about everyone else in the world really kind of catching up to where these crypto advocates have been for years, which is that this is a firmly established asset class with

with real staying power, which is something that for whatever reasons have been more nebulous before we saw the US elections kind of hit and really seeing this become a firm theme into 2025.

Yeah, top of this report, words like transformation, maturation, culmination. There's this sense when you read this report that this is a moment that we've been moving to for some time, at least in the view of Coinbase. Tell us a little bit more about the particulars about the next lever of detail underneath the surface.

Yeah, I would kind of separate our outlook into a few different themes. So, I mean, top of this is that a lot of our views on the market are driven by what's happening on the macro side of things. And that has to do with, you know, our views on what the Fed is doing, monetary policy, fiscal policy, what the next administration might do, as well as regulation more broadly. But all these things, I would say, are pretty well known. I'd say below that, I would, you know, we have kind of our high conviction views

in terms of what we think will transform the crypto industry, like stablecoins, stokenization, all those things that I would say are kind of like low-hanging fruit, like themes that we know are definitely being viewed right now by the market. But then you have these themes on the frontier.

These things, I think, will impact the asset class, but they're probably more long term. And I would say that's things like decentralized physical infrastructure or D-PIN, prediction markets, AI agents. And those are things I would love to kind of unpack because there's a lot of excitement around them. Let's try to figure out which ones are going to fall on the side of reality versus which ones are kind of moonshots.

But then the third pillar kind of underpins everything, which is, you know, things that are going to transform the user experience. And that's stuff like account abstraction, smart wallets, things that really kind of represent the foundation for the other two categories. So that's kind of how I framed the report itself, trying to figure out what these pillars are and how much weight to put on each of them.

Yeah, and one of the reasons I love doing these reports with you is to walk through them one pillar at a time, literally one theme at a time. So let's start at the very beginning with that 50,000-foot overview of the macro framework. What do you see happening there? What are the key movers? What are the catalysts in 2025?

Well, you know, obviously the elections were a very big theme of the U S elections rather. And I would say that that's still going to be very important because we're going to look at what's happening on the fiscal side. What are tariffs deregulation, like tax cuts, all these things mean, uh,

for markets more broadly. And I do think that, you know, risk taking is going to be supported or at least any asset denominated in dollars are going to be supported by a larger fiscal deficit in the US. And, you know, that's the dirty secret about deficits. Like people don't like them because they're like, oh, that means like we're going to borrow more as a country or this or that. Well, true. But also in terms of risk taking, like it will support anything denominated in dollars.

But monetary policy is where things get a little bit tougher because I think right now the Fed's kind of sitting at the precipice of their decision of like, do we cut another one, two or zero times in 2025? And that's going to be balanced against the stronger U.S. economy that I see happening.

I do think that risk more broadly is going to be supported by a stronger US economy, and that's going to support crypto as well. And I think probably with the idea of tariffs kind of sitting there

perhaps putting a stronger dollar as a potential, I think that's going to be balanced against what's happening on the regulatory side for crypto. And I do think that given the names we've already seen coming out of the Trump administration, what we are seeing in terms of Congress, we're probably in for a very positive first 100 days, if not full year for 2025.

Yeah. So let's take those one at a time. So much to talk about here. Let's talk a little bit about this idea of balancing growth and inflation, the idea of negative feedback loops when you have positive growth, more likely to see a more staid monetary policy, i.e. less cuts going forward. Talk a little bit about that picture, where you see the neutral policy rate and what you see the base case being from a monetary policy outlook perspective.

Yeah, the neutral policy rate is probably the most difficult thing. I mean, obviously, like the Fed itself is trying to figure it out. And I think Jay Powell, who has, of course, a lot of control over this board, hasn't necessarily been in love with the idea of neutral policy rates in the past. And that perhaps speaks more to his experience as a lawyer rather than as an economist. But I

I would say right now we could probably be still in for maybe another 50 to 75 basis points of cuts in order to kind of meet us at that neutral policy rate. But I don't necessarily think we're getting there. I think that, you know, if we had gone back six months, we were kind of looking at 3% as closer to neutral. But given how strong the labor market appears to be, perhaps that could be a little less deep than where it was previously.

Are we going to deliver on that? I mean, there's a lot of like three-dimensional chess that's being played right now with the Fed trying to anticipate what the new administration is going to do and how that's going to affect inflation. And if the reasons for the Fed not cutting as deeply is because the U.S. economy is doing better, I don't necessarily think that's a bad problem. I mean, it kind of reminds me of the late 90s more than anything, which was

actually a fairly good time for risk taking, to be honest with you, because then we saw that, yes, there was easier monetary policy, the conditions were easier, but growth was still strong enough to kind of sustain both at the same time. So I think that that's where we could be. We could be in this sweet spot where markets can continue to do well because we've already seen enough cutting by the Fed, like

Conditions are a lot better than where they were from a monetary perspective, but the economy is still doing fairly well and strong enough that people want to take risks because next best alternative just doesn't pay as well. Hi, Raoul here.

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So let's move on to something else you mentioned, which is the incoming administration and the team that's going to work on these policymaking decisions. So critical, something everybody's trying to get their head around. Where do you see that right now?

Yeah. So a lot of people are focused on what we've seen as the quote unquote red wave. And we want to, of course, see things from the perspective of like the pro versus anti crypto agenda and how Congress kind of sits with respect to that. And honestly, we're in a really good position because just in the Senate alone, for example, we have at least 59 seats that we can count that are quote unquote pro crypto seats.

So about one shy of the filibuster rule, but there's about four seats that are at least neutral that we can definitely tap. Meanwhile, in the House, we saw back in 2024, Fit21 passed with around 279 votes. Well, right now we have 289 seats that we could count on for pro-crypto vote. So very much, we think that we can get at least a revamp of Fit21.

And a lot of that will start in committees. And the committees themselves are definitely in a much stronger position than where they were. French Hill, for example, is sitting in the House Financial Services Committee. On the Senate side of things, we got Tim Scott and the Senate Banking Committee. On the ag side, you've got Glenn Thompson in the House.

you've got uh on the uh on the incentive side very strong members who are going to be very supportive of this so i think that we are in a good position legislatively and then when we look at the executive committees themselves you know like there has been at least some consternation by people in the crypto native community who have been worried about a repeat of what we saw with gary gensler at the sec and so far as gary gensler i think

came in as what many people thought would be a strong crypto advocate. And obviously, that didn't necessarily materialize the way people thought. And people are worried about whether Paul Atkins represents the same. And no, that's not true at all. I mean, he actually was the one who hired Hester Peirce, as well as Mark Mugueda. He's got the sign-off from Hester Peirce as well. So I think that we are going to be in for a very positive sign. The question is...

what the timeline looks like, because it's still going to take time for a lot of these seats on the executive committees to actually be approved. That could be around like April or May, for example. But meanwhile, I think that we will get kicked off more on the legislative side of things over the next few months.

Gosh, it's so interesting. We could talk about, do an hour show just talking about the political implications for this. So two points here. One, maybe you can tell me I'm being too optimistic, but obviously in this period between election and inauguration, in this very hyper-partisan environment, am I being too optimistic by saying, is it possible that maybe, maybe crypto has become a slightly less partisan issue as it's become clear that there is a lot of adoption here among just American citizens more broadly?

Yeah, this is why I wanted to put that chart in as a pro versus anti-crypto because these are not necessarily party-aligned seats. I mean, we have crypto advocates on both sides of the aisle. So I agree with you. I think that we are now looking at crypto as a much more bipartisan issue that I think is a lot more well-supported than it was back in even 2024.

I mean, like it was already starting to develop and we saw that with the fit 21 passage. We, we saw that with the overturning of SAB 121 in the legislature, but it was vetoed at the white house. So I think that we're looking at a much better setup, uh, now than we were previously.

yeah it's so interesting we talk about likely picks for the sec and this question you brought up uh this idea i mean i i remember uh how many times did we hear about that course that gary gensler taught at mit about digital assets about crypto you know but one of the open questions and we're not going to be able to answer this today but it is interesting to speculate on the extent to which this was really mr gensler's view or was it the view of the administration uh was it the view of the

party? I mean, these are always very nebulous questions, but it seems that we're at a period here where the guy at the top of the ticket, President Trump himself, has expressed a great deal of positive view about the future of crypto, about the future of American crypto. So I just don't know. It seems like we're at exactly your point, David. It seems like we're in just a different time here.

Absolutely. And even having David Sachs as crypto czar, for example, and, you know, I think that position will sit outside of the government. So it won't be as in a strictly official capacity. But the fact that we have someone basically talking to people at the top

about crypto, I think is massive and a very big sea change from where we were previously. I think that any way you cut it, this is going to be a much more amenable administration so that crypto regulation has become a much more of a tailwind for the industry rather than the headwind that we saw in the last couple of years.

Yeah. Well said. I know we're jumping around here a little bit, but there's just so much to cover. Anything else on this pillar before we move on to the next one? No, I would love to kind of move on. I mean, like, I unfortunately don't think I have a lot more innovative things or, you know, revelatory things to say about the regulatory environment than what people already know.

All right, let's talk about some of the underlying technologies that you mentioned in Pillar 2. To start it off, I find Deepin fascinating, this idea of integration between hardware and blockchain infrastructure, just a fascinating, fascinating idea. Tell us what Coinbase's view is, what your take on Deepin. Yeah, so this is something that I think people have kind of...

I would say overlooked in the last few years, but really starting in 2023 and 2024, I think it's had a massive comeback from where it was previously. And, you know, like Deepin, I think, was initially created to kind of overcome these economies of scale associated with different projects from cellular towers to energy to, you know, like just kind of creating more resilient ways to

of using resources that maybe aren't necessarily of the purview that large corporates want to take on. But this is a way for smaller projects to kind of get kick-started and actually find the funding that they need to kind of build up.

So this is a sector that I think still is probably waiting in the wings for the demand that's going to drive it forward. So maybe we're still about two years away from kind of like seeing mass adoption of these technologies. But this is where we're starting.

And projects like Helium, HiveMapper, I think have been capturing a lot of attention because, of course, these are ways for these projects to kind of get off the ground.

Now, there are going to be issues in terms of trying to incentivize people from the demand perspective. A lot of these projects have started to kind of overcome that issue as well. But the underlying technologies that these projects kind of utilize, I think, can probably not be done in any other way. A good example is one of the newer projects like GeoNet, I think is also a super interesting one because they're doing things with GPS that

Really, like today, it's only good to like, you know, a couple of yards. And that's not a terrible thing. But I mean, they're trying to get it down to like inches. And the applications for that are going to be limitless.

Yeah, those projects are fascinating to me. The idea of using stationary ground stations to triangulate the distance at more granular levels. But listen, just big picture, Deepin is fascinating to me because this is really a new idea under the sun in terms of the way that projects get done and incentivized. I mean, look,

You know, if we had this conversation 10 years ago, you had two basic ways of doing things. You had public sector and private sector, private corporations on the one hand, government action on the other. This is a way of almost monetizing the open source movement and just a novel structure. I know it's very early and I don't want to make statements that sound too broad or sweeping, but as a concept, as an idea, as a premise, this is really a big new idea in the world.

That's absolutely true. And, you know, it probably couldn't have materialized without everything that came before it, because of course we have like, you know, a new economy in terms of like things like Uber and other ways, like the gig economy, as it were. And

And I think that the deep end is more of an extension of that insofar as now people are able to kind of take it upon themselves to build out infrastructure. And as you say, like infrastructure previously, energy infrastructure, like building out solar panels, for example, or other things were previously the purview of large corporations in a way that

you and I, like on an individual level, couldn't necessarily tap. But D-Pen allows us to do that now. So with just very little buy-in, for example, like you can buy a kit for a few hundred dollars and kind of put that into like your home to kind of establish a network, things like that. I think that this is

entirely new way of doing things that could definitely be massive and is a use case for crypto natively that isn't necessarily like, you know, just trading or other, you know, even like DeFi, which I think is also having a resurgence right now. Like it's very, very crypto specific in a way that other things aren't.

I don't think they're going to let me install a kit in my apartment building here on the Upper East Side, but it is fascinating. And this idea of just being able to participate, just really, really interesting stuff. Let's move on to something that I know lots of folks in our Real Vision audience are curious about, which is AI and the integration with blockchain and digital assets. Absolutely.

I think that the growth in this sector could be massive in 2025 and even beyond that. But AI has been a very tough kind of sector when we're talking about the intersection between AI and crypto. And what I mean by that is that we've seen this kind of like quick cycling of narratives in terms of what,

what AI represents to blockchain. And we've seen this move from, okay, we're going to redistribute the AI model across different models or different nodes. Or we're going to...

store the AI data itself on chain or other things. And, you know, we've now kind of moved on to something that I think is a lot more sticky, which is AI agents themselves. And the issue with AI agents, at least from an uninitiated perspective, is that people kind of lump AI agents and AI bots together. And

And they don't really, they're probably in the same bucket, but they are very different things because AI agents themselves represent like more autonomous entities, like software that's kind of capable of making decisions, taking decisions. And they do that based on real time data. So this is something that I think is a lot more cutting edge.

You know, you have things like AIXBT, for example, which is an AI-powered agent that sits on bases like virtual protocol. So this design is actually a lot more unique, and I think it could be transformative for not just crypto space, but how we just do things. Because the applications there could be used in DeFi, for example, like

Instead of using like automated market makers, we have an AI agent sitting in there and actually managing like the exchange. I think that, you know, these kinds of things are kind of currently like sitting at the potential for where crypto and AI could actually meet.

Yeah, we could do a whole 90-minute show just on blockchain and AI agents alone. I know this is the highly caffeinated version we're moving through very quickly, but there's just so much to cover as we look out onto a new year with lots of interesting new technology. Gosh, let's talk a little bit about asset tokenization. It seems like every year in January, we do a show about how this is finally the year for asset tokenization to become a mainstream phenomenon. Talk a little bit about where you see that.

absolutely you know and when it comes to asset tokenization i mean you have stable coins and you have real world assets i.e everything else and i mean the expectations alone for i think real world assets uh

I mean, currently, if you take real-world assets, excluding stablecoins, I think it's currently around $13.5 billion. Stablecoin's market cap was $193 billion on December 1st, but today it's $206 billion. But the expectations are that this could grow to between $2 trillion to $30 trillion over the next five years. And yes, that's a very, very wide spectrum of expectations.

But the idea of even just trillions over the next five years, is that possible? Well, yes. I mean, stablecoins alone. I mean, if you take the idea that the current M2 market supply in the US is

is somewhere around $21 trillion. I mean, $3 trillion of that, which I think is a number that's been posited by folks like Circle, for example, like Jeremy Allaire, suggesting that actually that's just 14% of where the current M2 money supply is. That's really not far off. Today, we're about a little bit less than 1%.

So I think that as we see the payment side of things growing on stablecoin side, we could definitely see that level of growth, particularly since, you know, just the amount of like volume settled by stablecoins tripled over the course of 2024. But

On the other side of things, and strictly speaking, the tokenization, private credit, commodities, corporate bonds, real estate, what have you, I think all of that could actually grow as more and more companies, more and more Fortune 500 kind of entities are actually looking at this as a way to actually transact financially using these assets, these tokenized assets, as collateral and derivatives or other things.

So I think that more and more traditional institutions are seeing the value of these things and how they can expedite and actually reduce the middleman and cheapen out transactions more or less.

Yeah. And to your point, it is a broad range. But look, as you say, anytime you've got a number that's followed by 10 to the 12, it's an enormous, enormous number. One of the interesting things about stable coins is they're very sort of few types of technologies that are so reliant on regulation, on the legal framework for establishing rules of custody and that sort of thing. What's your sense about whether we're going to get some clarity or not on that in 2025?

So we already have a lot of stablecoin legislation in the world. You know, Mika, for example, put theirs firmly in place as of June 30th, 2024, I believe. But you also have it in parts of Asia, Singapore, for example. So this isn't going to be unique. We know what the framework is because we've seen recommendations coming from large, like a

you know, multinational entities already. So like having the framework in place or at least knowing what the rules should be are also already well known in terms of what should be backing stable coins, for example, like making sure that the reserves are transparent, making sure that people are protected. I think that when it comes to stable coin legislation that you're referring to,

are we going to see this in the u.s and i think that this is something that we've seen try to get off the ground for some time now uh patrick mckenry for example who's no longer in congress uh he retired unfortunately um put one forward in 2024 so we have a template in place uh cynthia lummis and christian gilterbrand also have one in the senate

So it's really a question of trying to negotiate and figure out what works best for the U.S. and trying to find a way for all these separate legislative frameworks sitting around the world on stablecoins to actually play together. Because, you know, as they're kind of already working on just stablecoin legislation more broadly, we're already seeing innovations in the form of like newer stablecoins,

for example, Athena, like other things kind of like arising and actually, you know, representing challenges to the existing kind of framework that we have for just, you know, current fiat backed stable coins.

Yeah, and it's just a question now of getting it over the line. But one of the interesting things about stablecoin legislation and the framework for it, as you say, is this idea of, you know, look, lots of stuff in crypto, we've got to figure out de novo. This is something that there's a lot of evidence for, for example, the commercial paper market, how you back assets with cash and cash equivalent securities, US treasuries, etc. It's something that's been thought through very thoroughly already on the traditional finance side.

Absolutely. And, you know, it's, you know, we keep kind of reinventing or rediscovering the same things. But, you know, to be fair, at least in traditional finance, it's not as if like there are like too many permutations of the things like finance.

Outside of strict borrowing and lending, these are all kind of permutations of that. You know, everything that we have from like CDSs to other things. But I digress. Like, I would say that when it comes to, you know, stable coins and it comes to like, even like looking into like, you know, strategic Bitcoin reserves and other things, I think that

The same concepts apply in terms of risk management, in terms of making sure that we're doing the right thing. But what's interesting about stablecoins is that so many people have come out here and actually looked at it, not just from the lens of like, what will this do to support remittances and other things that are still fairly costly in the world.

But like, how does it even help, say, the US, for example? Like, we saw Paul Ryan, for example, making this argument in his op-ed in the Wall Street Journal, talking about how this could be very supportive for the US debt market. Because, you know, right now, stablecoin issuers represent, like, I believe the 16th or 17th largest buyer of treasuries that are out there. So I think that this is also going to be the lens in which a lot of legislation is going to be perceived.

Yeah, that's really an intriguing topic for sure. I know we keep doing this sort of lightning round thing, but there's just so much to cover here as we talk about the outlook for 2025. Let's talk a little bit about DeFi, which dovetails rather nicely with everything we've been talking about.

That's a great place because I think the shift in the US regulatory landscape is definitely going to be very supportive for DeFi. And DeFi has had this kind of like it's come in waves. You know, like I think DeFi, the real advent of it kind of happened in 2020 and 2021. And a lot of that had to do with yield farming and other things and, you know, projects trying to capture incentives.

But it kind of came and went and then people were like, oh, well, DeFi is dead. There's no opportunities here anymore. And there's been, of course, this DeFi resurgence. And what's been interesting is that you've also seen very large, important players in the traditional markets, like, for example, Fed Governor Chris Waller actually talking about DeFi recently.

just a few months ago, saying that it's complementary to traditional finance or centralized finance. And I think that was a big statement from someone who has kind of shown more skeptical crypto leanings in the past.

So you're seeing that DeFi is capturing the imagination, not just among crypto natives, but also among people in the traditional finance space itself. So I think that DeFi itself is going to see a massive resurgence in 2025. You know, like I kind of mentioned things like stable coins, like Athena and other things.

They're enabling a lot more risk-taking than they did previously and in a much more thoughtful kind of way. And it's kind of dovetails nicely with AI agents, other things like new chains that are out there. They're trying to capitalize on this. So I very much think that we're going to see DeFi come back and it's not just going to benefit like some of the older players, like your Uniswaps or even some of your younger players like Drift or other, like, you know, other markets. But I think that we're going to see a change in the way

DeFi is going to be like played in the new year. Yeah. Let's move on to the other pillars. This is really interesting. We talked a little bit about this, which is UI, UX, account abstraction, all of these things, which in my view, at least along with security are probably the two outstanding issues that need to be continued to be refined in order to get large scale adoption. Talk a little bit about this pillar, big picture and why you believe it's so important in the space.

Yeah, I believe that the UI UX, the user experience itself has been well thought of over the course of the down market. And, you know, like this idea that we build during down markets and then we sell like during like the up markets, I think was definitely played feature very, very heavily here because we saw a lot of developers kind of say,

well, hold on, if we want to actually onboard the next billion users into crypto, well, we need to have something that their average user can kind of get behind. And unfortunately, a lot of crypto infrastructure is still very cumbersome for people to use. Like people don't necessarily know how to like kind of get on board with wallets, for example, because if, you know, for those of us who have been in this space,

It's really easy to say like, oh yeah, I got some ETH and I started playing or I got some SOL and I started like playing on these markets. But if you didn't know that, if you didn't know you had to cover gas fees, if you didn't know that in order to use an app, you need to already have a wallet with some ETH sitting in your wallet, like all this stuff is somewhat complex. I mean, it's kind of a bootstrapping issue. So,

So a lot of that has started to be abstracted away because now we're seeing paymasters kind of come in from the app side of things kind of saying like, well, we can actually cover those costs because the costs themselves have cheapened out significantly given the fact that we now have like either cheaper chains or layer two sitting on Ethereum that are also like, you know, less than a penny to kind of charge per transaction.

So we're now in a place where we can enable that user experience. Smart wallets are now a thing. You can kind of just go inside and start using rather than kind of writing down a 12-word passkey. So I think that this is going to enable the adoption growth that we've been kind of looking forward to.

Now, is it going to come in all at once? I don't think it always works out quite that way. I think these things kind of come in in waves. But as more and more people experiment with stuff and finding that it's a lot easier now to kind of use, I think this is what's going to enable or facilitate the greater adoption that we were looking for.

Yeah, it's unquestionably a paradigm shift in terms of bringing users on board. All those technologies, everything we just touched on right there, so important to understanding the way that the next million users are going to be brought onto crypto and beyond. Let's talk a little bit about the majors, which you touched on there. Let's talk a little bit about your outlook for Bitcoin, ETH, XRP, Solana, the big ones in the space. Give us your 50,000-foot overview on what you see in 2025 as being your base case scenario.

Yeah, some of the like frontier ones, well, I wouldn't say frontier is not the right word, but you know, your extra P, souls, like LTCs, HBARs,

I think people are looking at the potential for ETF applications to be approved on those, enabling a greater wave of inflows. But I'd probably look more towards what's going to happen in terms of staking being included in ETFs or a move from cash to in-kind creations or redemptions of those shares because they have created inefficiencies

That have also made it difficult for some of the larger institutional players in the space. I'm talking about your pension funds and elements to really participate. And as that shift happens, I could see that those inflows could actually start to really continue this trend that we've seen of more funds, more flows going into these ETFs being a pretty large catalyst.

So it's a different way of kind of looking at it than just the overall like more, more applications, more ETF issuers, like going into like different, like different, like, uh, tokens. I don't think that's the way we should be strictly thinking about this, but also I think for a Bitcoin and for ETH, uh, it's going to be a big year for them. Um, I mean, obviously we've already seen some pretty large milestones, especially for Bitcoin in terms of large round numbers, but,

But I think that given how much attention has been put on a potential Bitcoin strategic reserves, not just at the top level, because of course we saw that at Bitcoin Nashville, but now you're seeing a lot more countries kind of talking about it as well, like Brazil, Germany, like the Czech National Bank just mentioned it. And as well as in the US on a state level as well, because on the state level, you've seen Pennsylvania, Texas,

kind of mentioning the possibility. I think the idea that Bitcoin could be included in more corporate treasuries if they can kind of figure out the insurance issues, the fact that they could be included in potentially like sovereign kind of reserves. I think all these things could be meaningful for Bitcoin's move to the next new milestones.

Yeah, really fascinating topic. There's another show we could do, 60 Minutes, on just the implication of sovereign reserves of Bitcoin. Let me ask you this, since you touched on the ETF, this is an interesting debate because there are two schools of thought here broadly. One is, of course, obviously, ETFs are good for the digital asset ecosystem to have the ability to take more exposure to it, to have institutions that are perhaps banned because of their investment charter from taking direct positions in crypto. The

other position is that it's kind of antithetical to the idea of the space, that it's improved backward, that people should be holding these assets on chain. I'm curious about where you land on that. Yeah. I mean, it's tough because

I hear them. I mean, what has made this particular cycle different from others is that in the past, because things were held mostly on chain, you saw this kind of progression away from like Bitcoin into ETH into other alternative assets as people took this stuff and use this stuff. And I think it is still happening.

Because just thinking about the virtuous cycle created when you have ETH that's of a higher value, for example, because the stuff sitting in your Aave or other places is now worth more and that you can actually free up capital to actually do more things in the DeFi space. I think that is still happening. So it's not necessarily this idea like, well, this gets all locked up in institutions somewhere and therefore it's completely untapped.

I mean, it's not entirely untrue, but it's also not the complete story. So I do think that, you know, that's going to continue, you know, perhaps being a part of the narrative that we currently have. But we're still seeing that because Bitcoin is worth more, because a lot more Bitcoin is kind of getting locked up and

honestly, sitting there and not doing a whole lot, I think that this is what has motivated people to kind of saying like, well, let's build out this new like Bitcoin ecosystem. Well,

with respect to like Bitcoin layer twos, for example, other things that I think are like seeing a lot more development right now. Like things like Babylon, things like stacks, for example, are starting to pick up and people are trying to figure out like, what do we do with the Bitcoin that's sitting there? And those institutional entities I mentioned are

are going to take advantage of that because they're not going to let money sit on the table. So we're just kind of sitting, waiting for these developments to kind of break out as more and more of these long-term Bitcoin holders that are kind of increasing start to figure out what to do with those tokens.

Yeah. Speaking of L2s and Ethereum, I was wondering if you could give us your thoughts about BASE. I know that you guys have a sort of separation of church and state there at Coinbase, and you take an agnostic view of markets. But I'm curious what your view is about the role that BASE is going to play in the Ethereum ecosystem.

Yeah, you know, so base has, you know, obviously grown massively in terms of both like TVL as well as in terms of transaction activity. And it's now the second largest like layer two sitting on Ethereum.

And, you know, I would say that right now and, you know, Jesse Pollack, who leads the team, could do a much better job of explaining what's on the horizon more than myself. But there are a lot of plans in place in terms of trying to bring a base into like the newer ecosystem and increase adoption of crypto users.

And a big part of that has to do with the applications that are being attracted and building on here. Virtuals being one of them, for example, that I previously mentioned. I think that you're seeing the amount of wallets that are on base also picking up. And this is dovetailing nicely with other things that are happening at Coinbase itself.

Because, for example, we have identity being a big part of that. And this kind of goes into what we were talking about earlier in terms of account abstraction and other things, because now that we have the ability to kind of verify users and kind of create like kind of carve outs in terms of how applications want to use verified users, I think that that could also be a very large prospect for the crypto ecosystem as a whole, but also BASE in particular.

Yeah. And by the way, talking of Jesse Pollack, I should say I did a deep dive interview with him right here on Real Vision Shameless Plug. If you're not a Real Vision Pro crypto subscriber, you should sign up now and go take a look at that on the platform. We talk about it in some detail. He not only runs the team, of course, he's the creator.

of base. Gosh, we've blown through so much information here in the first 40 minutes of this conversation. David, I want to throw the car keys over to you and let you walk us through some points of the report, some charts, some visuals that maybe might help bring down to earth some of these conversations that we've just had, some of these topics we've just addressed, because I know you've done a lot of research. It's a monster 85-page report. We should probably tell people where they can download it, because I believe it's available to download for free from Coinbase now.

That's right. You know, probably the easiest thing for people to do is just go to Google right now or your favorite search engine and type in Coinbase Crypto Market Outlook 2025. And it should be the first thing that kind of pops up. But, you know, like I think that there's about 85 pages worth of content in here.

And, you know, like we try to, you know, aim for the middle in terms of making sure that we didn't go too far above people's heads and, you know, talk about things that they don't understand in terms of how the tech works or other things. But enough

data and enough content in there that allows even a newbie to kind of come in and pick it up and be like, oh, okay, like, you know, L2 is on Ethereum. This is something that I need to think about or like, how should I be thinking about the stablecoin market? So, you know, like I really would encourage people to kind of pick it up and find whatever topic that you think is most interesting to you and kind of dive into it.

Yeah, and I should say, I think it's available. The link is available on the description for this conversation as well. One of the things that maybe we could bring this up on the chart that's on page nine, which is the correlation matrix, 2024 data year to date. This is the full year to date or close to it on correlations. This is an interesting table always to look at and one that you always bring in this report. Talk a little bit about what we saw in 2024 in terms of asset correlation, cross-asset correlation.

correlation and what your expectations are for 2025. Yeah. So this is just a snapshot based on like the like the data we had at the time, which basically spans 11 months from January to November 2024. And, you know, what I would like to kind of point out is that the correlations we've seen between Bitcoin and the S&P 500, for example, or Nasdaq, pick your pick in terms of U.S. equity markets that you prefer.

I mean, it's really, doesn't really make a huge amount of difference. Is that still the correlations, even though like people like to kind of point out, well, like they tend to like converge higher over different periods.

It's still on the lower end. And actually, the relationship between, say, Bitcoin or crypto more broadly with the S&P 500 or US equities is still fairly low, which is to say it doesn't have much of a strong relationship at all.

And actually, you know, we, I think somewhere in the report, we also have a scatterplot chart where we look at different periods. And it's very like eye-opening because you can kind of see that like really the correlation periods only happened in periods where like

everything in the kitchen sink was going out the window. When all markets were converging because the Fed height rates by 500 basis points, yes, the correlation spiked higher, but that was a very, very unique period. Outside of that, the correlations tend to remain fairly low. But also what's interesting is that if you look at

Bitcoin's correlation with most other assets, for example, it's either low or has no relationship at all, which is to say that it still exists as a very strong diversifying asset in most people's portfolios. And what's really interesting about that is that as you add more and more crypto into your portfolio,

And I'm not trying to advocate for an optimal percentage in a portfolio. But as you increase it, your amount of diversification goes up on a faster than linear basis. So if you add 1%, it's around like 1.2%, for example. But if you add 3%, then it's closer to like 4%. So as you put into this, you have to keep in mind that it gives you exposure on a systemic perspective.

perspective on a systemic basis to something that exists outside of what would commonly be in your portfolio with respect to like equities or bonds. So I think that this is what is best captured by a correlation matrix like this. And something that, you know, we really need to add on here, which I'm going to do in the future is like we've now just launched our coin 50 index as well. And it's also a good way of kind of examining the data. Tell us about that.

Yeah. So the Coin50 index actually is a little bit different from the existing indices or benchmarks that currently exist. And I think that's all the way in the last section.

probably the last few pages, actually. Wow, you found it in one go. I'm really impressed. It's like you read this thing. So the Coin50 Index actually tries to get exposure to a broad set of sectors in the crypto ecosystem because we have other benchmarks out there. I'm not going to disparage those benchmarks, but they are heavily balanced towards smart contract platforms. And we, of course, have that as well.

But the Coin50 index caps the weight of any particular token at 50%. So even when like Bitcoin's, you know,

dominance actually increases to like, say 60%, we will cap it at 50%. And beyond that, we are looking at the top 50 tokens by market cap and try to rebalance it in a way where you get exposure to different things. So here, beyond just like layer ones and layer twos, for example, you also have access to meme coins, you have access to payments and stable coins.

Media and entertainment, D-Pen, DeFi. So this way, like, you know, if you're someone who doesn't want to do research into every little asset that's kind of out there, but you just say to yourself, I just want exposure to crypto.

I don't want to have to research every AI agent, a particular token, related token out there. Let me just buy or get exposure to the Coinbase 50 index instead in a way that allows me to have that. Now, right now, to get that, you can probably do perps if you're outside the US. But inside the US, you aren't able to do that. But we're working on trying to figure out ways for people to do this right now.

yeah that's really interesting and of course the vibes in the space change every 22 minutes it seems uh when you talk about what those bleeding edge assets are that everyone's talking about and buzzing about really interesting in terms of ways to get exposure i also wanted to take a look at this chart on page 13 uh title tokenization revolution uh holy hell look at private credit uh on that chart talk a little bit about this this is fascinating

Yeah, this is interesting because a lot of people tend to think of tokenization mainly on the U.S. debt side of things. And yes, like we've seen that money market funds, U.S. treasury debt. I mean, they capture the attention because a lot of the large institutional names that we know in this space, like BlackRock, like Franklin Templeton, are doing a lot with those assets. But actually, a lot has been happening on the private credit side.

And this is not a new thing. This has been happening since at least late 2023, early 2024. But people don't pay attention to it. And this is what we mean in terms of we think that tokenized assets actually represent a new paradigm for a lot of institutional investors. Because now, because things are tokenized, you can actually have it sitting as collateral for

when you're buying call or put options, for example, and it's fungible with other things. And you can actually program it so that if you need to actually have a margin call or other things, programmatically, it can be done immediately. So you don't have to have an intermediary sitting between and managing that. So it's a new way of doing things that we think are going to be massive and change the way that...

the way traditional finance is done today. So this is why we think as things grow, a lot of these other sectors in terms of corporate bonds, stocks, which still represent very little in terms of tokenized assets, these are very, very low hanging fruit for this space because it's already digital. So because of that, it's super easy to take that and actually tokenize it.

Yeah, so interesting, the points that you make there about the ability to do straight through processing and other programmatic things when you can post assets as collateral on-chain directly. Opens up just whole new worlds. Really, really interesting stuff that I'm sure we're going to talk about more in the future. David, I'm always interested to see which charts make the first 20 or 25 pages. This is an interesting one on page 15, Telegram bots. Take a look at this, if we could, and tell us a little bit about the significance of Telegram bots.

Yeah, this is interesting because I don't think a lot of people realize that Telegram bots actually represented one of the largest profit centers in crypto in 2024. And, you know, they've probably been, I would say, like the most profitable sector, which you can kind of see in terms of, you know, like the blue lines on this chart. They've actually even eclipsed some of the other traditional like kind of DeFi profit centers that we've seen in the past, like Aave, MakerDAO, which,

rename themselves, rebrand themselves to Sky in terms of net protocol revenue, because a lot of that was actually the result of, to be honest, meme coin trading activity in 2024. And, you know, meme coins were one of the best performing crypto sectors in 2024 by a wide margin. And a lot of people have disparaged that because they're like, oh, meme coins, what value do they really have? Well, there's real trading activity that's happening with meme coins. And

And for whatever they're worth, I mean, people are pretty upfront about what they represent. Maybe they don't have inherent value in and of themselves, but people want to trade them. People want to bet on them because A, they represent an intention market.

And B, having your pulse on that is a skill and it's a talent. So Telegram bots are a way that people were using that. It's a chat-based interface for being able to trade not just meme points, but other tokens as well. But a lot of custodial wallets were created in order to kind of respond to this. So they can be funded, managed by just like text commands that you have on Telegram, which is, for people who don't know, a chat program.

program. And, you know, like these bots were, you know, trading on different platforms, but primarily Solana.

I'm glad you brought up mean coins. I was actually just talking about this on Real Vision yesterday. I'm a little bit skeptical of mean coins myself. Is this question of underlying utility? I mean, no question about it. They can be very profitable if you're good at trading them. Unquestionably true. But the question that I always bring up is where's the ultimate accretive value of this? Like, how do you expand the Pareto frontier on this? How do you create more value other than like, you know, you trade better than I do. So, you know, my gains are your losses. Your losses are my gains. Like,

Is there any real fundamental utility here? Is there some way for this to be grafted on top of fundamental utility? I know these are big picture questions and it's really early to think about, but I'm curious just from your gut level, like what does your instinct tell you about these coins?

I think that we're seeing the transformation of this sector right now. And a lot of that has to do with kind of things we've already mentioned on this call, like AI agents and other things, because, you know, AI agents, one of the things they've done is create their own meme coins, for example, and kind of allow that to be traded and kind of promoted them. And we've seen what they can do with it. I think it's more of a template for what we can see in the future in terms of transforming like other, other

other assets, for example, that are out there. And you've seen that with, you know, AIXBT, for example, kind of making comments on other aspects of, you know, like other, like other analysis on, on, on assets that kind of exist out there.

But I think that you have a point as far as, man, like a lot of the meme coin activity, and I'm not good at trading it either. So you're not alone, Ash. But I would say that some of these like meme coin launchers, like Pump, for example, have done fairly well because they've been able to take advantage of it. But that's also created this infrastructure around it that's

in terms of making the infrastructure better. I think Anatoly from Solana made this comment that actually because of all the meme connectivity sitting on their platform, they were forced to kind of adapt and actually make their platform better in order to kind of accommodate all of that trading. So I think what we're going to see is that as a first instance, it's going to change the way DEX trading kind of works, like how the ease of use for a lot of users are. And again, it kind of goes back to account abstraction, for example,

And, you know, like these tokens that aren't listed on exchanges yet, but might in the future, like how do these kind of agents kind of respond to that? How do they use it? I think all of this is going to add on to the functionality that we have to the existing infrastructure and probably make things like market depth better as well as like improve liquidity. So I think from that perspective, it's actually improving the user experience for everyone. But

I hear you. From a very superficial, shallow level, you look at it and be like, "Oh, meme coins. What do they really offer us?" It's offering us all this stuff in the background. But active trading, if you're not really involved in this stuff, I can see how it's a little hard to see.

Well, that's actually a really good answer because I've sort of said before that meme coins allow the haters to point to it and say, look, this is all silliness. You guys are just ridiculous. But you bring this interesting point up, which is it develops infrastructure, creates liquidity, demand, depth, and perhaps that helps to build out some infrastructure for some things that there is greater utility for.

in the future. By the way, this is a really interesting chart, page 17. Talk about things that are really early, but really fascinating in terms of the opportunities that might present themselves in the future. I find that this intersection between gaming and digital assets to be a really fascinating one. Walk us through this chart. Tell us a little bit about what we're seeing here and what your view is for the future of crypto games.

Yeah, we talked about gaming in our 2024 Outlook as well. And at the time, we also said that we were on the precipice of seeing more crypto integrated games actually becoming dominant in the crypto sector.

And to some extent, that has happened. And the reason we thought that was because it takes about two, maybe three years, sometimes longer, to come up with a really good AAA game. And because a lot of that investment in crypto-integrated games

were made back in 2021, like 2024, 2025 was right around the time we would see the fruition of those efforts. And, you know, to some extent that's happened, like off the grid was a very big game in 2024. And, you know, like we saw that on some of the like, you know, streaming platforms that where people kind of watch gameplay, for example,

off the grid was like in the top five, not top 10 for those things. So I think that that was probably the first instance of it. And, you know, we're moving away from this play to earn model, which I think many people were familiar with, with respect to like games and crypto and a lot of that had to do with Axie Infinity, because that was the first time people started realizing, hey, like there's a way to start integrating crypto into games. But we're kind of moving away from play to earn and more into this

what I refer to as, I read a few times, as crypto integration. And I think that the difference...

is that now the way you use crypto in games is a lot more optional. You can opt in to how you want to use crypto in a game, and you can own the game fully on-chain now in a way that you didn't previously with the previous model. So it doesn't necessarily detract from the gameplay itself, which I think sits better with the gamers.

And so I think that this is kind of where game developers are meeting gamers who have in the past been somewhat skeptical about having crypto in their games.

Yeah, and to your point, it's just so very early. Look, games have to be fun. If they're not fun, people don't want to play them. But this is just a huge, huge industry. If you're not a gamer yourself, if you don't have kids who game, I mean, this is like a $200 billion a year industry, bigger than Hollywood and the music business combined. And if you think about it from a demographic perspective, these are the folks who are going to be interacting with the financial system and everything else, just as an ecosystem, as a model,

for UI, UX, for interaction. It has been just a massive, overwhelming success. It's hard to believe that crypto wouldn't have something to learn from some of those models.

That's right. And, you know, I think that the focus has been on the AAA games, and I think rightly so, because that's where a lot of the blockbuster, like money-making stuff kind of occurs. And, you know, you can think of choose whatever game that pops in your head for that. But I also think that we'll see other distribution channels as well, because so far, like mobile games, for example, haven't been quite the focus. But I think that that's another distribution channel for crypto-integrated games. You know, and we've seen some of that online,

already in like passive things like Telegram minigames and other stuff, which already kind of been the template for pursuing that. So I think that that could be like the next wave of where gaming and crypto will intersect. And, you know, the less you need to have like this external wallet set up to kind of do this, I think that's going to more often reduce the onboarding frictions that have kind of kept people away from this.

yeah and again talk about things that are just at the beginning uh the ui the ux the secure enclaves from the hardware perspective that could provide greater security uh the ability to manage those wallets on devices like iphones your android phone is such an interesting interesting topic gosh we've covered just so much here we've just bounced around talking everything uh that is happening in the ecosystem right now in our outlook here uh for 2025 as we explore this coinbase report david anything i missed anything you think that's important to get in

I mean, we've covered a lot. There are some things that unfortunately we don't have the time to kind of tackle. Like I really wanted to get more into decentralized identity because I think that's also going to represent a very strong paradigm. And things are changing on that front because now, for example, to set up a wallet, you know, like you can just use a link or use your Google account or other things. So I think that's going to be a massive one as well.

I do think that just the way things are changing with respect to the layer one, layer two, even layer three kind of landscape is also going to be really big because more and more we're seeing this kind of change in terms of liquidity fragmentation and how apps want to have their own app chain, how that could shift. I mean, infrastructure is always going to be a big topic, but I mean, we could probably go on this all day, but those are just like two more things that I'll probably just quickly highlight.

Yeah, there's only one solution. As always, you got to come back and do this with us again. Come back and we'll dive into some of these topics in more detail. Obviously, we can only touch on them slightly here today because there's just so much happening in the space. But it's great to be able to get that 35,000-foot cruising altitude view of everything that's happening in the space as we head into this new year. Go and download the report if you haven't already over on the Coinbase website. There's a link.

right here in the description on Real Vision and in the YouTube. I imagine when this posts on YouTube, great conversation. David, you make this fun. It's always fun to do this. Your infectious enthusiasm comes through every time you come on the show. I love being on this show. Don't tell any of the podcasts. This is my favorite show to be on. Final thoughts, key takeaways that you'd like to leave our listeners and our viewers with from this conversation about the 2025 Outlook.

You know, just please go ahead and download it. I'm always open to chatting. You can find me on Twitter and LinkedIn. And Ash, no, thank you so much for having me. Coinbase Institutional 2025 Crypto Market Outlook. David Duong, great conversation. Hope we can do this again soon. Thank you so much.

Thanks for watching. Thanks for listening. Thanks for joining us. That's it for now. And remember, you can still get tickets for the in-person crypto gathering event later this month down in Miami. Head over to realvision.com forward slash CG 2025. That's realvision.com forward slash CG 2025. I will be there looking forward to seeing you there. Thanks for watching. Thanks for listening. Have a great afternoon, everybody.

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