Sygnum, a global digital asset banking group, has released a comprehensive analysis of the potential market impacts from policy shifts and new classes of institutional investors beginning meaningful allocations to crypto assets for the first time, as well as the key risks that could affect market stability.
The report highlights how relatively minor institutional inflows into Bitcoin ETFs could have outsized market impacts due to limited liquid supply. Analysis of recent ETF flows suggests that every USD 1 billion of inflow (approximately 0.1% of Bitcoin’s market capitalisation) has corresponded to price movements of 3-6%, with larger inflow waves showing increased price sensitivity. When accounting for broader market dynamics, the report estimates strong multiplier effect on every dollar of inflow, with the multiplier increasing with the size of the flows.
This multiplier effect could be amplified if very large institutional investors including sovereign wealth funds, endowments and pension funds begin making allocations. The report notes that a few US state pension funds have already invested in crypto assets, while multiple states have introduced bills to direct pension funds to consider crypto allocations. With the size of the assets managed by these investors, even conservative estimates represent a greater wave of inflows than experienced in 2024 with the launch of US spot crypto ETFs.*
"Many traditional institutional investors – those with the largest pools of assets under management – are just beginning their crypto journey. Our analysis shows how even relatively modest allocations from this segment can fundamentally alter the crypto asset ecosystem," says Martin Burgherr, Sygnum Bank Chief Clients Officer. "With improving U.S. regulatory clarity and the potential for Bitcoin to be recognised as a central bank reserve asset, 2025 could mark steep acceleration for institutional participation in crypto assets."
Policy Shifts and Regulatory Clarity
The analysis also suggests that anticipated regulatory developments in the US could remove key barriers to institutional adoption. The report examines multiple proposed bills, including:
- The FIT21 crypto bill establishing a federal regulatory framework
- The Bitcoin Act compelling strategic Bitcoin reserves
- The Payment Stablecoin Act requiring issuers to maintain one-to-one reserves and prohibiting algorithmic stablecoins
- Legislation supporting self-custody, mining and DeFi
Of particular significance is the potential for Bitcoin to be recognised as a central bank reserve asset. The report notes that several US states and Brazil are already introducing similar bills, with the likelihood that further countries will follow the US’s lead.
"Regularity clarity with the potential legislative moves in the US will be transformative for the crypto industry, while the treatment of Bitcoin as a central bank reserve asset would catalyse unprecedented demand." notes Katalin Tischhauser, report author and Sygnum Head of Research. "Tailor-made regulation that fits disclosure requirements to the nature of the asset class would be particularly powerful."
Market Risks and Challenges
The report outlines several critical risks that could impact market stability in 2025. Inflationary pressures loom as U.S. government deficit and debt growth continue to outpace GDP growth, with government debt doubling and fiscal deficit increasing 4-5x, while GDP rose just 57% over the past decade. Proposed tax cuts and increased tariffs could magnify these trends.
In a reversal of traditional market dynamics, the pattern of bond yields rising on rate cuts has become more common since 2019, signalling that the Federal Reserve has little room to manoeuvre. As a result, the report suggests that in 2025 we may see a more dynamic crypto market that plays a deeper role in the global economy.
For more information and insights, download the Sygnum Crypto Market Outlook report here.
