Coinbase's outlook for the second half of the year: Companies rush into the market, new crypto regulations pave the way, and BTC's upward trend will continue

While there are potential risks, such as a steepening of the U.S. Treasury yield curve and possible forced selling pressure on publicly traded cryptocurrency instruments, we believe these risks are manageable in the near term.

Original: Monthly Outlook Three Themes for 2H25

Author: Coinbase

Compiled by: Vernacular Blockchain

Cover: Coinbase

The second half of 2025 is about to begin. Coinbase gave a fairly positive forecast for the trend of the entire crypto market in its recent report. The key points are as follows:

● The outlook for the cryptocurrency market in the second half of 2025 is positive, driven by better-than-expected economic growth, corporate cryptocurrency adoption, and improved regulatory clarity.

● Companies purchasing cryptocurrencies through leveraged financing may pose systemic risks involving forced or spontaneous selling, but we do not believe this problem is significant in the short term.

● Changes in the U.S. regulatory environment have provided support for cryptocurrencies, with progress made in stablecoin legislation and a cryptocurrency market structure bill under discussion.

The following is the text:

Our constructive outlook for the cryptocurrency market in the second half of 2025 is driven by several key factors: more optimistic expectations for U.S. economic growth, potential Fed rate cuts, increased cryptocurrency adoption by corporate treasuries, and progress on regulatory clarity in the U.S. While there are potential risks, such as a steepening of the U.S. Treasury yield curve and possible forced selling pressure on publicly traded cryptocurrency instruments, we believe these risks are manageable in the near term.

We see three key themes in the cryptocurrency markets. First, the macroeconomic outlook is more favorable than previously expected. The shadow of recession has receded, and the U.S. economy is showing signs of stronger growth. While a slowdown remains a possibility, market conditions are unlikely to cause asset prices to fall back to 2024 levels. Second, the adoption of cryptocurrencies by corporate treasuries is an important source of demand , but there may be legitimate concerns about systemic risks in the medium to long term. Third, major regulatory developments are underway on stablecoin and cryptocurrency market structure legislation that could significantly shape the U.S. cryptocurrency landscape.

While we expect Bitcoin’s uptrend to continue despite risks, the performance of Altcoin may depend more on their unique factors. For example, the SEC is processing numerous ETF applications, with decisions on potential physical creation and redemption, collateral inclusion, multi-asset funds, and single Altcoin ETFs expected by the end of 2025. These pending proposals and their related decisions could affect market dynamics.

01

Constructive outlook for the second half of 2025

We remain constructive on the market outlook for 2025. A few months ago, we said that the cryptocurrency market would bottom in the first half of 2025 and hit a new all-time high in the second half. We still believe in this forecast, despite the rebound in Bitcoin prices in late May. That said, we think there is still room for upside in the next 3-6 months.

In our view, the peak of the macro disruption caused by tariffs has passed. Looking ahead, risk sentiment should generally benefit from the US government's shift to more market-friendly policies, with the new legislative fiscal package expected to be completed by the end of the summer.

Chart 1. The total market value of cryptocurrencies as a percentage of global liquidity is increasing

Note: The total market capitalization of cryptocurrencies does not include stablecoins. G6 central bank liquidity includes the Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of Canada, the Bank of England, and the People's Bank of China. Source: Bloomberg, Coinbase.

However, an important risk to our view is that the passage of a government spending bill could lead to a steepening of the U.S. Treasury yield curve, particularly in the 10-30 year bond space. In fact, the 30-year Treasury yield reached 5.15% in May, the highest in two decades, amid concerns about the U.S. deficit. This could lead to a tighter than expected tightening of financial conditions, increasing borrowing costs for businesses and consumers, and potentially weakening the growth that underpins our market’s optimistic outlook. If long-term yields rise too quickly, it could spark volatility in both equity and credit markets, particularly if investors begin to doubt the U.S.’ ability to sustain high deficits without adverse consequences.

Such a development could challenge the consensus expectation of fiscal expansion ahead of schedule and could lead to a re-rating of risk assets before long-term fiscal risks fully manifest, especially if economic data or Fed policy fail to meet market expectations for growth. On the other hand, we believe this scenario could improve the outlook for store-of-value assets such as gold and Bitcoin, while Altcoin could perform weaker as Bitcoin continues to benefit from the decline in the dominance of the U.S. dollar.

Overall, we believe that there are three major themes in the cryptocurrency market in the second half of 2025:

• The macro outlook for the remainder of 2025 is more optimistic than before, especially for US growth expectations.
• Cryptocurrency adoption by corporate treasuries is an important source of demand, but investors may be concerned about potential systemic risks.
• US Cryptocurrency Regulatory Hurdles Have Eased, But What’s the Path Ahead?

02

Recession shadow recedes

Trade disruptions in early 2025 initially raised concerns that the U.S. could experience a technical recession this year, especially after economic activity contracted at an annualized rate of 0.2% in the first quarter. (Review headlines in The Economist and The Wall Street Journal such as “Trump’s trade war threatens global recession” and “Trump’s reciprocal tariffs could trigger a U.S. recession.”) A technical recession is defined as two consecutive quarters of negative real GDP growth.

However, we then maintained our constructive view for the second half of 2025 as we believe the severity of the recession is critical. While a technical recession could undermine investor confidence, it would not necessarily be a major disruption event with extreme consequences for markets unless negative macro dynamics intensify. In fact, the true recession in 2008 (a 53% decline in US stocks) had a significantly different impact than the relatively mild cases in 2015 and 2022 (see Table 1). In addition, the Atlanta Federal Reserve’s GDPNow estimate recently surged from 1.0% (seasonally adjusted) in early May to 3.8% on June 5, reflecting a significant shift in economic data.

As a result, we believe the worst-case scenario for this year is likely to be an economic slowdown or mild recession - perhaps even avoiding a recession altogether - rather than a severe recession or stagflation scenario. In a slowdown scenario, market impact is likely to be milder, with possible sector-specific damage rather than broad-based sharp declines across all asset classes. But given the rise in liquidity indicators such as the US M2 money supply and the general expansion of central bank balance sheets around the world, we believe market conditions are unlikely to cause asset prices to fall back to 2024 levels, meaning Bitcoin's uptrend is likely to continue. In addition, we may have passed the peak of the tariff impact, suggesting that markets have entered a new normal, although investors may remain nervous until July 9 (the deadline for suspending reciprocal tariffs for most countries and August 12 for China).

Table 1. Performance changes of various asset classes (from high to low)

Note: Standard deviation is based on the average of the previous 180 days. US investment-grade bonds are measured by the unhedged Bloomberg US Aggregate Bond Index. Source: Bloomberg, CoinMetrics, Coinbase.

03

Adopt… Copycats are coming?

About 228 public companies around the world hold a total of 820,000 bitcoins on their balance sheets . According to Galaxy Digital, about 20 of them use the leveraged financing method pioneered by Strategy (formerly MicroStrategy) on Bitcoin, Ethereum, Solana and XRP. We believe that many companies have recently begun to adopt this approach, in part due to cryptocurrency accounting rules that came into effect on December 15, 2024. Previously, the Financial Accounting Standards Board (FASB) only allowed companies to record impairment losses on cryptocurrency holdings under U.S. Generally Accepted Accounting Principles (GAAP). However, in December 2023, FASB updated its guidance to allow companies to report their digital asset holdings at fair market value.

Simply put, previous FASB rules prevented many companies from adopting cryptocurrencies because they only allowed losses to be recorded, not gains until the asset was sold. The revised FASB guidance eliminates accounting complexities faced by many CFOs and auditors by providing a clearer picture of financial condition .

While this explains why more companies have announced cryptocurrency holdings this year, a growing trend is public companies focused on cryptocurrency accumulation. Early adopters such as Strategy and Tesla initially used Bitcoin as an investment outside of their main business, and these emerging entities have the primary goal of accumulating Bitcoin or other crypto assets. They finance acquisitions by issuing equity and debt (usually convertible bonds), and many companies trade at a premium to their net asset value.

Chart 2. The number of Bitcoin wallets with a balance of ≥ $1 million has increased dramatically

Source: Glassnode, Coinbase.

The rise of publicly traded cryptocurrency vehicles (PTCVs) has significant implications for the market, both in terms of potential demand for cryptocurrencies and systemic risk to the crypto ecosystem. Systemic risk is divided into two parts: (1) forced selling pressure and (2) spontaneous selling.

Forced selling pressure: Many PTCVs raise low-cost funds to buy crypto assets by issuing convertible bonds. If the company's stock price rises due to the appreciation of cryptocurrencies, bondholders may profit. If things go badly and the company needs to repay its debts, it may be forced to sell its cryptocurrency holdings, possibly resulting in losses. Unless it can refinance, this collective sell-off could trigger a market liquidation and a broader cryptocurrency sell-off.

Spontaneous selling: A more subtle risk is that this could shake investor confidence in the crypto ecosystem. For example, if one or more entities suddenly sell off part of their cryptocurrency holdings due to routine cash flow management or business operations, it could trigger a sudden drop in prices and market liquidations. If prices begin to fall, other entities may rush to sell out of fear of reduced exit opportunities, thereby destabilizing the market before debt repayment issues arise.

Figure 3. Distribution of outstanding debt of selected companies by final maturity date

Includes debt issued by Classover, Gamestop, H100, Janover, MARA Holdings, Metaplanet, Riot, Semler Scientific, and Strategy. Sources: SEC filings, CoinDesk, CoinTelegraph, Nasdaq, press releases, Coinbase.

Nonetheless, we believe that downward pressure from these two risks is unlikely to replicate the consequences of certain failed crypto projects in the past. First, based on our review of outstanding debt of nine entities, most of the debt will mature in late 2029 to early 2030, suggesting that forced selling pressure is not a problem in the near term. (Note: Strategy's $3 billion convertible bonds mature in December 2029, with an optional early redemption date in December 2026.) See Exhibit 3. In addition, as long as loan-to-value (LTV) ratios remain reasonable, the largest companies may have refinancing methods to avoid liquidating their reserve assets.

Of course, our assessment could change as debt matures or more companies adopt these strategies, depending on risk levels and repayment periods. Currently, there is no consistency in how PTCVs are financed, making it difficult to track capital structures. Clearly, Strategy’s pioneering efforts have caught the attention of other corporate executives interested in cryptocurrencies, who may want to further investigate its investment rationale. We believe the market has not yet reached saturation, and the corporate accumulation trend in the second half of 2025 is likely to continue.

04

Opening up new regulatory paths

The first half of 2025 saw an unprecedented shift in the U.S. regulatory landscape, setting the stage for what could be the most transformative period for digital asset policy. This is in stark contrast to the previous administration’s “enforcement over regulation” approach. We believe the second half of 2025 is poised to redefine the U.S. as a global cryptocurrency hub, supported by a decisive shift toward crypto-friendly policies by the White House and urgent efforts by Congress to establish a comprehensive framework for the asset class.

We believe that stablecoin legislation is the bill most likely to become the first major crypto-related legislation in the United States, with strong bipartisan support. Both the House and Senate have shown clear progress, with the House advancing the STABLE Act and the Senate advancing the GENIUS Act. The Senate has fully approved the GENIUS Act and sent it to the House for consideration. Both bills set out reserve requirements for stablecoin issuers, anti-money laundering compliance parameters, and consumer protection and bankruptcy priority provisions for stablecoin holders.

The two main differences between the two bills are the treatment of non-U.S. stablecoin issuers and the size threshold for federal regulatory transition, which congressional negotiators will need to resolve in the coming months. Administration officials expressed confidence that the unified bill could be sent to President Trump for signature before Congress adjourns on August 4, 2025. This could pave the way for the development of a cryptocurrency market structure bill.

Cryptocurrency market structure bills may be the most significant long-term development of the year, particularly with the introduction of the bipartisan Digital Asset Market Clarity Act of 2025 (CLARITY Act) by the U.S. House Financial Services Committee on May 29. The bill would divide regulatory responsibilities between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) based on whether digital assets are classified as “digital commodities” or “investment contract assets.”

The bill builds on the 21st Century Financial Innovation and Technology Act (FIT21) passed by the House last year, but with some key differences. Most importantly, the bill requires the CFTC and SEC to jointly define key terms such as "digital commodity" and address gaps through future rulemaking, indicating that the precise boundaries of regulatory authority may continue to evolve. We believe the bill is intended to provide a basis for future bicameral discussions, but these negotiations are likely to be much more complex than those of the stablecoin bill.

ETF Approval Timeline: The SEC faces a complex landscape of approximately 80 crypto ETF applications in 2025, involving physical creation/redemption, staking features, index funds, and single Altcoin ETFs:

• Several ETF issuers (Bitwise, Franklin Templeton, Grayscale, Hashdex) have applied for multi-asset funds that track broad crypto indices. These funds are 90% weighted in BTC and ETH. The SEC already has a framework for crypto index ETFs, and a decision may be made before July 2.
• The in-kind creation/redemption proposal is under formal SEC review. In-kind creation/redemption could improve price consistency with net asset value (NAV) and narrow ETF price spreads. We think a decision could come in July 2025, but the SEC could extend it to October.
• The SEC has until October to decide on the pledge inclusion proposal, as there are unresolved questions about whether some fund structures meet the definition of an “investment company.” But Bloomberg Intelligence believes the SEC may be forced to act early because of the custom basket provisions and transparency standards of Rule 6c-11.
• The final statutory deadline for single- Altcoin ETF applications is October, and we think the SEC is likely to make full use of the review time.

summary

Our outlook for the cryptocurrency market in Q3 2025 is constructive, supported by a relatively optimistic US growth outlook, Fed rate cuts, increased corporate cryptocurrency adoption, and progress in US regulatory clarity. While there are risks of a steepening yield curve and forced selling pressure on publicly traded cryptocurrency instruments, we believe these risks are manageable in the near term. While we are confident in Bitcoin's upward trajectory, we believe only certain Altcoin are likely to perform well due to their unique circumstances.

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