As readers of this newsletter know, we have long been interested in the intersection of crypto and AI, which in our view are two of the leading technologies ushering in a new digital age in business, entrepreneurship, culture and society.
And increasingly, these technologies are converging. The most recent example being AI 'agents' like chatbots, virtual assistants, and trading bots, which use cryptoassets like a digital bank account.
This makes intuitive sense and could be the most bullish driver of all for crypto. AI agents may outnumber humans soon, but unlike people they can't walk into a bank and open a checking account, start a company or enter into a legal agreement. The only way for them to do transactions, move and store value and form binding business relationships is using cryptoassets and the on-chain toolkit of smart contracts and DAOs.
Imagine a world where there are AI agents doing every possible form of knowledge work — AI lawyers, accountants, pharmacists, engineers, financial analysts, marketing strategists, architects, plus self-driving cars, humanoid robots, delivery drones, and more, who will all need a way to transact online without a bank account, and you will begin to appreciate the potential of AI and crypto's impending convergence.
As with past periods of change, such as the rise of the internet, we believe this next era, defined by AI and crypto together, will be transformational for markets. There will be winners and losers, and the next crop of industry leaders will likely emerge from it.
Here are some of the key themes and drivers of AI and crypto adoption we are watching in 2025:
The Most Pro-Crypto and Pro-AI Administration Ever
The new U.S. administration is crypto- and AI-friendly. Trump has proposed a Bitcoin reserve and appointed pro-crypto leaders, like David Sacks as Crypto and AI Czar and Paul Atkins, to lead the SEC.
Trump has tapped a who's who of Silicon Valley to advise on AI, like VC Sriram Krishna. This shift is reflected in Congress, with 278 pro-crypto House members and 20 Senators elected. This policy shift promises regulatory clarity that will boost adoption and participation.
Enterprise Adoption of Crypto and AI Set to Surge
Enterprise adoption grew in 2024 and is poised to expand. 56% of Fortune 500 executives report crypto initiatives underway. Major players like BlackRock, Fidelity, PayPal, and Sony are embracing crypto and blockchain.
Institutions waiting for clearer regulation will likely increase their participation under the new regime, benefiting key platforms and assets. On the AI front, enterprises have quickly embraced AI for its ability to improve customer service, enhance workflow, improve security, and more.
This has translated into strong demand from so-called "Hyperscalers" like Microsoft, who are focused on enterprise and who have vowed to spend $80 billion on data centers, creating strong demand from chipmakers like Nvidia Corp. (NVDA:NASDAQ) and Advanced Micro Devices Inc. (AMD:NASDAQ).
2025 Poised for Deluge of Crypto and AI IPOs and Crypto ETF Launches
Crypto companies like Circle and Kraken, previously sidelined by the Biden administration, are expected to go public under Trump. More crypto ETFs, including for specific assets like SOL and XRP, are also anticipated.
AI startup Anthropic recently closed a private $2 billion financing on a $60 billion valuation. After the successful IPOs of 2024, such as Reddit, many AI companies may be eyeing the public markets for access to capital and liquidity.
A broader investment universe should increase market awareness, making our balanced portfolio approach a strong play.
Bitcoin "Season 2" – From SoV to Application Platform
Bitcoin has long been seen as "digital gold," but technical innovations now make it a viable platform for applications and other assets.
This shift could propel Bitcoin beyond its roughly $2 trillion market cap, opening up new opportunities for it as the foundation of many Web3 applications, from tokenization of real-world assets like gold to AI agents.
Ethereum Redemption
Ethereum may be in a bear market, but its fundamentals remain strong. ETH dominates the crypto space, with 55% of the $130 billion TVL and 55% of the $205 billion stablecoin supply on Ethereum.
While its price has dipped, a return to its past market value relative to Bitcoin could drive a 400% increase.
We believe Ethereum will rebound in 2025.
Real-World Asset Tokenization Leading Financial Innovation
Tokenization is driving the next wave of financial innovation. BlackRock CEO Larry Fink has stated that "every financial asset in the world will be tokenized."
Tokens represent value across various asset classes, including stocks, bonds, and real estate, and eliminate intermediaries. The stablecoin market has grown from under $1 billion in 2018 to over $200 billion today, while tokenized U.S. treasuries have surged from $100 million to $3.6 billion since 2023.
Other tokenized assets, like securities, bonds, and commodities, are also gaining traction.
Alex Tapscott is the managing director of the Digital Asset Group, a division of Ninepoint Partners LP. He is also the author of "Web3: Charting the Internet's Next Economic and Cultural Frontier." Sign up for his newsletter, Digital Asset Digest.
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