The New Era of DeFi is About to Unfold!
There is a saying: “One day in the crypto world is like ten years in the real world.” This reflects the rapid changes in the cryptocurrency market, where not only the prices fluctuate but also the industry’s progress is swift.
In the past year, significant events have occurred, including the gradual establishment of global cryptocurrency regulations, the introduction of Bitcoin spot ETFs, Donald Trump’s return to the White House with a friendlier attitude toward cryptocurrencies, and Bitcoin (BTC) price surpassing the $100,000 mark. These developments indicate that the relationship between cryptocurrencies and global finance will become increasingly intertwined.
As we officially enter the Year of the Snake, I believe that 2025 will be a pivotal year for decentralized finance (DeFi), especially as people become more conscious of their “financial autonomy.” This topic was discussed at an offline gathering co-hosted by XREX and WEB3+, where Winston also expressed that “centralization” and “decentralization” will represent two entirely different tracks; as centralization matures, it will also catalyze the development of decentralization.
**2025 Keywords: The Dawn of a New Era in DeFi**
Wayne Huang: “Financial Autonomy” Will Become Increasingly Important
One of the greatest values of blockchain technology is its decentralized nature, which provides individuals with a “financial autonomy” that has never been experienced before. This autonomy allows everyone to choose how to store their assets, with “self-custody” freeing them from the constraints of traditional financial intermediaries.
In this regulatory era, many issues within the cryptocurrency industry have been resolved. However, as countries and regulatory bodies gain greater control over the industry, even transforming it into a licensed sector, it signifies a reduction in flexibility.
Bitcoin has been around for 16 years, but the ideal of “financial autonomy” is still not fully realized. Technology presents a barrier, and education is also a crucial issue. Nevertheless, many real-world challenges, such as wars, compel us to think about how to safeguard our financial autonomy.
In the new year, I recommend that everyone pays close attention to the knowledge and dynamics related to the DeFi field, which is a topic I will dedicate more time to contemplate this year.
Winston Hsiao: The Decentralization Era is Beginning
As the world enters a major regulatory phase, 2025 will mark an important watershed between “centralization” and “decentralization.”
Take exchanges as an example. In the past, during the unregulated era, the pursuit of greater commercial benefits led to a concentration of resources in developing “centralized exchanges,” which indeed improved user experience and protection of user rights. On the other hand, the past decade has seen insufficient investment in the DeFi sector, resulting in a lack of sufficient and user-friendly “decentralized exchanges,” creating an imbalance in development between the two.
As regulations gradually improve, the paths of “centralization” and “decentralization” will be entirely separated. In Taiwan, for instance, the future virtual currency industry (VASP) will adopt a “registration system” and gradually transition towards a specialized law and licensing system, becoming a “licensed industry,” which will inevitably limit the number of operators allowed to operate.
This means that the new era of DeFi will officially begin, requiring more “decentralized forces” in the market to provide an important alternative for people and exert influence within market mechanisms, leading to a more balanced development direction.
I believe that the pain points of imbalance between centralization and decentralization will gradually emerge in the coming years. In the new year, I would advise startup teams to pay more attention to the developments in the DeFi space.
**Key Trends in Blockchain Finance for 2025**
Wayne Huang
Trend 1: Approval of Bitcoin Spot ETFs Opens a New Financial Era
In early 2024, BlackRock, the world’s largest asset management company, will issue Bitcoin spot ETFs, signifying that Bitcoin is officially recognized as a new asset class.
ETFs (Exchange Traded Funds) serve as a bridge to lower investment barriers, tracking major market indices or bond market indices, allowing transactions through familiar brokerage firms in the same way as trading stocks. A Bitcoin spot ETF tracks the price of Bitcoin.
I initially believed that it would take a considerable amount of time for virtual assets to be commoditized by traditional finance. The emergence of Bitcoin spot ETFs lays an important foundation for virtual assets to be regulated and processed by traditional finance, providing more confidence for the development of derivative finance, such as trading Bitcoin spot ETFs.
With Bitcoin spot ETFs leading the way, this means that if there is a desire to tokenize traditional financial assets like U.S. Treasury bonds and funds and trade them on the blockchain, the obstacles will be significantly reduced.
Imagine being able to trade from anywhere in the world with just a wallet, enabling real-time on-chain clearing and settlement, unlocking more possibilities and creativity on top of the existing rules and trading experiences of financial products.
Trend 2: Trump Elected as the 47th President of the United States, Ushering in a Crypto-Friendly Era
Trump’s return to the White House has shown a friendly attitude toward cryptocurrencies during his campaign, proposing various policies that will significantly impact the global cryptocurrency industry.
The United States is an incredibly influential country; its stance and policies on any issue largely sway other countries’ attitudes. Consider if the U.S. were to oppose cryptocurrencies or even criticize them vehemently; many countries would likely become more conservative, or even fearful. Therefore, a major international power like the U.S. displaying a friendly attitude toward cryptocurrencies is beneficial for the overall atmosphere and development space.
Regardless of how many of Trump’s proposed crypto policies are ultimately realized, as long as there is no deliberate suppression, even if the U.S. does not focus its policy on cryptocurrencies, other countries can freely develop their own crypto policies without conflicting with the U.S. stance.
Winston Hsiao
Trend 3: Regulatory Framework Taking Shape, An Orderly Market is Emerging
Taiwan’s virtual currency industry is seeing regulatory frameworks take shape, with specialized laws expected to be implemented this year. The cryptocurrency market has moved past the wild, unregulated growth phase, and a structured market is anticipated to form by 2025.
Furthermore, the “fairness” and “transparency” of cryptocurrency market information will be key developmental directions moving forward.
For example, if Bitcoin’s price rises by 20%, historical data from the past decade suggests that several other coins may follow suit with a certain percentage of increase. If such historical objective data can be compiled into a public and trusted platform without bias or direction, then whenever similar price increases occur, that can trigger traders to start trading, creating market liquidity.
This data is somewhat similar to how publicly listed companies regularly disclose financial reports. Only when every piece of information in the market can be accurately reflected in market prices will the overall operational efficiency of the market improve, the investment environment become better, and ultimately, the price differences and volatility diminish, leading the cryptocurrency market toward maturity.
Wayne Huang
Traditional finance has undergone hundreds of years of evolution, establishing a relatively complete risk control mechanism and regulatory norms. For instance, currently listed companies are subject to the Securities Exchange Act, which prohibits insider trading, meaning that key personnel who can significantly influence market prices face restrictions when trading securities to prevent market manipulation. Moreover, they must adhere to requirements in their statements and actions to avoid causing market panic or severe volatility.
Currently, in the cryptocurrency market, many individuals exploit information asymmetry to influence or even manipulate market prices, which is relatively difficult to avoid. This situation relies heavily on the self-identification and judgment abilities of investors. However, over the past year, the approval of Bitcoin and Ethereum spot ETFs has allowed virtual assets to be traded in a manner consistent with traditional finance, which has somewhat addressed the issue of information asymmetry under such mechanisms and systems.
Trend 4: Traders Will Welcome New Dividends; Investors Will Encounter Deployment Opportunities
As an orderly market takes shape, traders will enjoy new dividends, while investors will find opportunities for long-term positioning in virtual assets.
The cryptocurrency market exhibits higher volatility compared to the Taiwan stock market and allows for trading 24/7, without the issue of default settlements. All the pain points faced by day traders in traditional markets do not exist in the cryptocurrency market.
Therefore, in the early stages of an orderly market formation, I believe it will attract traders from traditional markets looking to uncover opportunities. “Traders” refer to those who seize opportunities to trade, profiting from price differences through frequent buying and selling in a short timeframe. Traders can leverage their accumulated trading knowledge from traditional financial markets, benefiting from the price fluctuations and further enhancing liquidity in the cryptocurrency market, thus making the overall market more efficient.
For investors, the initial stage of an orderly market provides an opportunity to start positioning for long-term investments in virtual assets. Investors are those who believe in the long-term value and potential of a particular asset or business and support project development through prolonged holding.
This is akin to investing in NVIDIA and TSMC stocks before the AI boom exploded, allowing these investors to position themselves in potential cryptocurrencies that they believe will thrive, thereby reaping dividends in their era.
A complete and efficient trading market must include both investors and pure traders to create together. Whether traders or investors, both can obtain their respective dividends and opportunities in a market environment that increases fairness, transparency, and openness, which will lead to a more mature future for virtual asset development.