The New Era of DeFi is about to begin!
There is a saying in the cryptocurrency world that “one day in the crypto market is equivalent to ten years in the real world.” This is to describe the rapid changes in the cryptocurrency market, including the price of cryptocurrencies and the progress of the industry.
Global cryptocurrency regulations are gradually being put in place, the launch of Bitcoin spot ETF, the return of Donald Trump, who is considered friendly towards cryptocurrencies, to the White House, and the price of Bitcoin surpassing $100,000, all of these events have occurred within the past year. The relationship between cryptocurrencies and the world of finance is becoming increasingly closer.
Entering the Year of the Snake, I believe that decentralized finance (DeFi) will be worth paying attention to in 2025, especially as people become more conscious of their “financial autonomy.” We discussed this topic at the offline meetup organized by XREX and WEB3+. Winston also believes that “centralization” and “decentralization” will be two completely different tracks. As centralization matures, it will also catalyze the development of decentralization.
Keywords for 2025: The New Era of DeFi Begins
Wayne Huang: “Financial Autonomy” will become increasingly important
One of the biggest values of blockchain technology is its decentralization, which has given people unprecedented “financial autonomy.” This means that everyone can choose how to store their assets and eliminate the constraints of traditional financial intermediaries.
In the age of regulation, many problems in the cryptocurrency industry have been solved. However, the issue is that as the control of the industry by countries and regulatory agencies increases, and it even becomes a licensed industry, it also means that there is less flexibility.
Bitcoin has been around for 16 years, but the ideal of “financial autonomy” is still far from being fully realized. There are still barriers in terms of technology and education. However, there are many real-world issues, such as wars, that force us to think about how to protect our financial autonomy.
In the new year, I recommend everyone to pay more attention to the knowledge and developments in the field of DeFi. This is also the topic I will spend more time contemplating this year.
Winston Xiao: The era of decentralization begins
As the world enters the age of heavy regulation, 2025 will be an important turning point for the two tracks of “centralization” and “decentralization.”
For example, in the past, before regulations were in place, all the resources focused on developing “centralized exchanges” because they could generate more business benefits. The user experience and protection of user rights have also improved. On the other hand, there has been a lack of sufficient and user-friendly “decentralized exchanges” due to the lack of investment in the DeFi field over the past decade, resulting in an imbalance in their development.
With the gradual improvement of regulations, the two tracks of “centralization” and “decentralization” will be completely separated. In Taiwan, the virtual asset service providers (VASPs) will adopt a registration system in the future and gradually move towards a special licensing system. This will inevitably limit the number of operators allowed to operate.
This means that the new era of DeFi will officially begin, and the market will need more “decentralized power” to provide people with another important choice and exert influence in the market mechanism, bringing a more balanced development direction.
The pain points of centralization and decentralization imbalance, in my opinion, will gradually emerge in the next few years. In the new year, I would suggest that startup teams pay more attention to the development of the DeFi field.
Four Blockchain Financial Trends in 2025
Wayne Huang
Trend 1: Approval of Bitcoin spot ETF opens a new era of finance
BlackRock, the world’s largest asset management company, launched a Bitcoin spot ETF in early 2024, which means that Bitcoin is officially recognized as a new asset.
ETFs (Exchange Traded Funds) are like bridges that lower the investment threshold. They are funds that track major market indices or bond market indices and can be traded through brokerage firms in the same way as buying and selling stocks. The Bitcoin spot ETF tracks the price of Bitcoin.
I used to think that it would take a long time for virtual assets to be commoditized by traditional finance. The emergence of Bitcoin spot ETF establishes an important foundation for the regulation and handling of virtual assets by traditional finance. It also provides more confidence for the development of derivative financial products, such as the trading of Bitcoin spot ETF.
With the first Bitcoin spot ETF, if we want to tokenize traditional financial assets such as US bonds and funds and trade them on the blockchain in the future, there will be fewer obstacles.
Imagine being able to trade from anywhere in the world as long as you have a wallet. You can also achieve real-time on-chain settlement. This opens up more possibilities and imagination on top of the existing rules and trading experience of traditional financial products.
Trend 2: Trump’s election as the 47th President of the United States ushers in a new era of crypto-friendliness
With Trump’s return to the White House, he demonstrated a friendly attitude towards cryptocurrencies during his campaign and put forward several related policies, which had a significant impact on the global cryptocurrency industry.
The United States is a country with tremendous influence, and its stance and policies on any issue will greatly influence other countries. Imagine if the United States does not support cryptocurrencies and even criticizes them harshly, many countries will become more conservative and even develop a sense of fear. Therefore, the friendly attitude of international powers like the United States towards cryptocurrencies is very helpful for the overall atmosphere and development space.
Regardless of how many of the cryptocurrency policies proposed by Trump will actually be implemented, as long as they are not deliberately suppressed, even if the United States does not focus its policies on cryptocurrencies, other countries can freely develop their own cryptocurrency policies without conflicting with the United States’ position.
Winston Xiao
Trend 3: Regulation takes shape, an orderly market is forming
The regulation of the Taiwanese virtual currency industry is taking shape, and it is expected that specific laws will be implemented this year. Cryptocurrencies have already gone through the wild west period and a period of wild growth. An orderly market will take shape in 2025.
In addition, the “fairness” and “transparency” of cryptocurrency market information will be the expected development directions in the future.
For example, if the price of Bitcoin rises by 20%, based on historical data from the past decade or so, there may be several other cryptocurrencies that will follow with a certain percentage increase. If these objective historical data, without any bias or direction, can be organized and made publicly available on a trusted platform, it will trigger traders to start trading whenever similar price surges occur, creating market liquidity.
This data is somewhat similar to the regular disclosure of financial reports by listed companies. Only when every piece of market information can be accurately reflected in the market and prices, can the overall efficiency of the market operation be improved, the investment environment be better, and eventually reduce price differentials and volatility, gradually leading the cryptocurrency market to maturity.
Wayne Huang
Traditional finance has undergone hundreds of years of evolution and has relatively complete risk control mechanisms and regulatory standards. For example, listed companies are subject to regulations that prohibit insider trading under the Securities Exchange Act. This means that important personnel within a company or organization who can influence market prices are subject to certain restrictions when buying or selling securities to avoid market manipulation. Furthermore, they are also required to comply with requirements in their speech and actions to avoid causing market panic or drastic fluctuations.
Currently, in the cryptocurrency market, many individuals with ulterior motives use information asymmetry to influence or manipulate market prices. It is relatively difficult to avoid such situations at the moment, and it relies on investors’ self-recognition and judgment. However, in the past year, the approval of Bitcoin and Ethereum spot ETFs, which are traded in a traditional financial manner, has to some extent resolved some of the information asymmetry.
Trend 4: Traders will enjoy new dividends; investors will find strategic opportunities
After an orderly market is formed, traders will enjoy new dividends, and investors will find strategic opportunities.
The cryptocurrency market has higher volatility than the Taiwan Stock Exchange, and it can be traded 24 hours a day without the problem of default settlement. All the pain points that day traders encounter in traditional markets do not exist in the cryptocurrency market.
Therefore, in the early stages of an orderly market, I believe it will attract traders from the traditional market to search for opportunities. “Traders” refer to those who trade when opportunities arise and profit from price differentials through frequent buying and selling within a short period of time. Traders can use their accumulated trading knowledge from traditional financial markets to enjoy the benefits of price fluctuations, further bringing liquidity to the cryptocurrency market and making the overall market more efficient.
For investors, they can start positioning themselves in the early stages of an orderly market for long-term investments in virtual assets. Investors believe in the long-term value and development of a certain asset or project, so they support its development by holding it for a long time.
This is like investing in the stocks of NVIDIA and TSMC before the AI boom took off. These investors can strategically position themselves in their chosen promising cryptocurrencies and reap the dividends of their era.
A complete and efficient trading market requires the coexistence of investors and pure traders in order to create together. Whether it is traders or investors, in a market environment that increases fairness, transparency, and openness, they can obtain their own dividends and opportunities. This will also lead to the development of virtual assets towards a more mature future.