Growing demand for Bitcoin

On a wave of optimism from the arrival of a new administration in the US, cryptocurrency market capitalization reached an all-time high of around $3.7 trillion in early December 2024 before declining to $3.25 trillion by early January 2025.

After the inauguration of the US president and the signing of the first decrees, including the creation of a national Bitcoin reserve at the expense of cryptocurrencies already held by the US and seized as part of various criminal prosecutions, the market showed a prolonged decline until April 2025, when capitalization fell to $2.5 trillion. Part of this decline was due to unjustified market expectations that the US would start buying Bitcoin for its reserves, partly due to the new tariff policy of the US presidential administration.

Individual cryptocurrencies behaved differently during the first 5 months of 2025. Bitcoin updated its maximum value several times, reaching $109,000 on January 20 and then almost exceeding $112,000 on May 22. However, other cryptocurrencies show a decline: Ether capitalization has fallen by 30% since the beginning of the year, and other altcoins - by 15%.

The capitalization of stablecoins continues to grow, with their volume in circulation increasing by 17% since the beginning of the year and reaching $229 bn by the end of May 2025. Compared to the beginning of 2025, the share of USDT + USDC capitalization in stablecoins remained approximately the same (around 93.5%), but their ratio changed - 66.7%/26.7% vs. 69.5%/24.1% at the beginning of the year.

Inflows into US exchange-traded mutual funds investing in Bitcoin (Bitcoin-ETFs) are¹ continuing.

Cumulatively for the first half of 2025, net inflows totaled $9.1 bn, despite fairly strong net outflows in February ($2.4 bn) and March ($800 mn). Demand for Ether-ETFs is much lower, with net inflows totaling only $400 mn in the first 5 months. By comparison, net inflows in November and December 2024 were $1 bn and $2 bn respectively.

The continuing demand for cryptocurrency ETFs indicates that traditional investors are interested in this asset class, which is behaving quite attractively. The yield of the U.S. market (S&P 500 index) for the first 5 months of this year showed growth of only 0.68% with a maximum decline of 17.66% in early April against the background of situations with trade tariffs. At the same time, Bitcoin for the same period showed a growth of 10.17% with a maximum decline of 19.12% in April.

Compared to the Russian market Bitcoin was worse in the first 5 months, which is mainly due to the strengthening of the ruble against the US dollar - from 110 at the beginning of the year to 77 rubles (-30%). Thus, in rubles, Bitcoin fell² by 25.5% by May 2025. In the long run, investments in cryptocurrencies remain quite attractive for domestic investors - our calculations show that the inclusion of Bitcoin by 1-2% in the investment portfolio to the Moscow Exchange Index allows even to reduce volatility of the portfolio and demonstrate a higher yield at the same time.

In this regard, it is worth noting that since mid-May 2025, Russian brokers and management companies have started offering their clients various kinds of structured investment products whose value is linked to Bitcoin. Moreover, in early June, trading in Bitcoin futures opened on the Moscow Exchange. It should be noted that so as a fully legal way of acquiring cryptocurrencies in Russia is absent, these investment products are based on American Bitcoin-ETFs. Compared to direct ownership of cryptocurrency, this method is, firstly, more expensive (commissions of the American ETF issuer + management fees of the Russian management company), secondly, such a chain of intermediaries may cause some discrepancy in the dynamics of the value of these securities and the cryptocurrency itself, which undermines the effectiveness of investments (so-called tracking error), and, thirdly, more exposed to the risk of sanctions from Western regulators. Structured products and Bitcoin futures are only available to qualified investors.

From the monitoring issue No. 5 (17), May 2025. Download the full issue (PDF) · issue page at the Gaidar Institute