Opinions expressed here are based on findings from our annual State of Bitcoin report. Check it out for everything Bitcoin this year: from OP_CAT's revival to record-breaking ETF flows, MEV on Bitcoin to the dawn of recursive covenants, we cover it all.
1. Bitcoin L2s/Sidechains/Rollups (et al.) will not pass the TVL of Bitcoin on EVMs
2024 was dubbed the “Bitcoin Renaissance” thanks to native Bitcoin staking via Babylon, significant developments in Bitcoin script programmability via BitVM, strong social movement behind bringing back OP_CAT via a Bitcoin soft fork, and a slew of new (self-proclaimed) Bitcoin L2s under development.
Yet only a small minority of these projects have actually launched, and so far, the hype around these has not been meaningfully justified. I expect this trend to continue. Although more Bitcoin layers will launch this year, by January 1, 2026, Bitcoin TVL on alt chains will still outpace that of Bitcoin layers*.
The current market sees significantly more Bitcoin on EVM chains than Bitcoin scaling layers. Nearly 230,000 BTC is locked up across tBTC, WBTC, cbBTC, BTC.b (Avalanche), and BTCB (Binance). This Bitcoin is actively used in protocols like Aave, Uniswap, Beefy Finance, Compound, etc., to generate yield or be used as collateral.
Top Bitcoin sidechains (Rootstock, BOB, Core), Lightning, and Babylon (which includes the TVL of protocols like Lombard, Solv, etc.) hold ~92,000 Bitcoin. Unless the user experience for the sidechains drastically improves and pulls a lot of the EVM BTC liquidity or Babylon’s Bitcoin staking product goes live, we don’t expect Bitcoin Layers TVL to flip Bitcoin on alt chains in 2025.
*Note that this distinction is not explicitly technical. For example, BOB is currently an Ethereum rollup. However, it is a self-proclaimed “Hybrid L2,” focusing primarily on extending Bitcoin’s productivity and accepting gas payments in BTC, so we would count the TVL for the Bitcoin layer category, not the alt chain category. Alt chains, for the purpose of this prediction, are primarily comprised of Ethereum, Arbitrum, Base, and other EVM chains, as well as Solana, Sui, and any “non-Bitcoin” chain.
2. Ordinals flip Runes in cumulative market cap
As of writing, Runes cumulative market cap is currently $1.2B. This number has fluctuated between $1-2B since they launched post-halving in April 2024. The primary reason they were able to sustain this high of a valuation is by riding the rest of the crypto market’s speculation, which has heavily favored memecoins this cycle.
But despite individual memes on Solana and Base reaching high nine figures or even unicorn status, Runes have been static.
The simple thesis for the flippening is that if people want to gamble at a higher velocity, they will do so on Solana, Base, Sui, Hyperliquid, or other fast chains. Although Magic Eden has a simple UX for trading memes, Bitcoin is a slow chain.
On the other hand, Ordinals are sitting at a $647m market cap. Ethereum’s NFT market is $7.21B — 10x that of Bitcoin. It doesn’t even require the NFT narrative to come close to where it was in 2021: Bitcoin NFTs are underpriced.
While there will likely be a surge in both, we expect Ordinals' growth to outpace Runes'.
3. MSTR NAV premium eclipses 5x
Microstrategy is the most exciting Bitcoin-equity trade—its yearly performance reflects this. While there is an ongoing debate about how long the music will stay on for MSTR’s Bitcoin treasury strategy, so long as the Bitcoin bull market continues, MSTR can continue to be the Bitcoin-beta darling in equity markets.
A metric that interests us most is the premium to NAV, which measures how much MSTR’s market cap exceeds its Bitcoin holdings. Post-election, it peaked just north of 3x, and has since fallen to ~2x.
During the next (and potentially last of this bull run) big push for BTC, we expect MSTR’s premium to NAV to hit above 5x. You can track it here.
We wrote about Microstrategy in depth in our annual State of Bitcoin Report.
4. Bitcoin dominance makes a new all-time low
The crypto economy is expanding. With the growth in stablecoins, altcoins, and now the new hot money sector, AI, Bitcoin’s dominance will continue its long-term downtrend.
The lowest BTC dominance ever was at the end of 2017, at 37.64%, and its slow crawl up to 60% over the past 2.5 years is coming to an end.
While we’re firmly in the “everything goes to zero against Bitcoin” camp, the attention the crypto x AI sector has sustained is impossible to ignore and will only grow as products are further developed. Paired with the aforementioned stablecoin growth, a bustling alt sector with tokens like HYPE and SUI making significant highs, the distribution from BTC into alts likely stays on trend with previous cycles.
5. Bitcoin ETF flows surpass 2024 total of $44 Billion
The U.S Bitcoin ETFs were the most successful ETF launch in history, amassing $44 billion in total inflows. ETFs, in the entire market, have been on an absolute tear for the past 4 years:
2021: 900B
2022: 600B
2023: 600B
2024: 1.12T
Even though Bitcoin ETFs saw an insane amount of success, they are still mildly integrated, at best, in TradFi portfolios. The only direction for allocation is up, and if this is going to be another green year for BTC, investor appetite will also be in the green. Crypto-friendly regulation, buzz on Wall Street, and global adoption all point to another outstanding year for BTC ETFs.
6. Bitcoin bridges get a major revamp and move towards obsolescence thanks to BitVM and the revival of opcode(s).
The growing security risks associated with traditional bridges have underscored their vulnerabilities and accelerated the transition toward trust-minimized designs, such as zk-STARK/zk-SNARK-based light-client bridges and BitVM-enabled mechanisms. Traditional Bitcoin bridges (federated/multisig arrangements) will likely face extinction pressure in 2025. Rather than isolated bridges connecting separate networks, we'll see the emergence of what we might call "native Bitcoin state verification".
This shift will be driven by a couple of converging forces.
- First, BitVM 2’s permissionless verification model reduces reliance on trusted bridge operators by enabling decentralized and dynamic dispute resolution. This advancement transforms traditional bridge designs by making federated models increasingly redundant.
- Second, the revival of opcodes like OP_CAT expands Bitcoin’s scripting capabilities, allowing for enhanced programmability and covenant-based state verification. While this doesn’t entirely replace the need for bridges, it reduces the scope of their necessity by enabling more secure, Bitcoin-native methods for handling cross-chain or Layer 2 interactions.
The key metric to watch in 2025 will be the "bridge extinction rate" - the percentage of TVL moving from traditional bridged assets (like wrapped BTC) to natively verified Layer 2 assets.
7. WBTC supply falls below 100k BTC as supply moves into decentralized options
In 2025, the dominance of centralized custodial Bitcoin wrappers like WBTC will be fundamentally challenged as decentralized custody models become the new standard for tokenized Bitcoin. This transformation will center around trust-minimized technologies like multi-party computation (MPC) wallets, forward security mechanisms, and zk-proof-based attestations, exemplified by projects like tBTC and BTC.b. tBTC likely capturing 40-50% more of the tokenized bitcoin landscape, than what they currently have. By the end of 2025, decentralized custody solutions will handle 15% or more of all tokenized Bitcoin supply.
8. Global Bitcoin adoption reaches 180 million users, representing a 1.5-1.7x increase from 2024's 106 million users.
In 2025, Bitcoin will continue to cement itself as the backbone of global digital asset infrastructure, and the regulatory clarity in the United States under the new administration will provide a foundation for steady institutional growth.
Rather than a dramatic surge, we'll likely see methodical integration through traditional financial channels, similar to how ETFs brought in 13% of U.S. crypto users in 2024. This measured approach will help prevent market overheating while building lasting infrastructure. The institutional infrastructure developments in 2024 - from ETFs to banking integration - will provide reliable on-ramps for new users. However, unlike the explosive growth of previous cycles, this expansion will likely be more gradual as users and institutions take time to understand and implement these new tools effectively.
As sanctions persist, Russia’s embrace of Bitcoin for international payments will push other sanctioned or dollar-averse nations (e.g., Iran, Venezuela) toward adopting Bitcoin in their trade systems. This shift could drive $500B in annual Bitcoin-based cross-border trade.
9. Bitcoin mining expands with renewed focus
Bitcoin mining will transform from being primarily an energy consumer to becoming an integral part of global energy infrastructure. The key development will be the emergence of "energy-Bitcoin arbitrage" - where miners act as flexible loads that can be quickly adjusted based on grid conditions.
Just as oil futures transformed from simple contracts into complex financial instruments, we could see the development of "mining power derivatives" - financial products that allow energy companies and miners to hedge their positions and trade future mining capacity. Governments in regions like Canada, Norway, and El Salvador will offer tax incentives for miners who operate on renewables, further driving the shift. Bitcoin mining will also play a role in carbon credit markets, with miners offsetting emissions by funding renewable energy projects.
While today's miners simply turn off their machines during peak demand, by 2025, sophisticated financial products that formalize these relationships will likely emerge.
For example:
- Energy companies issue "mining-backed bonds" where the yield is tied to both Bitcoin price and energy costs
- Grid operators create "flexible mining futures" that guarantee certain amounts of curtailable load
- New financial products emerge that bundle mining operations with renewable energy credits
