Crypto in 2025: Bitcoin, Stablecoins, and the Digital Future of Money

In the 17 years since Satoshi Nakamoto published his (or her) landmark Bitcoin whitepaper, cryptocurrencies have evolved from digital novelties discussed on fringe message boards to multi-trillion-dollar assets that dominate investment discourse. Yet even now, despite this growth in scope, scale, and acceptance, crypto remains a highly polarizing topic with diametrically opposed views on the types of risks that it represents, how it should (and could) be used, and even whether it has any value at all. That said, with the recent passing of the GENIUS Act, cryptocurrency has been officially brought into the federal government’s regulatory embrace, setting the stage for further proliferation that has the potential to upend global finance.

There is no way around it – crypto is here to stay and its impact on personal finance is only going to grow. But we have come a long way since Satoshi’s original idea of decentralized money, and the original “coin” has morphed into something different altogether. As such, we need to examine the current state of crypto, starting with Bitcoin and how it should be assessed by investors before moving on to what a more “stable” future may mean for the U.S. and the world.

What is Bitcoin: Money Dreams to Pure Speculation  

The coin that started it all has experienced the greatest bull run since the tech boom of the late 1990s, currently sitting at a market cap of over $2 trillion and making it the 8^th most valuable asset in the world.ⁱ Even a cursory glance at a price chart over the last decade makes the appeal quite evident. But while attractive, it does beg the question: what is driving the value?

If you pose this question broadly, you will get answers of varying degrees of sensibility, ranging from arguments closely aligned with the original intent (being a potential challenger to government-controlled currency) to geopolitical and inflation hedging. Accordingly, you also see a wide range of prognostications about where Bitcoin will go from here, from calls that it was going to double in value again in 2025ⁱⁱ to brilliant Nobel laureates claiming that Bitcoin represents little more than a financial black hole that will fall to zero within a decade.ⁱⁱⁱ Add in high-profile crypto flip-floppers like Larry Fink, Jamie Dimon, and Ray Dalio and it becomes more and more difficult to truly nail down what role Bitcoin serves, and by extension, how we can judge its value.

But before we can address what Bitcoin is, we need to understand what it is not, and to do that, we need to rip off the proverbial Band-Aid: Bitcoin is not money. And for all the faults of fiat (i.e., backed by the “full faith and credit” of the government, as opposed to a commodity like gold) currency, Bitcoin is very unlikely to become money. This may have been Satoshi’s original intent – to create a decentralized, blockchain^iv-based currency independent of a government or central bank – but we argue that the money-potential of Bitcoin was doomed almost from the start. This opinion is often met with consternation and quibbles over this or that business accepting Bitcoin as payment or the (now abandoned) El Salvadorian experiment to make Bitcoin an official currency.^v But exceptions aside, these types of arguments miss something vital – what money actually is.

You may recall the classic three-part textbook definition of money: a “store of value, unit of account, and medium of exchange.”^vi As with most economic definitions, it is a bit convoluted, but more than that, it is not very useful. In fact, to quote the great monetary economist (and historian) George Selgin, "it’s good for nothing but confusion and mischief.”^vii Instead, we highlight only one of these characteristics, because whatever qualities a particular media may possess, what matters at the end of the day is that it is generally accepted in exchange. All others, in the words of Ludwig von Mises, "are merely particular aspects of its primary and sole function.”^viii In short, if folks are not regularly using it in exchange for goods and services, it is not money.

And Bitcoin, for all its potential virtues, is not being used for exchange. In fact, the very thing that makes Bitcoin attractive to the broader public – its dramatic price action – is exactly why the dream of common Bitcoin-denominated exchange has sailed. The dollar may be eaten away by inflation over time, but you can be fairly certain you can receive it today and spend it tomorrow with little change in value. The same is simply not true for Bitcoin, and this uncertainty strips it of the most basic characteristic that could lead to it being commonly accepted. And with the proliferation of Bitcoin ETFs and regulatory changes that will allow retirement plans to hold crypto - all of which highlights the average investor’s desire for exposure to its price, not the coin itself - Bitcoin is becoming further cemented in the realm of speculation, moving ever further away from Satoshi’s ideal. To put it bluntly, nobody wants to be this guy.

So, if Bitcoin’s value does not lie in its “money-ness,” we must keep looking to find a way to answer the question of not only what Bitcoin is, but what role it should play for investors. The problem, however, is that Bitcoin lacks two of the most fundamental determinants of value: cash flow and non-speculative use. Stocks and bonds, for example, derive their value heavily from what they are going to pay out over time (which is also why they are impacted by interest rate changes). Commodities, like gold, also have uses far removed from central bank allocations and personally held bullion.  And while crypto proponents will argue that, also like gold, Bitcoin’s algorithmic scarcity drives its value (only 21 million tokens can be created), supply constraints alone are not enough – it is the supply/demand imbalance that moves prices.

Perhaps we can get closer to what Bitcoin is by examining what Bitcoin does compared to the factors it is said to correlate with:

• Bitcoin is often discussed as an inflation hedge due to the above-mentioned fixed supply, but this idea relies too heavily on the comparison to traditional fiat currency which we have already dismissed, and this is reflected in the unstable relationship between Bitcoin and inflation. While we did see a sharp spike in Bitcoin prices during the initial post-pandemic inflation surge (figure 1), not only did that relationship seem to subsequently collapse, but the move was more tied to euphoric “fear of missing out” behavior by retail investors than to inflation (remember NFTs and meme stocks?).  That said, in the past year, Bitcoin has shown higher correlation with longer-term inflation expectation shifts, but these mainly reflect sentiment around the state of the economy and Fed policy, meaning a tight relationship with Bitcoin is more about the latter’s behavior as a normal risk asset (more on this below) than any special inflation hedging capacity.

• Bitcoin is sometimes referred to as “digital gold,” framing it as a potential safe haven during periods of global uncertainty. We have discussed oft-cited mischaracterization of gold elsewhere, so we will just add that Bitcoin appears to behave like any other speculative asset during such periods (figure 2). While geopolitics may drive headline interest in crypto, the price appears to respond negatively to heighted uncertainty.^ix

• Bitcoin is also discussed as a prudent diversifier, something to include in your portfolio simply because it has low correlation with other asset classes. But by this point, you likely have a good idea how this theory plays out. In fact, over the past few years, Bitcoin has been little more than a high-octane bet on technology stocks (figure 3), making diversification arguments for the cryptocurrency a bit puzzling. But that does not mean it is useful to think of Bitcoin as a stock market bet. Remember, Bitcoin lacks the necessary component to be priced like a stock (a way to forecast cash flows), so while correlation may be higher, that simply suggests that tech sentiment and Bitcoin sentiment are currently aligned, not that there is a fundamental reason for their close movements. In fact, not only does the correlation between Bitcoin and stocks appear less stable than parts of the chart suggest, shifting from near-zero to considerably higher after the pandemic, but it moves dramatically based on prevailing volatility in the market.^x

But even with this visible correlation, there are clearly periods where Bitcoin appears to march to the beat of its own drum. Its price action seems to be mostly that of sentiment measurement, and even then, it is moved heavily by sentiment around Bitcoin (or crypto) itself. Indeed, Blackrock – a major proponent of Bitcoin investment – emphasizes this same point as part of its value proposition: “the potential for future widespread adoption is thus central to the investment case for Bitcoin.”^xi

Technically, this means that Bitcoin is perhaps most correctly framed not as a traditional financial asset, but as a game. Specifically, a zero-sum game. Being a “winner” necessitates a loser – think lottery or even blackjack. Even more specifically, Bitcoin (and the other volatile crypto assets), represents a specific type: the early-bird game.^xii Early buyers of Bitcoin gain at the expense of those who come later, and continued gains require a steady flow of the latter.  And while you can find solace in the fact that these latecomers do not seem to be in short supply, no amount of administrative support or investment normalization can make Bitcoin something it is not, meaning that it has effectively been relegated to the realm of speculation and little more.

The price action may be exciting, but its role in a portfolio is, at least for the time being, inherently limited simply because it is difficult to nail down exactly what that role is. That said, it is possible that even with its highly volatile nature and poor fundamentals, broader portfolio inclusion could bring some normalcy to its relationships with other asset classes and economic factors simply due to investor behavior. But we are not there yet. So for now, if you play Bitcoin, do so in moderation. And more importantly, remember the rules of the game.  

A More Stable Digital Future

But while the dream of Bitcoin money has faded, ironically driven by how popular it became, the technology it brought to the forefront is still poised to play a major role in global finance.

Imagine you could take the virtues of Bitcoin, the very virtues that made it such an attractive concept at inception – quick, cheap, easy, secure, and decentralized transactions not limited by borders or shared currency – and strip out the volatility that makes it such a poor option for exchange purposes. You would end up with something much closer to Satoshi’s ideal: the stablecoin.

Stablecoins – which are just asset-backed cryptocurrencies - are not new. In fact, they’ve been around for over a decade and currently make up a $250 billion market. But so far, their use has been relatively niche, mainly used to transact in other crypto (if you have a Coinbase account, for example, you have likely held a stablecoin).  Their history has also been a bit rocky – you may remember META’s Libra coin that shuttered in 2021 due to concerns around its underpinning assets^xiii, or when Circle’s USD coin (USDC) “broke the buck” during the Silicon Valley Bank collapse.^xiv

However, the signing of the GENIUS Act into law in July marked a potential watershed moment for the industry, bringing stablecoins under a federal regulatory framework for the first time. Specifically, this law lays out requirements for which types of firms can issue stablecoins, how they must be backed (fully and with stable U.S. dollar-denominated assets), and which regulatory bodies will be responsible for keeping them in check. And while some crypto purists may blanch at the idea of government oversight of something that was always meant to be “for the people,” this shift appears to be the confidence spark that the industry needed. In fact, by the end of the decade, forecasts for the size of the stablecoin market from Citibank, the Treasury, and various other institutions hover between $2 and $4 trillion.^xv More interestingly, the very thing that was meant to provide an alternative to fiat currency like the dollar, blockchain-based crypto, is now being framed as the thing that could cement the dollar’s dominance even further. You see, while there may be some useful ramifications for the average U.S. consumer as banks and corporations launch their own stablecoins, including faster payments, lower processing fees, and less concern about expensive currency exchanges if you’re buying something from abroad, the true benefit from a growing stablecoin industry lies elsewhere.

We have written at length about why the dollar, despite non-stop predictions of its demise, is secure in its role as the global reserve currency and how that is a key benefit when it comes to continuing to borrow despite a rising national debt (here, here, and also here). This rests on the idea that given our relative institutional stability (even with the ongoing spat between the White House and the Federal Reserve), dollar and dollar-denominated assets have relatively stable demand. A rapid expansion of stablecoins under the GENIUS act provides a massive boost to said demand, further extending the dollar’s reach globally. According to Fed Governor Chris Waller, who is incidentally in the running for next Fed Chair, “I believe that stablecoins have the potential to maintain and extend the role of the dollar internationally.”^xvi That’s potentially one more mark in the win column for the U.S.

And while easier access to a U.S. stablecoin could be greatly beneficial to emerging markets that often face unstable local currencies, not everyone is excited about these developments. The European Central Bank, for example, has expressed concerns that the widespread use of U.S. dollar-backed stablecoins could disrupt its ability to conduct monetary policy and could shift demand from EU debt to U.S. treasuries, sparking calls for an acceleration in European crypto development (unfortunately for Europe, this is more likely to result in a Central Bank Digital Currency than a robust private stablecoin market, something we are glad to see prohibited in the U.S.). This is not the place to delve too deeply into how warranted these fears may be, but suffice to say, their expression alone demonstrates that the dollar’s power may not be waning as much as the headlines might lead you to believe.

Conclusion

We are nearly two decades into this crypto revolution, and despite Bitcoin exploding in popularity and value, Satoshi’s true impact on the realms of money and finance may still lie ahead of us. The cryptocurrency space is now bifurcated, and while the exciting volatility of the speculative coins will continue to drive investment interest, the digital future appears to depend on their more stable blockchain cousins. At this early regulatory stage, it is difficult to predict how far this will go or what the final ramifications on monetary and fiscal policy will be. But if even the conservative estimates for growth of the sector prove accurate, this could represent a paradigm shift in the delivery of financial services. And if so, the second Trump administration’s full embrace of the sector – importantly with considerable bipartisan support - has not only given us a leg up in regulation and development, but a nice little boost to the U.S. dollar’s ongoing dominance.

ⁱhttps://companiesmarketcap.com/assets-by-market-cap/
ⁱⁱBitcoin (BTC) price predictions for 2025
ⁱⁱⁱCapitalisn’t: Why This Nobel Economist Thinks Bitcoin Is Going to Zero | Chicago Booth Review
^ivA decentralized digital database that can serve as a ledger or record of transactions. For a more through explanation, see here.
^vhttps://ticotimes.net/2025/02/02/el-salvador-abandons-bitcoin-as-legal-tender-after-failed-experiment
^vihttps://www.federalreserveeducation.org/teaching-resources/economics/money/functions-of-money
^viihttps://www.cato.org/blog/three-pronged-blunder-or-what-money-what-it-isnt
^viiihttps://www.econlib.org/book-chapters/chapter-part-4-chapter-xvii-indirect-exchange/
^ixhttps://www.sciencedirect.com/science/article/pii/S1544612323012114
^xhttps://www.cmegroup.com/openmarkets/economics/2025/Why-Bitcoins-Relationship-with-Equities-Has-Changed.html
^xihttps://www.blackrock.com/institutions/en-us/insights/portfolio-design/sizing-bitcoin-in-portfolios#:~:text=In%20a%20traditional%20portfolio%20with,range%20for%20a%20bitcoin%20exposure.
^xiihttps://thedailyeconomy.org/article/bitcoin-as-a-novel-financial-game/
^xiiihttps://www.cnbc.com/2019/12/27/swiss-president-says-facebooks-cryptocurrency-project-libra-failed.html
^xivhttps://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dollar-peg-after-firm-reveals-it-has-3point3-billion-in-svb-exposure.html
^xvhttps://fintechnews.am/blockchain_bitcoin/53909/digital-dollar-report-stablecoin-market-set-to-soar-to-reach-up-to-us3-7-trillion-by-2030/
^xvihttps://www.federalreserve.gov/newsevents/speech/waller20250820a.htm


The information in this report was prepared by John Weitzer, CFA, Chief Investment Officer, Matt Wiley, CFA, Vice President of Investment Management, and Matt Conner, Senior Investment Consultant of First Command. Opinions represent First Command’s opinion as of the date of this report and are for general informational purposes only and are not intended to predict or guarantee the future performance of any individual advisor. All statistics quoted are as of the date of this publication, unless otherwise noted. First Command does not undertake to advise you of any change in its opinions or the information contained in this report. This report is not intended to be a client specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Should you require investment advice, please consult with your financial advisor. Risk is inherent in the market. Past performance does not guarantee future results. Your investment may be worth more or less than its original cost. Your investment returns will be affected by investment expenses, fees, taxes and other costs.

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