The direction of the cryptocurrency market is being questioned amid policy shifts, technological maturity, and changes in market structure

 

Introduction

The cryptocurrency industry is currently facing a new turning point. Over the past week alone, a series of events have unfolded that illustrate the multifaceted and complex nature of the industry, including comprehensive policy announcements by the Trump administration, the 10th anniversary of Ethereum, and technological innovations and emerging challenges across various blockchain networks.

In this article, we will analyze the current state of the cryptocurrency industry from a multifaceted perspective, covering the latest policy trends, technological advancements, and emerging market trends, and explore future prospects. It is important to note that these developments are not isolated but rather intertwined, collectively shaping the direction of the industry as a whole.

Because the author is Japanese, there may be errors in word spelling and grammar. We apologize for any errors.

U.S. Cryptocurrency Strategy at a Policy Turning Point

The Trump Administration's Comprehensive Approach

On July 30, 2025, the White House released a report titled “Strengthening U.S. Leadership in Digital Financial Technologies,” which became a landmark document for the cryptocurrency industry. This report was compiled by a presidential task force led by David Sachs and is positioned as a strategic roadmap for the United States to establish leadership in the global cryptocurrency field, rather than simply a list of policies.

Interestingly, the report includes not only a summary of existing initiatives but also new policy proposals. Of particular note is the proposal to require U.S. residents and companies to report overseas cryptocurrency accounts. While this may appear to be a regulatory tightening at first glance, it is actually a strategic measure aimed at enhancing the competitiveness of domestic cryptocurrency companies.

The administration has clearly expressed concerns that the current regulatory environment, where cross-border transfers are easy, creates loopholes for tax evasion and results in structural disadvantages for U.S. cryptocurrency companies. This recognition is highly significant, as it indicates a focus on building a fair competitive environment rather than simply strengthening regulations.

Details and Impact of Mandatory Reporting

The “foreign digital asset accounts” subject to the proposed reporting obligation are defined as accounts managed by overseas cryptocurrency exchanges and other entities. This definition is relatively clear and appears to be designed to avoid practical confusion. However, the impact of this policy, if implemented, is expected to be wide-ranging.

First, individual investors may face increased administrative burdens. U.S. residents using overseas exchanges will be required to report account information to the government, which is likely to complicate tax processing. On the other hand, this measure could relatively enhance the competitiveness of domestic exchanges and potentially promote the development of the cryptocurrency ecosystem within the U.S.

At the corporate level, cryptocurrency-related companies operating globally will need to comply with new compliance requirements. However, this does not necessarily mean an increase in burdens. The clarification of regulations may also enhance the predictability of business operations and facilitate the formulation of long-term investment plans.

Consideration and Balance for DeFi

Notably, the administration has explicitly stated that “new reporting requirements should not be imposed” on DeFi (decentralized finance). This demonstrates consideration for technological innovation and reflects the administration's stance of striving to strike a balance between regulation and innovation.

DeFi protocols are inherently decentralized and possess characteristics that cannot be fully captured by traditional financial regulatory frameworks. The fact that the government understands this and is taking an approach that does not hinder technological development is a very positive sign for the industry as a whole.

However, whether this policy will be maintained in the long term may depend on the development of the DeFi sector and the understanding of regulatory authorities. At present, DeFi remains a relatively niche field, but as it becomes more widespread in the future, adjustments to policy stances may become necessary.

Current Status of the Bitcoin Reserve Fund Proposal

The Bitcoin Reserve Fund proposal, which had garnered significant industry attention, was only briefly mentioned in the final chapter of this report. While government officials have stated that the plan is underway, no specific timelines or details have been disclosed.

This cautious approach could actually be interpreted as a sign of policy maturity. Building a Bitcoin reserve is an unprecedented endeavor that requires overcoming numerous technical and legal challenges. Rather than rushing to make announcements, it is crucial to develop a practical policy through thorough consideration.

Additionally, coordination with existing financial policy institutions such as the Federal Reserve Board (FRB) and the Treasury Department is indispensable. Holding Bitcoin as a national reserve asset would necessitate significant changes to the traditional financial policy framework, making careful consideration inevitable.

The Technological Progress of Ethereum Over the Past 10 Years

A Decade of Progress and Achievements

Ethereum's 10th anniversary is a major milestone for the entire cryptocurrency industry. Over the past decade, Ethereum has evolved from a simple cryptocurrency into a versatile platform that supports innovative applications such as DeFi and NFTs.

In particular, the transition to Proof of Stake, known as “The Merge,” was a technical feat worthy of note. The unprecedented endeavor to change the fundamental consensus mechanism without halting the operational network demonstrated the maturity of blockchain technology.

Today, Ethereum has established itself as the second-largest blockchain platform by market capitalization. It is important to note that this position is not merely based on speculative value but is supported by real-world use cases and technical robustness.

Institutional Investor Participation and Improved Practicality

Shao Wei Wang, co-director of the Ethereum Foundation, has outlined a vision for Ethereum to become a “global computer seamlessly integrated into everyday life” over the next 10 years. This prediction is by no means unrealistic.

In fact, major financial institutions such as BlackRock and JPMorgan have begun building services on Ethereum. The entry of these institutional investors serves as evidence that Ethereum's technical stability and security have been recognized by the market.

In particular, the fact that a major asset management firm like BlackRock is leveraging Ethereum demonstrates that the integration of traditional financial systems with blockchain technology has become a reality. This development signifies that the initiative has moved beyond experimental efforts and entered a phase of full-scale business expansion.

Prospects for Next-Generation Applications

Joseph Lubin, CEO of ConsenSys, believes that Ethereum's role will extend beyond the financial sector to become the infrastructure that supports decentralized social networks and AI agents. This prospect demonstrates the true value of Ethereum's programmability.

Several projects are already underway to develop decentralized social networks on Ethereum. Interest in blockchain-based social media is growing as a means to address issues such as censorship and data privacy that plague traditional centralized social media platforms.

Regarding AI agents, combining the automated execution capabilities of smart contracts with AI's decision-making abilities enables the creation of more advanced autonomous systems. This represents a fundamentally different approach from traditional centralized AI services, offering the potential to enjoy the benefits of AI while protecting user sovereignty.

Technical Challenges and Future Development Directions

On the other hand, Ethereum faces a number of challenges. Scalability issues remain unresolved, and the development of Layer 2 solutions continues. Additionally, the surge in gas fees is hindering general user adoption.

However, these challenges are likely to be addressed gradually through technological advancements. In particular, the implementation of sharding and the maturation of Layer 2 solutions are expected to significantly enhance processing capacity.

Improving user experience is also a critical challenge. Currently, using Ethereum requires a certain level of technical knowledge, making it a significant barrier for general users. However, improvements in wallet usability and innovations at the application layer are likely to gradually address this issue.

Analysis of Emerging Technology Trends and Market Developments

Explosive Growth of Solana Stock Tokens

The growth of xStocks, tokenized stocks issued on Solana, demonstrates new possibilities for the convergence of traditional financial products and blockchain technology. The fact that cumulative trading volume reached $1.66 billion in just one month since trading began on June 30 speaks to the high demand in the market.

Notably, approximately 95% of these transactions were conducted on centralized exchanges (CEX), indicating that users prefer a more familiar trading environment. Meanwhile, trading volume on decentralized exchanges (DEX) reached 85.2 million dollars, suggesting that there is also a certain level of demand for decentralization.

It is interesting to note that Tesla xStock (TSLAx) is the most popular stock. The 24/7 trading availability of Tesla shares offers new investment opportunities beyond the constraints of traditional stock markets. This is a concrete example of how blockchain technology is breaking through the limitations of existing financial systems.

Changes in Trading Patterns and Market Maturity

The tendency toward a lull in trading activity toward the end of July may indicate a shift from initial speculative interest to more selective and sustainable trading patterns. This change can be viewed as part of the market's maturation process.

While the total on-chain transaction amount reached $356.3 million, the fact that the majority of transactions are conducted off-chain indicates that a practical approach balancing scalability and usability is being adopted.

The asset under management (AUM) reaching 39.26 million dollars and the number of unique holders reaching 24,528 indicates that this product has achieved a certain market scale. However, these figures are still in the early stages, and future developments are worth watching.

The rapid growth of Base and the token issuance boom

The fact that Base, a Layer 2 supported by Coinbase, has surpassed Solana in terms of the number of new tokens issued per day demonstrates the intensifying competition within the blockchain ecosystem. The primary driver of this surge is Zora, a protocol for tokenizing digital content.

The issuance of over 100,000 new tokens in just two days on July 27 and 28 highlights the high demand for tokenization. However, this phenomenon requires careful analysis.

According to TK Research's analysis, approximately 93% of Zora participants are speculative traders, while only 6.1% are pure creators. This figure suggests that the current token issuance boom may not necessarily reflect healthy growth.

Speculation vs. Value Creation Debate  

AI researcher Sterling Crispin has harshly criticized these tokens as “shitcoins,” warning that they are essentially a zero-sum game where “no one can profit unless someone else loses.” This observation is significant, as it prompts deeper reflection on the true value of tokenization.

On the other hand, Polack, the founder of Base, states that “content and creators have been undervalued for years” and argues that tokens can correct this imbalance. This opposing viewpoint highlights the fundamental challenges facing the cryptocurrency industry.

In reality, tokenization technology itself is a neutral tool that can be used for either value creation or speculation, depending on how it is applied. What is crucial is to identify the appropriate use of the technology and strive to build a sustainable ecosystem.

The Evolution of Payment Infrastructure and Stablecoins

Visa's Stablecoin Strategy

The fact that Visa, a major payment company, processed over $200 million in stablecoin payments in the second quarter of 2025 demonstrates that the integration of traditional payment systems and blockchain technology is gaining momentum. This achievement is the result of the company's expanded stablecoin payment program, which operates seven days a week.

Ryan McInerney, Visa's CEO, clearly outlined the company's strategic approach to stablecoins. His statement, “It's a meaningful scale, but still modest compared to our total payment volume,” indicates that the current efforts have moved beyond the experimental stage and into practical application.

At the same time, the statement, “While still in the early stages, we see true potential and have been investing in the stablecoin space for years,” underscores Visa's long-term commitment to this field. This underscores that the initiative is not a short-term trend but a strategic business decision.

The Potential of Programmable Payments

Visa's “Visa Tokenized Asset Platform” has the potential to break through the limitations of traditional payment systems. With this platform, banks and fintech companies will be able to issue their own stablecoins and develop programmable financial products such as automated payments and time-specific transfers.

The concept of programmable payments enables complex conditional payments and automated financial services that were previously difficult to achieve in traditional financial systems. Examples include payments that are executed only when specific conditions are met, and the automation of regular investments and savings.

These features have the potential to bring about fundamental changes in financial services, going beyond mere technical improvements. In particular, in the field of international remittances, there is a high possibility of achieving both shorter processing times and cost reductions.

The Importance of the Regulatory Environment

Mr. Makina's emphasis on the critical importance of regulatory clarity accurately highlights the challenges facing the industry as a whole. The view that progress in regulatory development in the US and other regions will lead to the expanded use of tokenized payments is realistic.

Currently, many financial institutions are cautious about utilizing stablecoins, with regulatory uncertainty being one of the main factors. Once a clear regulatory framework is established, it is expected that more institutional investors and financial service providers will enter this field.

Furthermore, regulatory clarification is also important from the perspective of consumer protection. Establishing clear standards regarding the financial soundness of stablecoin issuers and the management of reserve assets will likely enhance user trust.

The Reality of Technical Challenges and Operational Risks

Lessons Learned from the Polygon Network Outage

The PoS network outage that occurred on July 30 highlighted the challenges of operating blockchain technology. The fact that the approximately one-hour outage affected many applications and users demonstrates the reality that even decentralized systems are not completely immune to outages.

Interestingly, the cause of the outage was an emergency fix to the consensus layer. This underscores the need for continuous maintenance and updates in blockchain network operations, as well as the potential for unforeseen issues to arise during this process.

According to Polygon founder Sandeep Nailwal, the actual issue was not a halt in block generation, but rather some RPC providers losing synchronization, which made the network appear to be down from an external perspective. This explanation highlights the complex structure of blockchain networks and the interdependencies between different layers.

The Importance of the Infrastructure Layer

This outage demonstrates that, in operating a blockchain network, not only core technology but also the stability of the infrastructure layer is extremely important. The fact that synchronization issues with the RPC provider affected overall availability suggests that even in decentralized systems, single points of failure can exist.

Mr. Nailwal's summary of the issue as “caused by a lack of coordination with the infrastructure rather than a flaw in the protocol” is an appropriate analysis from a technical perspective. However, for end-users, whether the cause lies at the protocol level or the infrastructure level is irrelevant; the issue is that the service is unavailable.

From this perspective, blockchain projects must prioritize not only technical excellence but also enhancing operational reliability. Especially with the increasing adoption by corporations and institutional investors, maintaining availability of 99.9% or higher is indispensable.

Response to the Outage and Communication

The Polygon team's quick identification of the problem and application of a patch to fix it was commendable. In addition, Mr. Nailwal's apology to users demonstrated a responsible attitude toward project management.

However, there is room for improvement in the disclosure of information during the outage. The confusion of information among stakeholders indicates that there are issues with the communication system in emergencies. Transparent disclosure of information is extremely important for maintaining user trust.

Future blockchain projects must concurrently enhance technical robustness while establishing incident response processes and strengthening information disclosure frameworks. This is less a technical challenge than an issue related to the maturity of project management.

Comprehensive Outlook and Future Challenges

Interaction between Policy, Technology, and Markets

The trends we have seen in each of these areas are by no means independent. There is an interaction between the Trump administration's policy direction, which has a significant impact on the direction of market development, technological advances that give rise to new regulatory issues, and market maturity that deepens the understanding of policymakers.

In particular, U.S. policy trends have a significant impact on the global cryptocurrency market. Policies such as the reporting requirement for overseas accounts and the Bitcoin reserve fund proposal are likely to have ripple effects on policies in other countries. This is because the U.S. has the world's largest financial market and the dollar functions as the reserve currency.

Technologically, as demonstrated by Ethereum's 10-year development, long-term technological development and ecosystem construction ultimately determine success. Meanwhile, the rapid growth of emerging platforms like Base indicates that the pace of technological innovation is accelerating.

Balancing Regulation and Innovation

One of the most important challenges for the future development of the industry is the establishment of an appropriate regulatory framework. Excessive regulation can hinder technological innovation, while inadequate regulation may pose problems for consumer protection and financial system stability.

The Trump administration's decision not to impose reporting requirements on DeFi can be seen as a consideration for technological innovation. However, as DeFi continues to expand, there may be a need for some form of regulatory framework in the future. The key is to understand the characteristics of the technology and find the appropriate balance.

The entry of traditional financial institutions like Visa into the market is a good example of how cryptocurrencies can be utilized in a regulated environment. An approach that complies with existing regulatory frameworks while leveraging the benefits of blockchain technology could serve as a model case for the future.

Improvements in Technical Maturity

As demonstrated by Polygon's outage, blockchain technology is still in its infancy, and operational challenges remain. However, this does not mean that the technology is immature; rather, it shows that continuous improvement is necessary for the operation of complex systems.

Looking at Ethereum's 10-year development process, it is clear that technical challenges are being resolved in stages. What is important is not to hide problems, but to address them with transparency and a commitment to improvement.

Future blockchain projects must focus not only on technical excellence but also on improving operational reliability, user experience, and developer experience. Comprehensive improvements in these areas will likely lead to broader adoption by general users.

Toward the healthy development of the market

As demonstrated by the token issuance boom on Base, the democratization of technology does not necessarily guarantee the healthy development of the market. The reality that 93% of participants are speculative traders highlights the gap between technological innovation and value creation.

However, this is not a problem with the technology itself, but rather a problem related to how it is utilized and the maturity of the market. In the early stages, speculative movements are a natural phenomenon, and over time, truly valuable projects are expected to survive through natural selection.

Products like Solana's stock token xStocks, which combine existing financial products with blockchain technology, offer practical value beyond speculation. By providing functions that were difficult to achieve in traditional financial systems, such as 24/7 trading and cross-border accessibility, they create true added value.

The Significance of Institutional Investor Participation

The entry of major financial institutions such as BlackRock and JP Morgan into Ethereum goes beyond simply expanding investment opportunities. These institutions have strict risk management systems in place, and their participation indicates that cryptocurrency technology has reached a certain level of safety and practicality.

Similarly, Visa's adoption of stablecoin payment processing holds the same significance. The fact that a company operating the world's largest payment network has begun to fully utilize blockchain technology indicates that the technology is becoming mainstream.

These developments demonstrate that cryptocurrencies are transitioning from speculative assets to practical financial infrastructure. This transformation is likely to contribute to enhanced industry-wide reliability and broader adoption.

Geopolitical considerations

U.S. policy trends are likely to influence the direction of international cryptocurrency regulation. In particular, if the Bitcoin reserve proposal is realized, other countries may consider similar policies. This could also lead to intensified geopolitical competition surrounding cryptocurrencies.

On the other hand, international coordination of regulations is also an important issue. Cryptocurrencies are inherently cross-border technologies, and if countries establish disparate regulations, this could hinder technological development and create opportunities for regulatory arbitrage.

Going forward, dialogue and cooperation among policymakers in various countries will be crucial. To promote technological innovation while ensuring the stability of the financial system, international harmonization is indispensable.

Outlook and Recommendations for the Future

Short-Term Outlook (1-2 Years)

In the short term, the most important factor will be the concretization of the US policy framework. The announcement of details regarding the Bitcoin reserve fund proposal and the enactment of legislation regarding overseas account reporting obligations could have a significant impact on the market.

Technologically, improvements in Ethereum's scalability and the maturation of Layer 2 solutions are expected to progress. Additionally, intensified competition from emerging platforms like Base is likely to accelerate improvements in user experience.

In the market, the entry of institutional investors is expected to expand further, solidifying the status of cryptocurrencies as investment products. At the same time, speculative elements are likely to persist, and market volatility is expected to continue for the foreseeable future.

Medium-term outlook (3-5 years)

In the medium term, the practical application of blockchain technology is expected to become more widespread. Solutions that replace conventional systems are likely to become popular in areas such as payment, remittance, and asset management.

In terms of regulation, the establishment of an international coordination framework will progress, and a more unified regulatory environment will be developed. This will facilitate the provision of cross-border services and accelerate the development of a global crypto asset ecosystem.

Technologically, interoperability between different blockchains is expected to improve, leading to the formation of a more integrated ecosystem. Additionally, the adoption of cryptographic technologies adapted to the advancement of quantum computing is also anticipated.

Long-term outlook (5-10 years)

In the long term, blockchain technology is likely to become established as the infrastructure for financial systems. With the spread of central bank digital currencies (CBDCs), digital currencies are likely to become a common means of payment.

Decentralized autonomous organizations (DAOs) and decentralized finance (DeFi) will also mature, potentially bringing about changes to traditional corporate structures and financial systems. However, these changes are expected to occur gradually, and there will likely be a period of coexistence with existing systems.

Furthermore, the realization of concepts such as Web3 and the metaverse may lead to the establishment of new forms of the digital economy. In these fields, cryptocurrencies are expected to play a fundamental role.

Recommendations for industry stakeholders

Recommendations for policymakers: Careful consideration should be given to balancing technological innovation and regulation, taking care not to hinder technological development through excessive regulation. At the same time, consumer protection and ensuring the stability of the financial system are also important issues that need to be addressed. It is also important to promote international coordination to avoid regulatory fragmentation.

Recommendations for Technology Developers:  While pursuing technical excellence, it is important to focus on improving user experience and ensuring operational reliability. It is also important to consider regulatory requirements from the design stage. Transparent development processes and appropriate information disclosure are essential for gaining user trust.

Recommendations for investors: It is important to make investment decisions based on long-term technological development and market maturity, without being swayed by short-term price fluctuations. In addition to the technical superiority of a project, the execution capabilities and regulatory compliance capabilities of the team should also be included in the evaluation criteria. It is wise to thoroughly manage risk and keep investment amounts within acceptable limits.

Recommendations for general users:  It is important to acquire basic knowledge about cryptocurrencies and blockchain technology to protect oneself from fraud and risks. While maintaining interest in new technologies and products, a cautious approach is recommended. Information should be obtained from reliable sources, and calm judgment should be exercised.

Opportunities and Responsibilities in an Era of Transformation

The Social Significance of Technological Innovation

Cryptocurrencies and blockchain technology have the potential to bring about fundamental changes to social systems, going beyond being mere investment targets or objects of technical curiosity. Their potential social benefits, such as promoting financial inclusion, improving transparency, and increasing efficiency by eliminating intermediaries, are immeasurable.

However, to realize these benefits, it is essential not only to address technical challenges but also to establish appropriate regulatory frameworks, promote societal understanding, and ensure responsible development. The cases discussed here illustrate one aspect of this complex transformation process.

The Path to Sustainable Development

As the token issuance boom on Base shows, the democratization of technology does not necessarily lead directly to value creation. However, it is also true that through this process of trial and error, truly valuable use cases are discovered and refined.

What is important is to maintain a long-term perspective without being swayed by short-term turmoil or speculative movements. As the 10-year development of Ethereum demonstrates, sustained technological development and the construction of a robust ecosystem ultimately lead to market trust and widespread adoption.

A New Paradigm of Cooperation and Competition

A proper balance between competition and cooperation is essential for the healthy development of the cryptocurrency industry. While technological competition promotes innovation, cooperation is indispensable for ensuring standardization and interoperability.

Additionally, constructive dialogue between the industry and regulatory authorities is important. As indicated in the Trump administration's report, a deeper understanding among policymakers can lead to the development of more appropriate regulatory frameworks. Industry stakeholders should also actively contribute to this dialogue process.

Conclusion  

Recent developments indicate that the cryptocurrency industry is at a critical turning point. The current situation, where policy clarification, technological maturation, and market development are occurring simultaneously, suggests a transition to the next phase of industry growth.

However, this transformation will not occur automatically. It can only be realized through the collaborative efforts of policymakers, technologists, investors, and general users, each understanding their respective roles and responsibilities. The developments over the next few years will determine whether cryptocurrency and blockchain technology will establish themselves as technologies that truly contribute to society.

To maximize the benefits of technological innovation while minimizing risks, continuous learning, adaptation, and responsible action are essential. If this challenge is met, the cryptocurrency industry has the potential to make a significant contribution to the development of humanity's socio-economic systems.

Disclaimer
This article is for informational purposes only and is not intended as investment advice. Cryptocurrencies are high-risk investments, so please check the latest information at your own risk.