Alice Morgan Photo Illustration by Investopedia
The Key Takeaways
- Bitcoin’s price has surged in this year. It was boosted by approval of ETFs for spot bitcoins and the bitcoin-halving event as well as the optimism that surrounded Donald Trump being elected as U.S. presidential candidate.
- In 2025, attention will turn to the Trump administration's attempts to provide regulatory clarity for the crypto industry.
- Analysts predict bitcoin’s price could reach $200 000 by the end next year. The demand for the cryptocurrency is increasing from institutions, but history shows that the market might be overdue for a corrective move.
- The recent rise in Bitcoin is unlikely to spillover into altcoins.
Although there are still many uncertainties, the cryptocurrency market had a remarkable year. Participants in the market remain hopeful about 2025 when a brand new administration is installed in Washington D.C.
Bitcoin (BTCUSD), a cryptocurrency, rallied at the beginning of this year on the back of exploding demand generated by newly released spot bitcoin exchange traded funds (ETFs). A bitcoin halving that slowed down the creation of new bitcoins created an imbalance in demand and supply, sending prices even higher.
Bitcoin’s price has risen to $100,000 for the first-time in the last few weeks thanks to the recent election of Donald Trump as well as the support from several lawmakers who are crypto-friendly.
Watch out for these trends in 2019.
What Trump could mean for Crypto Regulation
In recent years, the U.S. Securities and Exchange Commission has taken a more aggressive enforcement approach in enforcing regulations and regulating the crypto markets.
On the campaign trail, Trump made a number of promises to the bitcoin and crypto industries, including that he would fire SEC Chair Gary Gensler on day one of his administration and establish a ‘Strategic National Bitcoin Stockpile.’ Gensler resigned and Trump suggested crypto-advocate Paul Atkins as the new head of the agency.
While markets wait for regulatory clarity there’s no guarantee that they will receive what they desire or when.
“Trump’s stance on [decentralized finance (DeFi)] and crypto has been somewhat inconsistent,” Delphi Ventures General Counsel Sarah Brennan told Investopedia. “While he has expressed interest in the space, much of his focus seems limited to supporting dollar dominance and real estate applications.” Bitcoin Dominance Index recently reached new highs.
Nic Carter of Castle Island Ventures says that first, the focus on legislation will be getting stablecoins passed. Next, it will focus on the Crypto Market Structure Bill, which would clarify what crypto assets are commodities, and which ones are securities.
Bitcoin price predictions and driving factors
VanEck analysts estimate bitcoin at $180,000, while Bitwise predicts it will hit $200,000 in 2025.
In the past, such predictions about bitcoin’s price were made but they seemed unrealistic. Now that bitcoin has surpassed $100,000, these predictions may no longer seem as farfetched.
The total number of bitcoins available is 21,000,000. Of these, 19.79 million are in circulation. Demand for bitcoin has increased despite the fact that its supply is limited.
There is growing demand for bitcoin from institutional investors that include ETF promoters, corporations and nation-states. Investors have poured in more than $36 billion into spot bitcoin ETFs. MicroStrategy MSTR, a leader in public companies that hold bitcoins on their books, owned 444,262 valued at approximately $42 Billion as of December 23, 2012.
Historically, bitcoin—and by extension the entire crypto market—rises and falls in line with the four-year bitcoin halving cycle. The crypto market would have to experience a correction by 2025 if this cycle held. However, the large number of institutional investors present could help to limit any decline.
Bitcoin has become a mainstream currency “supercycle,” According to Asgard Markets’ founder and economist Alex Kruger “recurrent 20%-40% corrections” Instead of “85% drawdowns.”
Federal Reserve may also ruin bitcoin’s celebration. Recently, the Federal Reserve lowered its expectation for interest rates to be cut in 2025. This weighed down on bitcoin’s price. Treasury yields will remain high as the Fed reduces its rate reductions. This could make these assets more appealing to investors than riskier investments such as bitcoin.
What will happen if the Bitcoin rally spills over to altcoins?
Financial institutions, beyond those previously approved by the SEC for Bitcoin and Ether, are now submitting ETF applications related to other crypto assets such as XRP.
It is still unclear whether altcoins (cryptocurrencies other than bitcoin) will be joining the party.
Recent highs have been reached by the Bitcoin Dominance Index which measures Bitcoin’s share of all crypto markets.
"Historically bitcoin dominance has been cyclical," CoinFund Managing Partner and Head of Liquid Investments Seth Ginns told Investopedia. "We’d expect a handoff to alts once bitcoin gets meaningfully above its all-time high, as happened in the last cycle."
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