Important points
Cryptocurrency markets have had an unusual year, and while a new administration in Washington, D.C. has made market participants more optimistic about the outlook for 2025, much uncertainty remains.
Bitcoin (BTCUSD) rose at the beginning of the year on the back of explosive demand from the newly launched Spot Bitcoin exchange-traded fund (ETF). Shortly after, the Bitcoin halving slowed down the pace at which new Bitcoins were created, creating an imbalance between supply and demand and pushing the price even higher.
The election of Donald Trump and several pro-crypto politicians has pushed Bitcoin further higher in recent weeks, helping it breach the $100,000 price mark for the first time.
Here’s what market participants are watching over the coming year:
What does President Trump mean for virtual currency regulation?
One of the biggest concerns in the cryptocurrency market in recent years has been the lack of clarity regarding regulation and the U.S. Securities and Exchange Commission’s (SEC) enforcement approach.
During his campaign, Trump made a number of promises to the Bitcoin and cryptocurrency industries, including firing SEC Chairman Gary Gensler on his first day in office and establishing a “Strategic National Bitcoin Reserve.” . Mr. Gensler decided to resign, and Mr. Trump nominated crypto advocate Paul Atkins to take over.
Even as the market waits for regulatory clarity, there is no guarantee that you will get what you want and when.
“Trump’s stance on[decentralized finance (DeFi)]and cryptocurrencies has been somewhat inconsistent,” Sara Brennan, general counsel at Delphi Ventures, told Investopedia. “Although he has expressed interest in this area, much of his focus appears to be limited to support for dollar dominance and real estate applications.” The Bitcoin Dominance Index is based on the overall crypto market valuation. It measures the share of Bitcoin in Japan, and recently reached a new high.
Nick Carter, a partner at Castle Island Ventures, said the legislative focus is first on getting the stablecoin bill passed. The focus will then turn to the Crypto Market Structure Bill, which will clarify which crypto assets are products and which are securities.
Bitcoin price predictions and drivers
Bitwise analysts expect Bitcoin to reach $200,000 by the end of 2025, while VanEck analysts expect Bitcoin to reach $180,000.
Such predictions for Bitcoin price have been made many times in the past, but they seemed too ambitious. These might not seem all that far-fetched now that Bitcoin has soared above $100,000.
Only 21 million Bitcoins will ever be created, of which 19.79 million are already in circulation. The supply of Bitcoin is finite, but the demand for Bitcoin is increasing.
Demand for Bitcoin is increasing from institutional investors, including ETF promoters, corporations, and nation-states. Investors poured $36 billion into the Spot Bitcoin ETF. MicroStrategy (MSTR), the leading publicly traded company with Bitcoin on its books, held 444,262 Bitcoins, worth approximately $42 billion, as of December 23.
Historically, Bitcoin, and by extension the entire cryptocurrency market, rises and falls in line with four-year Bitcoin halving cycles. If this cycle can be maintained, the cryptocurrency market will undergo a correction in 2025. However, the presence of large institutional investors could limit the decline.
According to economist and Asgard Markets founder Alex Krueger, Bitcoin is in a “supercycle,” which means “repeated corrections of 20% to 40%,” rather than “85% drawdowns.” ” means.
The Fed could also destroy the Bitcoin movement. The central bank recently scaled back its expectations for a rate cut in 2025, weighing on Bitcoin prices. If the Fed slows its pace of rate cuts, yields on U.S. Treasuries could remain high, making them more attractive to investors compared to riskier assets like Bitcoin.
Will the rise in Bitcoin have a ripple effect on altcoins?
Financial institutions are already moving beyond the previously approved Bitcoin and Ether boundaries by submitting applications for ETFs related to additional crypto assets such as XRP (XRPUSD), potentially making for more friendly regulations. We are taking steps to embrace the environment.
However, it remains unclear whether altcoins or cryptocurrencies other than Bitcoin will join Bitcoin’s family.
The Bitcoin Dominance Index, which measures Bitcoin’s share of the overall crypto market, recently hit a new high this crypto cycle.
“Historically, Bitcoin’s dominance has been cyclical,” Seth Gins, managing partner and head of liquid investments at Coinfund, told Investopedia. “If Bitcoin breaks significantly above all-time highs, as happened last cycle, we can expect a handoff to alternatives.”
