Anticipating Bitcoin’s Trajectory in 2025

Trump’s re-election has sparked a rally in bitcoin and advocates are upbeat about 2025. We look at the likely price drivers for the main cryptocurrency coin next year, the role that asset managers will play in bringing it into the mainstream and likely changes in the regulatory landscape.

The “crypto winter” of 2021 and 2022 now seems a distant memory. That was a major crisis for cryptocurrencies, and one in which the bitcoin price slumped below $20,000, losing 75% over 12 months.

Such a turnaround is impressive, but the history of bitcoin is one of extreme highs and lows, says John Plassard, senior investment specialist at Mirabaud Group: “Bitcoin’s unprecedented rise reflects a blend of increased legitimacy and growing demand, but history suggests caution as bitcoin’s price trajectory has been marked by sharp corrections following periods of exponential growth.”

Cryptocurrencies are known for their high volatility. Prices can fluctuate significantly in short periods, induced by factors such as market sentiment and risk appetite, regulatory news, technological developments, and macroeconomic trends.

Indeed, Adrian Fritz, head of research at 21Shares, says that corrections are part of bitcoin’s history and vital for the price dynamic.

“These downward adjustments, typically ranging from 20% to 40%, serve as a vital mechanism for reestablishing market equilibrium and are an integral part of bitcoin’s historical price patterns”.

Dovile Silenskyte, director of digital assets research at WisdomTree agrees.

“Investors should approach investing in bitcoin with the understanding that volatility is an inherent characteristic. This means being prepared for price corrections and potentially substantial declines in value, regardless of the current price or market conditions.

“Investors should also recognize that volatility can work in both directions: while it presents the possibility of substantial upside gains, it equally entails the risk of significant losses.”

Bitcoin: Opportunities And Risks in 2025

Making predictions about the price of cryptocurrencies is a very risky exercise. “In 2025, bitcoin’s future looks promising yet uncertain,” says John Plassard.

“The growing integration of bitcoin into mainstream finance through spot ETFs and institutional adoption suggests it could consolidate its position as a legitimate asset class,” he says.

However, its performance will depend on macroeconomic factors, market liquidity, and regulatory policies under the Trump administration.

“If the current trajectory continues, Bitcoin could see further growth, though volatility and market corrections are likely to remain part of the narrative,” he adds.

Among the possible positive drivers for bitcoin in 2025, WisdomTree’s Silenskyte also cites persistent inflationary pressures and monetary policy uncertainty as spurring interest in bitcoin as a “store of value”.

Cheaper Money Could Head to Crypto

Adrian Fritz says that as monetary policy eases in 2025, “increased liquidity in the financial system could also flow into digital assets, potentially driving up demand for bitcoin.”

Fritz counters by highlighting that escalating geopolitical conflicts, particularly in the Middle East, could significantly dampen investors’ appetite for high-risk assets.

“The resulting economic uncertainty and market instability often push investors toward safer, more traditional assets, potentially triggering a sell-off,” explains the 21Shares head of research.

He also warns about the possibility of slower-than-expected implementation of pro-cryptocurrency policies by the White House.

This “could lead to market disappointment and a price correction as many investors bet that the Trump administration will turn the tide of cryptocurrency processing in the United States”.

Trump Pushes Pro-Crypto Regulation

Indeed, the Trump administration is expected to play a significant role, as bitcoiners anticipate much more favorable regulation toward cryptocurrencies. Gary Gensler, current chairman of the Securities and Exchange Commission (SEC) – historically averse to the crypto world and a proponent of much stricter regulation – will step down on Jan. 20, 2025. In his place, Donald Trump nominated Paul Atkins, who has been an advocate of cryptocurrencies for years.

Trump has promised to make the United States the new “bitcoin hub”, and the US press speculates about names for leadership roles in the Department of Commerce, Treasury, and the SEC that are very supportive of the crypto industry.

There are concrete plans for the establishment of advisory councils specializing in digital assets and also for the appointment of a “crypto tsar” who would be tasked with advising and regulating the industry. Ripple CEO Brad Garlinghouse is being discussed for this role.

“These moves suggest a possible streamlining of regulatory processes and greater integration of digital assets into traditional financial systems, potentially fostering innovation and growth,” Fritz comments.

Not Buying Bitcoin is Asset Allocation

Bitcoin has evolved into a full-fledged financial asset class over the last few years. Its market capitalization of USD2.03 trillion (£1.57 trillion) places it among the world’s largest assets, and the approval of spot ETFs in January 2024 in the US* has bridged the gap between crypto and traditional finance.

“These instruments will continue to contribute to increased demand in the US as more private banks, hedge funds, and government pension funds add BTC to their portfolios, as evidenced by the SEC’s 13F filings over the past three quarters,” Adrian Fritz adds.

Mirabaud’s Plassard adds that the entry of major asset managers such as BlackRock and Fidelity has “further legitimized bitcoin as a portfolio asset”.

WisdomTree’s Dovile Silenskyte also says that institutional investors are increasingly recognizing the value of allocating a small percentage of their multi-asset portfolios to bitcoin. Conversations with institutional investors are evolving, she says.

“More and more are beginning to recognize that no allocation in bitcoin represents an active underweighting, rather than a neutral position”.

The author or authors do own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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