The re-election of Donald Trump as president of the United States has sparked a Bitcoin rally, and its supporters are optimistic about 2025. However, given the high volatility of cryptocurrencies, a short but severe sell-off could still be on the cards.
Bitcoin’s value has surged about 125% since early January, hovering around the $100,000 mark in the final weeks of the year. With the big rally of 2024, the “crypto winter” of 2021 and 2022 now seems like a distant memory. This period marked a major crisis for cryptocurrencies; the value of bitcoin fell 75% over 12 months, falling below $20,000.
The History of Bitcoin Extremes
Such a turnaround is impressive, but John Plassard, senior investment specialist at the Mirabaud group, has reservations. “Bitcoin’s unprecedented rise reflects a mix of increased legitimacy and growing demand,” he explains. “But history urges caution, as Bitcoin’s price trajectory has been marked by sharp corrections after periods of exponential growth.”
Cryptocurrency prices can fluctuate significantly over short periods of time, depending on 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 the history and dynamics of Bitcoin prices: “These downward adjustments, typically between 20% and 40%, serve as a vital mechanism for restoring market balance and are an integral part of the market. historical Bitcoin price patterns.
Dovile Silenskyte, director of digital assets research at WisdomTree, agrees. “Investors should approach Bitcoin knowing that volatility is an inherent characteristic,” she says. “This means preparing for potentially substantial price corrections and declines in value, regardless of current price or market conditions. Investors should also recognize that volatility can work both ways. While this presents the possibility of substantial upside gains, it also involves the risk of significant losses.
Opportunities and risks in 2025
Given their volatility, predicting cryptocurrency prices is very risky. “In 2025, the future of bitcoin looks promising but uncertain,” believes Plassard. “Bitcoin’s growing integration into traditional finance via spot ETFs and institutional adoption suggests it could solidify its position as a legitimate asset class.”
However, Bitcoin’s performance will depend on macroeconomic factors, market liquidity, and the regulatory policies of the new Trump administration. “If the current trajectory continues, bitcoin could see further growth, although volatility and market corrections will likely remain part of the story,” Plassard said.
Among possible positive factors for bitcoin in 2025, Silenskyte also cites continued inflationary pressures and monetary policy uncertainty as driving interest in bitcoin as a “store of value.”
Cheaper money could be heading to crypto
Fritz says that as monetary policy eases in 2025, “increased liquidity in the financial system could also flow into digital assets, potentially increasing demand for bitcoin.” He counters by emphasizing that the escalation of geopolitical conflicts, particularly in the Middle East, could considerably dampen investors’ appetite for high-risk assets. “Economic uncertainty and resulting market instability often push investors toward safer, more traditional assets, potentially triggering a sell-off,” he explains.
Fritz also warns that any pro-cryptocurrency policies from the White House could be implemented more slowly than expected. This “could lead to market disappointment and a price correction as many investors bet that the Trump administration will reverse the trend in the treatment of cryptocurrencies in the United States.”
Trump pushes pro-crypto regulations
The Trump administration is expected to play an important role as Bitcoin enthusiasts expect much more favorable regulation of cryptocurrencies. Trump has promised to make the United States the new “bitcoin hub” and he is offering senior positions at the Commerce Department, Treasury and more to figures seen as very supportive of the crypto industry. Gary Gensler, current chairman of the Securities and Exchange Commission – historically opposed to the crypto world and a proponent of much stricter regulation – will resign on January 20, 2025. Trump nominated Paul Atkins, who has advocated cryptocurrencies for years , to the post of president. replace it.
There are concrete plans to create advisory boards specializing in digital assets and appoint a “crypto czar” to advise and regulate the sector. Ripple CEO Brad Garlinghouse is in discussions for this role. “These measures suggest a possible streamlining of regulatory processes and greater integration of digital assets into traditional financial systems, potentially fostering innovation and growth,” comments Fritz.
Bitcoin as an asset
Bitcoin has become a financial asset class in its own right over the past few years. Its market capitalization of $2.03 trillion places it among the world’s largest assets, and the approval of spot ETFs in the United States in January 2024 has bridged the gap between crypto and traditional finance.
“These instruments will continue to contribute to increasing demand in the United States as more private banks, hedge funds and government pension funds add bitcoin to their portfolios, as evidenced by deposits 13F from the SEC over the last three quarters,” Fritz said.
Plassard adds that major asset managers such as BlackRock BLK and Fidelity FNF entering the space have “further legitimized bitcoin as a portfolio asset.”
Silenskyte says 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: “More and more people are starting to recognize that no allocation to bitcoin represents an active underweight, rather than a neutral position. »
