Key takeaways
- Bitcoin has soared this year, boosted by the approval of spot Bitcoin ETFs and the Bitcoin halving, as well as optimism surrounding the election of Donald Trump as president of the United States.
- In 2025, attention will turn to the Trump administration’s attempts to clarify regulation of the crypto sector.
- Some analysts believe bitcoin could reach $200,000 by the end of next year amid growing demand from institutional investors, although history suggests the market may be due for a correction.
- There is no clear indication whether Bitcoin’s recent rally will spill over to altcoins.
The cryptocurrency market has had an extraordinary year and market participants are optimistic about the outlook for 2025 as a new administration takes over in Washington DC, although many uncertainties remain.
Bitcoin (BTCUSD) rallied earlier this year amid explosive demand from recently launched Bitcoin spot exchange-traded funds (ETFs). Shortly after, the bitcoin halving, which slowed the rate at which new bitcoins were created, created an imbalance between supply and demand that caused prices to rise further.
The election of Donald Trump, along with several crypto-friendly lawmakers, has given bitcoin new momentum in recent weeks, helping the digital currency cross the $100,000 mark for the first time.
Here’s what market participants will be paying attention to in the coming year.
What could Trump mean for crypto regulation?
One of the biggest concerns in the crypto market in recent years has been the lack of clarity around the regulation and enforcement approach of the United States Securities and Exchange Commission (SEC).
During the election campaign, Trump made a number of promises to the bitcoin and crypto industries, including that he would fire SEC Chairman Gary Gensler on his first day in office and establish a “stock National Strategic Bitcoin”. Gensler decided to resign, and Trump offered crypto advocate Paul Atkins to lead the agency.
Even as markets wait for clearer regulation, there is no guarantee they will get what they want or when.
“Trump’s stance on (decentralized finance (DeFi)) and crypto has been somewhat inconsistent,” Sarah Brennan, general counsel at Delphi Ventures, told Investopedia. “While he has expressed interest in this sector, much of his focus appears to be limited to supporting dollar dominance and real estate applications.” The Bitcoin Dominance Index measures Bitcoin’s share of the overall crypto market valuation and has recently reached new highs.
According to Castle Island Ventures partner Nic Carter, the legislative focus will first be on passing stablecoin legislation. Next, the focus will be on the Crypto Market Structure Bill, which would clarify which crypto assets are commodities and which are securities.
Bitcoin Price Predictions and Driving Factors
Analysts at Bitwise expect bitcoin to reach $200,000 by the end of 2025, while those at VanEck peg it at $180,000.
Such bitcoin price predictions have been made several times in the past, but they seemed too ambitious. With bitcoin surpassing $100,000, this may not seem so far-fetched now.
There are only 21 million bitcoins that can be created, and 19.79 million of them are already in circulation. Although the supply of Bitcoin is limited, demand has increased.
There is growing demand for Bitcoin from institutional investors, including ETF sponsors, corporations and nation states. Spot Bitcoin ETFs have seen investors invest $36 billion. MicroStrategy (MSTR), the leading public company with bitcoin on its books, held 444,262, worth approximately $42 billion, as of December 23.
Historically, bitcoin – and by extension the entire crypto market – rises and falls in accordance with the four-year bitcoin halving cycle. If this cycle were to continue, crypto markets would see a correction in 2025. But the presence of large institutional investors could limit any slowdown.
Bitcoin is in a “supercycle,” according to economist and founder of Asgard Markets Alex Kruger, which means “recurring corrections of 20-40%” instead of “85% declines.”
The Federal Reserve could also crash the Bitcoin party. The central bank recently lowered its expectations for interest rate cuts in 2025, which weighed on bitcoin prices. If the Fed slows its rate cuts, Treasury yields could remain high, making them more attractive to investors compared to riskier assets such as bitcoin.
Will the Bitcoin rally spill over into Altcoins?
Financial institutions are already taking steps to adopt a potentially friendlier regulatory environment by submitting applications for ETFs linked to additional crypto assets, such as XRP (XRPUSD), going beyond those previously approved for bitcoin and ether.
But it remains unclear whether altcoins, or non-bitcoin cryptocurrencies, will join the bitcoin party.
The Bitcoin Dominance Index, which measures Bitcoin’s share of the overall crypto market, recently reached new highs for this crypto cycle.
“Historically, Bitcoin’s dominance has been cyclical,” Seth Ginns, CoinFund managing partner and head of liquid investments, told Investopedia. “We expect a shift to alts once bitcoin significantly exceeds its all-time high, as happened during the last cycle.”
