Will Bitcoin Experience a Downturn by 2025?
Cryptocurrency, specifically Bitcoin (BTC), is back in the limelight again. Despite controversies, Bitcoin's popularity is surging once more, following a significant price surge in 2024. With an impressive 140% increase in value year-to-date (YTD), Bitcoin has smashed through the $100,000 mark. Companies such as MicroStrategy are stockpiling Bitcoin for their accounts, and even the incoming Trump administration is considering setting up a Bitcoin strategic reserve.
The Bitcoin hype is at an all-time high. Shrewd investors are wary, remembering that in 2013, 2017, and 2021, optimism around Bitcoin often preceded a dramatic price drop. Is Bitcoin about to plummet again in 2025? Let's delve deeper into Bitcoin's standing as we approach the end of 2024, and determine whether it should make a place in your investment portfolio.
Bitcoin's extraordinary climb in 2024
This dizzying rise of Bitcoin in 2024 can be broken down into two primary factors. Initially, we have the authorization of Bitcoin and cryptocurrency exchange-traded funds (ETFs) in January. Bitcoin ETFs have bought billions of dollars worth of Bitcoin for their clients this year, demonstrating the high demand for these products in the financial world. If you add MicroStrategy's Bitcoin acquisitions this year, a staggering 700,000 Bitcoins have already made their way into institutional portfolios in 2024. That's approximately 3.3% of the total 21 million Bitcoins that will ever exist.
Following the approval of Bitcoin ETFs, Bitcoin's price shot up beyond $60,000. It hovered around this level until the US presidential election a month ago. With Trump's re-election, Bitcoin's price gained even more support. The new administration has discussed establishing a Bitcoin Strategic Reserve, implying that the US government would buy and hoard a substantial amount of Bitcoin. Although I can't condone the use of tax dollars in this manner, this reserve should bolster Bitcoin's price. Since the election, Bitcoin's price has soared by around 50% and now stands at roughly $106,000 as we speak.
Interestingly, Bitcoin is not an asset with inherent earnings potential. Given its fixed supply of digital tokens, Bitcoin's value can only rise if more and more people come to believe that they should own it. With institutional funding and political pledges fueling the fire, it's no wonder that Bitcoin's price has exploded through the $100,000 barrier in late 2024.
Price forecasts and gold comparisons
Bitcoin price predictions range wildly. Some believe it will reach $1 million or even $13 million per coin, while others see it as worthless. What's consistent in these predictions is the wealth-creating bias. MicroStrategy CEO Michael Saylor, for example, expects a $13 million Bitcoin price.
Some view Bitcoin as digital gold, predicting it will eventually overtake gold as the dominant store of value in the market. Currently, gold has an estimated market cap of approximately $18 trillion. If we use Bitcoin's 21 million coin count, an $18 trillion market cap for Bitcoin would translate to a Bitcoin price of $857,000, nearly 8 times the current price. This might bolster investors' enthusiasm for the cryptocurrency.
Uncertainty is the only certainty
Bitcoin-related discussions are endless and often tiring. The unvarnished truth is that nobody can reliably predict whether Bitcoin will sink, stagnate, or soar in 2025. Pretending to have certainty about Bitcoin's price movements is misleading, even if they end up being correct. Anyone can project with confidence, just as I could claim a dice will land on six before you roll it with a one in six chance. But that doesn't inspire confidence in the odds of the dice roll.
Invest in Bitcoin if you are bullish on its long-term thesis as digital gold, currency adoption, or any other perspective. But don't bet on Bitcoin's price swinging up or down in 2025 based on the false certainty that it will. The only absolute certainty in the world of cryptocurrency and Bitcoin is uncertainty.
- Given the surge in Bitcoin's price, many individuals are now considering investing in Bitcoin ETFs, hoping to replicate the success seen this year in the finance world.
- As a result of Bitcoin's impressive rise, some financial analysts are comparing its potential market cap with that of gold, suggesting that if Bitcoin were to surpass gold, its price could reach up to $857,000 per coin.
