Bitcoin (BTC) has passed $100 000 - what's next?
Bitcoin (BTC) updated ATH after the victory in the election race for U.S. President Donald Trump, who is known for his loyal attitude to cryptocurrencies.
This is the third time that the price of the cryptocurrency Bitcoin has risen after the U.S. presidential election and then updated ATH. Already in December, the Bitcoin exchange rate reached its all-time high and crossed $100,000, which was one of the most critical events in the crypto industry's history. It remains to be seen what will happen next: a continuation of the bull run or a correction? Experts' opinions differ, and several important factors need to be considered.
What factors may affect the further movement of the Bitcoin exchange rate?
The U.S. presidential election has already been mentioned, but other factors can affect the crypto market even more than the election race results.
Fed Funds Rate
One of the most decisive factors, which has repeatedly demonstrated its influence on the entire crypto market, is the key rate of the Fed (Federal Reserve System of the United States).
As a rule, investors find conservative instruments such as bank deposits or loans more profitable when the rate increases. They are more willing to eliminate high-risk and highly volatile assets such as bitcoin or stocks on the stock market. Experts have long noticed that the correlation between bitcoin and stock indices such as the S&P 500 and Nasdaq Composite has become very high.
As the Fed's key rate increases, the yields of conservative instruments rise, and vice versa when it decreases. Therefore, investors become willing to take more risk if the Fed lowers key rates.
For example, in October 2024, the Fed lowered interest rates by 0.5 percentage points — to 4.75%-5% per annum, and by the end of the month, the bitcoin rate rose to almost $70,000. In case of further reduction of the key Fed rate, the positive dynamics of the BTC price may continue, but if it is maintained or increased, it may not.
According to analysts, fresh U.S. inflation data for November may point to further reduction of the key Fed rate. Investors expect the central bank to cut borrowing costs by a quarter, while experts believe the Fed will cut interest rates by 25 basis points.
Limitation of issue or deficit of asset on the market
Another factor analysts call the ever-increasing shortage of cryptocurrency. First, the maximum number of bitcoins is limited to 21 million, of which 19.79 million have already been mined, and the issuance rate is also decreasing over time. At the same time, the number of BTC will still decrease due to losses. For example, according to BBC, in 2024, 4 million bitcoins have been lost irretrievably, which is as much as 19% of the possible number of BTC.
Secondly, the demand for the first cryptocurrency continues growing, stimulating the bitcoin exchange rate. The stronger the demand exceeds the supply on the market, the stronger the growth of this or that asset.
This can also include factors such as liquidity. If liquidity is sufficient or if it grows, according to well-known trader Vladimir Cohen, in the next six months (as of December 2024), the value of BTC could rise to $200,000 — $250,000. However, Cohen does not deny the possibility of a correction and a decline in the bitcoin rate to $85,000 — $90,000.
Infrastructure development
No matter how popular cryptocurrencies are, the world is still dominated by the traditional financial system, to which digital assets still have a long way to go. Therefore, the pace at which the blockchain infrastructure develops plays a significant role.
Judging by recent developments, the momentum remains positive: the world's leading investment company, BlackRock, which manages over $10 trillion in assets, already emphasizes Bitcoin over traditional assets. What is, therefore, important is how large companies integrate with blockchain environments such as decentralized finance (DeFi), for example.
For example, the same BlackRock launched its own tokenized treasury fund, BlackRock BUILD, in March 2024. This fund aims to develop one of 2024's leading RWAs and tokenize real-world assets. These steps will contribute to the development of the crypto market in the future.
News
However, unforeseen factors that cannot be predicted in advance can also influence the market. These include news, which can be both positive for the crypto market and negative. For example, few people, except for a small group of insiders, assumed that:
- May 2022 will see the collapse of the Terra blockchain ecosystem;
- In June, one of the largest cryptocurrency lending companies, Celsius Network, will freeze trading and withdrawals from its platform due to "extreme market conditions" and declare bankruptcy as early as July;
- Tesla will sell 75% of its Bitcoin inventory at a loss in July;
- In November of the same year, one of the three most significant crypto exchanges, FTX, went bankrupt;
- In June 2024, the German government will sell thousands of bitcoins confiscated from the previously seized Silk Road platform;
- In August of the same year, the bankrupt cryptocurrency exchange Mt. Gox will start paying its affected investors.
Depending on the scale of each, such an event can affect the entire crypto market to a greater or lesser extent.
Decline or growth of Bitcoin?
Without negative factors, the value of Bitcoin can probably continue its growth. However, do not forget that a correction accompanies every upward movement, as investors occasionally take profits.
However, the BTC exchange rate can repeatedly update its historical highs in the long term. For example, in its report, Bitwise's significant investment company, which launched its own Bitcoin-ETF, predicts the price will rise to $200,000 or more in 2025.
Fundstrat co-founder Tom Lee said on CNBC that bitcoin quotes could soar to $250,000, and according to Cardano creator Charles Hoskinson, the price of the first cryptocurrency could reach a value in the range of $250,000 to $500,000.
Some analysts make even bolder predictions: for example, Matt Hougan, head of investment at the previously mentioned Bitwise, and Ryan Rasmussen, head of research, believe that Bitcoin could rise to $500,000 by the end of 2025.
In his study based on data from the last three bull cycles (bull runs) in the crypto market, renowned Bitcoin mining analyst Danny Marquez said that if macroeconomic indicators worsen, Bitcoin's price could rise from $174,000 to $461,000 in 2025.
Most analysts suggest that 2025 will be a bullish year for cryptocurrencies. But some doubt this. For example, according to Ryne Lee, a leading analyst at Bitget Research, the value of Bitcoin in 2025 could drop to $90,000.
In any case, it is always worth remembering that any investment involves the risk of losing money, and negative scenarios cannot be excluded, which are not always possible to foresee.