In the period from November 4 to November 22, Bitcoin (BTC 1.57%) soared from $67,000 to a price above $99,000. Pro-crypto optimism was off-the-charts, investors were euphoric about Bitcoin's future growth potential, and a final climb over the $100,000 mark seemed like a no-brainer. But the past few days have seen an unexpected retreat, with the price of Bitcoin now hovering around $93,000.
So, is the party over for Bitcoin? While there's certainly a case to be made that Bitcoin might have gone up too far, too fast, I think there's still plenty of upside potential as we head into 2025. Here's why.
The psychology of Bitcoin
You don't need to be an economist to understand Bitcoin. It would help more if you were a psychologist. That's because market sentiment is such a major factor in how investors perceive Bitcoin. The crypto Fear and Greed Index is useful for tracking this sentiment. It shows that even experienced crypto investors can oscillate between fearful and greedy on a daily, if not hourly, basis.
CRYPTO: BTC
Key Data Points
Right now, all anyone can focus on is the psychologically important $100,000 price level. Almost everyone expected a certain amount of profit-taking as soon as Bitcoin hit that level, and now it appears that some investors got started a little bit early. After all, Bitcoin had been on an absolute rocket ship after the election -- up more than 40% at one point -- and a pullback of some kind was almost inevitable.
In addition to being the sort of nice, round number that gets plenty of eyeballs and clicks, a price of $100,000 is important for another reason: it would make Bitcoin a $2 trillion asset. Only a handful of publicly traded stocks have ever hit a $2 trillion valuation, so Bitcoin would be a very select company. It recently passed Meta Platforms in market cap and is now on the way to passing Alphabet, too.
Image source: Getty Images.
So, it's easy to understand why investors might be taking a time-out right now when it comes to Bitcoin. Is Bitcoin really worth more than Silicon Valley's top tech companies? Indeed, a lot of investors are talking about the need to take a breather and figure out how much Bitcoin should really be worth.
Key catalysts for Bitcoin
Heading into 2025, there are at least three different catalysts that could push Bitcoin higher. The first of these is the continued inflow of new money into the spot Bitcoin ETFs. The amount of new money these ETFs have been able to attract is nothing short of astounding.
The iShares Bitcoin Trust (IBIT +1.59%), for example, just passed $40 billion in assets under management. By comparison, that's more than the iShares Gold Trust has been able to attract in nearly 20 years!
Another key catalyst is the ability to get some movement on the pro-crypto promises that incoming president Donald Trump made on the campaign trail. One of those promises -- remove SEC head Gary Gensler from his post on day one -- is already in motion, with Gensler publicly announcing that he would step down in January.
But what about the promise to get some pro-crypto legislation on the books? Or the even bigger promise to create a strategic Bitcoin reserve? Movement on either one of those fronts would be huge for Bitcoin. The creation of a strategic Bitcoin reserve, for example, would result in the U.S. government committing to the purchase of 1 million Bitcoins over a five-year period. That would contribute significant upward buying pressure for Bitcoin.
"Straight Bitcoin"
So, no, I don't think Bitcoin's post-election rally is over. Not by any means. Bitcoin could easily hit the psychologically important $100,000 mark by the end of the year. And from there, it would be off to the races. The next major date to put on your calendar would then be January 20, which is Inauguration Day. That's when Trump's pro-crypto agenda could take effect.
It's really just a question of how you want to get your exposure to Bitcoin. According to billionaire investor Mike Novogratz, CEO of Galaxy Digital, the best way to get your exposure is "straight Bitcoin." In other words, you can buy Bitcoin directly in the spot cryptocurrency exchange, or via a spot Bitcoin ETF. Now is no time to get cute by investing in Bitcoin proxy stocks such as MicroStrategy, Coinbase Global, or any of the big Bitcoin mining stocks.
As we get closer to the end of the year, I fully expect Bitcoin to go on another heater. But be forewarned: Bitcoin rarely goes straight up. Based on its track record of high volatility, getting past the $100,000 price barrier is sure to encounter significant turbulence. So, buckle up and enjoy the ride.
