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2025 is predicted to be an interesting year for the crypto market, especially Bitcoin. This article will look at the crypto market and macro narrative in 2025, considering various factors, from Bitcoin’s cyclical patterns to global liquidity and potential risks.
- 📈 Bitcoin has significant room for growth, with a current market cap of only 11% of the combined market cap of major technology companies. Bitcoin price predictions could reach $150,000 – $200,000 before the RSI reaches 90, supported by historical cyclical patterns and increased liquidity.
- 🌐 Monetary policies from central banks such as the Fed and PBOC play an important role in supporting the Bitcoin market. The expansion of global liquidity and growth in global M2 money supply creates a conducive environment for crypto assets to thrive.
- 💱 Stablecoins such as USDT and USDC are becoming major pairs for altcoin trading, providing the liquidity needed in the crypto market. The expected growth of stablecoins to surpass $200-250 billion will drive new speculation and increase the price of crypto assets.
- ⚠️ While the outlook for Bitcoin is bright, risks include liquidity withdrawal by central banks, bond volatility, global economic downturn, and strict regulation. Investors must be vigilant and adjust their investment strategies according to market developments.
Table of Contents
Bitcoin Cycle, Volatility, and Growth Potential: The Road to 2025 Price Predictions
The Bitcoin cycle is closely related to the halving event, which occurs every four years. Halving halves the rewards for Bitcoin miners, potentially driving up the price due to reduced supply. Historically, halving has always been followed by a significant increase in Bitcoin price. Based on historical data, Bitcoin bull markets usually peak when the monthly Relative Strength Index (RSI) indicator breaks 90. If the current cycle follows the same pattern, Bitcoin prices could reach $150,000 – $200,000 before the RSI reaches 90.
However, remember that Bitcoin’s volatility can be very high, both on the upside and downside. This emphasizes the importance of the investment timeframe. Data shows that investors who bought Bitcoin at the peak of the November 2021 bull market and held during the bear market until now still made gains that outperformed other asset classes over the same period.
Although Bitcoin’s market cap is already large, its growth potential is still very high. Bitcoin’s market cap is only 11% of the combined market cap of Apple, Nvidia, Microsoft, Amazon, Google, Meta, and Tesla.
This figure is even smaller than the total market cap of US and global public stocks. Moreover, if the world’s central banks allocated just 5% of their gold reserves to Bitcoin, it would be equivalent to more than $150 billion, three times the BlackRock Bitcoin ETF inflow in 2024. US household wealth, currently at a high of over $160 trillion, also suggests that plenty of liquidity could flow into Bitcoin.
In previous cycles, retail investors tended to enter the market after Bitcoin broke through an all-time high (ATH). This is also evident from Google search trends and transaction revenue on Coinbase. These factors indicate that while Bitcoin’s market capitalization has grown rapidly, there is still room for substantial growth.
Global Liquidity, Monetary Policy, and its Impact on Bitcoin
The US debt ceiling will be reset on 1 January 2025. Before then, the US Treasury will have to use cash reserves in the Treasury General Account (TGA) to fund state spending. The US continues to run trillion-dollar deficits, which means it needs more liquidity and may need to devalue the fiat currency (currency debasement). This could benefit scarce assets such as stocks, real estate, gold, and Bitcoin.
In addition to the Fed, the Bank of China (PBOC) plays an important role in global liquidity. The PBOC’s liquidity expansion through 2025 is predicted to be positive for stocks, US businesses, and especially Bitcoin.
Also Read: The Central Bank of China Will Give Stimulus, Here’s How It Affects Bitcoin
Over half of the world’s central banks have started cutting interest rates. Projections from the European Central Bank also indicate the possibility of further rate cuts to address stagflation. Although not as aggressive as 2020-2021, these macro trends favor the market. Low interest rates and moderate economic growth will drive debt expansion, strongly correlated with global M2 money supply growth.
The combination of accommodative monetary policy and high liquidity needs in the US and other countries creates a favorable environment for assets like Bitcoin. History shows that amid similar macroeconomic conditions, assets with limited supply, such as Bitcoin, tend to experience significant appreciation in value.
The Role of Stablecoins and Debt in the Crypto Market: The Next Growth Catalyst?
In the past, altcoins were traded with BTC pairs. Now, stablecoins like USDT and USDC are the main pairs for altcoin trading and as collateral for loans. However, stablecoins are very sensitive to interest rates. When interest rates are high, investors prefer risk-free instruments rather than speculating on the blockchain with stablecoins.
A Fed rate cut in September 2024 and more crypto-friendly regulations could drive stablecoin growth and debt expansion in the crypto market. Since Donald Trump’s election victory, the market capitalization of stablecoins has grown by almost 15%, or around $20 billion. This trend is expected to continue, with some analysts predicting that stablecoin market capitalization could surpass $200-250 billion at its peak.
The growth of stablecoins will provide much-needed liquidity in the crypto market, facilitating the trading of altcoins and derivative instruments. This, in turn, could trigger a new wave of speculation and push crypto asset prices higher, especially if Ethereum ETFs start to gain momentum.
Lurking Risks: Factors that Could Hinder Bitcoin’s Progress
While the long-term outlook for Bitcoin looks bright, there are some risks to consider:
- Liquidity Withdrawal by Central Banks: If central banks, especially the Fed or PBOC, withdraw liquidity, it could negatively impact the market.
- Bond Volatility and Economic Downturn: High bond volatility can tighten credit conditions. If the economy slumps and private debt growth is hampered, it could also have a negative impact.
- Energy Price Spikes: Energy price spikes could siphon liquidity from financial markets to the real economy.
- Failure of Chinese Stimulus and Increase in Global Debt: If China fails to provide as much stimulus as expected, it could hamper risky markets, including Bitcoin. An increase in global debt without sufficient funding and large debt maturities could cause liquidity issues.
These factors could hamper Bitcoin’s growth and even trigger a significant price correction. Investors must monitor macroeconomic developments closely and adjust their strategies according to market conditions.
Conclusion: A Resilient Crypto Industry and a Promising Future
The year 2024 marks a historic turning point for the crypto industry. The industry has risen from many challenges, including the FTX crash, lending issues, strict regulations, and a sharp economic downturn. While there are still challenges ahead, the momentum has changed. The once-underestimated crypto industry stands tall and poised for a future with tremendous growth potential. The combination of factors such as the Bitcoin halving, increased global liquidity, wider adoption of stablecoins, and friendlier regulations create a very favorable environment for the growth of Bitcoin and other cryptocurrencies in 2025 and beyond.