After a record-breaking 2024, many analysts believe bitcoin and other cryptocurrencies could see another strong rally this year.
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Cryptocurrencies such as Bitcoin have been on a wild ride recently.
Bitcoin surpassed $100,000 for the first time last month after more than doubling its price last year – and analysts believe Bitcoin and other cryptos could have another game-changing year in 2025 .
To explain why Bitcoin investors are so excited, here are three key things to watch out for and why critics are so concerned.
Could Bitcoin experience another strong rise?
This is what many analysts think. A recent CNBC investigation showed that several experts predict bitcoin will hit $200,000 this year.
There are reasons to be optimistic. Most importantly, bitcoin is becoming increasingly mainstream after the Securities and Exchange Commission (SEC) reluctantly approved investment funds that track the price of bitcoin early last year.
These exchange-traded funds, or ETFs, tend to be popular with regular investors, giving them an easier way to gain exposure to bitcoin without having to shell out six figures for a single bitcoin.
The Bitcoin fund launched by BlackRock has become one of the best-performing ETFs of all time after amassing more than $50 billion in assets last year.
There is another major reason why Bitcoin investors are so bullish: Donald Trump’s return to the White House.
Will Trump keep his crypto promises?
During the 2024 presidential campaign, Trump made a big promise to crypto investors: to make the United States the “crypto capital of the planet.”
Trump isn’t president yet, but he’s keeping a key aspect of his promise: choosing regulators and policymakers who should be much more friendly to crypto interests (including his own family, given that he and his two son are involved in a crypto business). ).
This would mark a dramatic shift from the Biden administration, which has taken a much more skeptical approach to cryptocurrencies.
The SEC, led by Gary Gensler, has taken aggressive enforcement action against major crypto players such as Coinbase as part of a legal battle aimed at getting them to comply with Wall Street regulations.
But investors are hoping Wall Street’s next market cop will take a much different approach after Trump chose Paul Atkins to head the SEC.
Atkins, CEO of a consulting firm with crypto clients, is a former SEC commissioner known as a strong supporter of cryptocurrencies.
Trump also named the nation’s first crypto and artificial intelligence czar, prominent venture capitalist David Sacks, who is expected to help craft policies more favorable to both sectors.
The next Trump administration would work with a Republican-controlled Congress.
Rep. French Hill, R-Ark., is the new chairman of the House Financial Services Committee. A former community banker in his home state, Hill has advocated for policies that help develop crypto and AI, making him a potentially powerful ally for the new Trump administration.
Rep. French Hill, an Arkansas Republican, is set to become the new chairman of the powerful House Financial Services Committee.
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The prospect of more favorable legislation, however, worries many crypto experts, including Carol Alexander, a professor at the University of Sussex known for her expertise on digital assets and her successful track record of predicting the price of Bitcoin.
Alexander fears that professional traders could take advantage and benefit at the expense of regular investors, comparing it to a football match between two teams without a referee.
“We need to regulate the space,” she says, calling the move toward a more crypto industry-friendly legislative environment a “step in the wrong direction.”
Could the United States launch a strategic Bitcoin reserve?
Trump made another promise to crypto investors that could be a game-changer for the industry if kept: that the United States would create “a strategic national stockpile” consisting of bitcoin.
In a speech at a crypto conference in Nashville in July, Trump said the government could bootstrap the stock with Bitcoin tokens it has seized from various bad actors. The United States is estimated to hold approximately 200,000 Bitcoin tokens, worth over $19 billion at current market prices.
The crypto industry – and some lawmakers – would like Trump to go even further by creating a strategic bitcoin reserve. This would mean the government would actively buy and sell bitcoin as part of how the government manages its resources.
This would be similar to how the government buys and holds oil in its Strategic Petroleum Reserve, freeing up barrels in the event of an energy emergency.
Sen. Cynthia Lummis, R-Mont., introduced a bill to create such a reserve. Last year, it proposed that the US government buy 200,000 bitcoins per year for five years until it reached one million, or 5% of the total bitcoin supply.
Supporters of a stock or reserve say such a fund would bring great benefits, including strategically linking the United States to the growth of bitcoin and giving the government the ability to use bitcoin earnings to repay the country’s large debts.
Trump promised to make the United States “the crypto capital of the planet” and create a national bitcoin stockpile during a speech at a major bitcoin conference in Nashville, Tennessee, July 27, 2024 .
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However, major questions arise over how the United States could legally create such a Bitcoin fund, and many critics warn of serious consequences, as Bitcoin is known for its volatility and would directly expose the US government to significant losses.
Many critics also believe that having the United States create a strategic reserve of bitcoin would lend legitimacy to an asset that they say has no real use except as a speculative investment.
It remains to be seen whether the United States will eventually launch such a fund or not. For now, crypto investors are giddy – and hoping Bitcoin’s golden moment lasts for a while.
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