Over the long term, the cryptocurrency industry has steadily accumulated value, but it has been a wild ride. With the prices of Bitcoin (CRYPTO: BTC) already down by 22% from their all-time high of $109,358 (reached on Trump’s inauguration day, Jan. 20), buying these assets at the wrong time could expose your portfolio to tremendous volatility.
Let’s explore what the rest of the year might have in store.
Bitcoin’s latest rally is demonstrably linked to the Trump Administration. Despite falling sharply from all-time highs, prices for the digital currency are still up by more than double since President Trump’s election victory on Nov. 5. This price movement reflects the market’s optimism that the new administration will take a more positive stance toward the industry in contrast to the stricter regulatory approach favored in previous years.
Bitcoin Price data by YCharts.
So far, the optimism looks justified. Under its acting director Mark Uyeda, the Securities and Exchange Commission is prioritizing regulatory clarity over enforcement, creating a Crypto Task Force to help investors and developers better understand the rules of the game.
The regulatory body has also dropped a series of lawsuits against crypto exchanges like Coinbase, Consensys, and Kraken, mainly related to whether or not cryptocurrencies should be classified as securities.
Regulatory clarity will be key to Bitcoin’s acceptance by mainstream financial institutions like mutual funds, pension funds, and even insurance companies. These organizations are typically seen as smart money, which can boost the asset’s legitimacy. They also tend to invest vast amounts of money for the long haul, which can reduce volatility and make Bitcoin’s price more stable.
While Bitcoin enjoys long-term tailwinds with the new administration, challenges could emerge in 2025.
Economists at J.P. Morgan (part of JPMorgan Chase) forecast a 40% chance of recession due in part to Trump’s tariff policy, which could spark a trade war between the U.S. and its biggest trading partners. A slew of consumer goods retailers like Dollar General and Walmart have also flagged deteriorating consumer sentiment, which is a bad sign for the economy. That said, it is unclear how a downturn would affect Bitcoin.
Unlike a corporate stock, Bitcoin isn’t valued based on revenue or earnings growth, so a recession wouldn’t actually affect its intrinsic value. In that sense, it’s more like a currency. However, recessions tend to reduce asset prices in general, which sucks wealth out of the economy.
