In December, when Bitcoin (BTC 2.66%) finally broke through the $100,000 mark, the conventional thinking was that it was going to skyrocket in value in 2025. Bitcoin seemed to be on the cusp of going mainstream, especially after the launch of new spot Bitcoin exchange-traded funds (ETFs). Best of all, the incoming Trump administration ran on a decidedly pro-Bitcoin platform.
Unfortunately, things have not turned out as planned. Yes, Bitcoin set another all-time high on Inauguration Day, and currently trades at around $105,000. But Bitcoin has struggled to stay above $100,000, while other top cryptocurrencies have exploded out of the gate in early January. So is Bitcoin still a buy?
Bitcoin campaign promises
One major factor hindering Bitcoin's price has been a lack of follow-through on earlier campaign promises. Remember when President Donald Trump pledged to support the Bitcoin mining industry? Or when he promised to create a strategic Bitcoin reserve?
Thus far, neither has happened, and the markets are disappointed. On Day 1 of the new presidency, there was not a single mention of Bitcoin in Trump's inauguration speech. Instead of taking concrete moves to boost the prospects of Bitcoin, Trump launched a new meme coin. And, instead of going all-in on a strategic Bitcoin reserve, the government now seems to be embracing a "national digital asset stockpile" that would also include Bitcoin.
The good news is that Trump recently signed a new executive order on digital assets and cryptocurrencies. This executive order calls for the creation of a new working group on digital assets, and appears to signal an overhaul of the U.S. regulatory framework for crypto. It also makes clear that the U.S. government will not create a new central bank digital currency to compete with Bitcoin.
How sustainable are Bitcoin's triple-digit returns?
Over the past two years, Bitcoin has posted triple-digit returns. In 2023, Bitcoin was up 150%. In 2024, Bitcoin was up 125%. Over the past decade, it has been one of the top-performing assets in the world. In 2024, for example, Bitcoin outperformed every other asset class, and it wasn't even close.
Image source: Getty Images.
But here's the thing: Bitcoin may become a victim of its own success. Simply put, as Bitcoin goes increasingly mainstream, it will become harder to deliver triple-digit returns. Even Michael Saylor of MicroStrategy -- who is arguably the biggest Bitcoin bull on the planet -- thinks that, over time, Bitcoin's returns will eventually decline to become more in line with those of traditional asset classes.
That means Bitcoin may eventually start to behave more and more like a traditional tech stock. Instead of delivering 100% a year to investors, Bitcoin might only deliver 20% to investors. In the decade from 2011 to 2021, tech stocks delivered annualized returns of 20% to investors, so this is a reasonable estimate.
And that raises an interesting question: Will investors still buy Bitcoin if they're only getting 20% per year? Some will, because they view Bitcoin as a long-term store of value, similar to gold. But others won't. Instead, they may start to look for riskier digital assets, to get the same returns they once got with Bitcoin.
How high can Bitcoin go?
For much of the past 24 months, the target price for Bitcoin has been $1 million. This price target was first articulated by Cathie Wood of Ark Invest, and has almost become part of crypto lore by now: Bitcoin is going to $1 million by 2030, and there's nothing that anyone can do to stop it.
But is that really the case? According to Larry Fink, CEO of BlackRock, the price target for Bitcoin might only be $700,000. That's important to note, because BlackRock is the largest asset manager in the world, with more than $11.5 trillion in assets under management. And BlackRock is also the company behind a phenomenally successful spot Bitcoin ETF: the iShares Bitcoin Trust, which has pulled in more than $60 billion from investors.
As Fink sees it, everything really depends on the risk appetite of large institutional investors, such as pension funds, endowments, and sovereign wealth funds. If they're only willing to allocate 1% of their portfolios to Bitcoin, there's no way that Bitcoin is going to $1 million. If they're willing to allocate 5% or more of their portfolios to Bitcoin, then it's an entirely different story.
The one Bitcoin catalyst to watch in 2025
The major catalyst for Bitcoin in 2025 will be the creation of a strategic Bitcoin reserve. This would lead to unprecedented buying of Bitcoin by the U.S. federal government, and would likely trigger other nations around the world to start buying Bitcoin. In fact, some have conjectured that it might kick off a "Bitcoin arms race" among the top superpowers.
So, keep your eyes on what's happening in Washington, D.C. If the Trump administration follows through on its campaign promises, it could be off to the races for Bitcoin. But if not, then investors could be stuck with a very expensive tech stock for the foreseeable future.
