Key Points
- Bitcoin market dynamics are expected to shift dramatically by 2025 due to rising institutional investments.
- Altcoins may struggle to gain traction unless the US government enacts regulations tailored to their unique attributes.
A recent report by Sygnum Bank predicts a significant change in Bitcoin’s market dynamics by 2025. This is due to an anticipated surge in institutional inflows.
The bank suggests that increased involvement from sovereign wealth funds, pension funds, and other large-scale institutional investors could lead to major “demand shocks”. This could potentially push Bitcoin prices to unprecedented levels.
Impact of Institutional Inflows
The report released on Thursday indicates that for every $1 billion in net inflows to spot Bitcoin exchange-traded funds (ETFs), the price of Bitcoin could increase by 3-6%. This multiplier effect, already evident in the market, is expected to intensify further as regulatory clarity in the United States improves and Bitcoin moves towards recognition as a national reserve asset.
Challenges for Altcoins
While Bitcoin’s dominance is expected to increase, the report from Sygnum warns that altcoins may face difficulties gaining similar traction unless the US government introduces regulations specific to their unique attributes.
The report emphasizes the importance of the Financial Innovation and Technology for the 21st Century Act (FIT21) and the Payment Stablecoin Act for the wider adoption of alternative cryptocurrencies.
The need for clear rules on self-custody, crypto mining, and decentralized finance (DeFi) operations is underscored by this situation.
Despite these challenges, some market observers are positive about altcoins. They predict that by 2025, the altcoin market cap could reach new highs, driven by emerging sectors like artificial intelligence. However, Bitcoin’s continued dominance, currently around 56%, has delayed major altcoin rallies.
Bitcoin’s Dominance
Bitcoin has maintained its dominance since the debut of spot ETFs earlier this year. According to data by SoSoValue, US-based Bitcoin ETFs now manage over $113 billion in net assets, reflecting institutional confidence in the asset.
Investor enthusiasm increased further after the victory of crypto-friendly President-elect Donald Trump in early November. The report stated that numerous crypto advocates nominated to cabinet positions, changes in the SEC personnel, the likely extended role of the CFTC in regulatory oversight and a new White House post dedicated to crypto policy suggest a highly favorable environment ahead for innovation and growth.
At the time of writing, Bitcoin is trading just below $101,000, recovering 3% in the last 24 hours despite a sluggish start to the week. It has a market cap of $1.99 trillion, according to data by CoinMarketCap.
Currently, the Crypto Fear and Greed Index sits at 83, indicating extreme greed and heightened demand among investors. Such elevated levels were last observed earlier in March when Bitcoin reached its prior all-time high of $73,000.
The potential for “demand shocks” driven by increasing institutional involvement presents a promising outlook for Bitcoin. However, the trajectory for altcoins remains uncertain.
