Supporters of Bitcoin frequently point out theories predicting Bitcoin’s price will surpass $100,000, attributing this to increasing inflows in spot exchange-traded funds (ETFs) and institutional investment. However, these analyses tend to overlook the fundamental factors driving investors to view Bitcoin as akin to digital gold rather than a risky asset.
Three primary factors driving Bitcoin’s consistent price growth are regulatory shifts allowing broader institutional involvement, loosened limitations on retirement savings investments, and growing acceptance of Bitcoin as a reserve asset akin to gold.
Strict regulations and internal policies limit institutional Bitcoin adoption
As more banks and retirement funds consider investing in Bitcoin, they encounter considerable challenges from regulatory and financial reporting rules. Many pension funds and investment firms aren’t equipped to directly own Bitcoin Exchange-Traded Funds (ETFs) because of administrative limitations or the need for internal policy adjustments.
It’s worth mentioning that companies such as MicroStrategy stand out as exceptions. For example, at Microsoft’s December 10, 2024 shareholders meeting, a proposal to include Bitcoin in the company’s financial records received only limited backing. Previously, Microsoft’s board had discouraged this action, leading to a nearly unanimous vote against it.
Viewing things from a broad standpoint, investor opinions often mirror the Federal Reserve’s guidance. For instance, predictions for the Federal Open Market Committee (FOMC) meeting on January 29, 2025 indicate that they will keep the current interest rate range of 4.25% to 4.50%. Despite Bitcoin’s high-risk nature, high operational costs are still hindering economic expansion and dampening speculative investments.
When investors expect a decline in both stock and real estate markets, there’s often an increase in interest for cash reserves and short-term government securities. This trend became noticeable in early 2025 as traders gravitated towards safer assets, sometimes sacrificing potential returns or even facing losses on long-term bonds, commercial properties, and stocks.
Due to increased concern for safety, there’s been a shift towards safer investments, known as the “flight to quality” phenomenon. This is evident in the decrease of the 6-month U.S. Treasury yield, reaching its lowest point since October 2022 and almost touching 4.30%. At the same time, the U.S. dollar has grown stronger against various foreign currencies because global investors are favoring cash holdings as a safe haven. This pattern suggests worries about an upcoming recession that may impact other economies more severely, while the U.S., with its powerful financial standing, could remain relatively unscathed.
SAB 121 repeal, retirement account reform, and a strategic Bitcoin reserve
Changes in regulations will significantly impact how Bitcoin is accepted more widely. For example, the withdrawal of SAB 121 guidance means banks can now categorize crypto assets held in custody as off-balance-sheet items, which could boost their profitability. This change may also lead European regulators to ease up on MiCA rules, making it possible for Bitcoin to be used as collateral for loans or financial products, if the regulatory environment adapts accordingly.
Loosening the regulations on retirement savings could speed up the process of mainstream institutions adopting new investments like Bitcoin. If the Employee Retirement Income Security Act (ERISA) were made less restrictive, those responsible for managing these funds (fiduciaries) might have more freedom to invest in digital assets such as Bitcoin. This could lead to a massive influx of capital and help integrate digital assets more fully into traditional financial markets.
It’s possible that Bitcoin may find increased acceptance as a strategic reserve asset with the upcoming administration of President-elect Donald Trump. Although it’s unclear if the government will directly purchase Bitcoins, limiting the sale of existing holdings could lessen selling pressure and strengthen Bitcoin’s credibility as a legitimate financial asset. This could lead to greater integration of Bitcoin within global financial systems.
This post serves as a source of general knowledge and isn’t meant to act as legal or financial guidance. The perspectives, ideas, and opinions within this piece belong solely to the writer and may not necessarily correspond with or be endorsed by CryptoMoon.
Read More
- TRB PREDICTION. TRB cryptocurrency
- RLC PREDICTION. RLC cryptocurrency
- POL PREDICTION. POL cryptocurrency
- TNSR PREDICTION. TNSR cryptocurrency
- OKB PREDICTION. OKB cryptocurrency
- CAKE PREDICTION. CAKE cryptocurrency
- DMTR PREDICTION. DMTR cryptocurrency
- AGI PREDICTION. AGI cryptocurrency
- SXP PREDICTION. SXP cryptocurrency
- CTXC PREDICTION. CTXC cryptocurrency
2025-01-16 21:42