Bitcoin has had a turbulent week. Yet many are predicting 2025 could be the year of mainstream adoption that pushes its price upwards. We discuss if you should buy the dip in the article below.
The week has not started well for Bitcoin. On Monday, it dropped below the $90,000 mark and then continued to hover around $90,319. This has seen 9% shaved off the currency in the last week alone. Its recent bull run has reversed, and it had fallen as low as $89,259.00 on the day of writing. This was following a record year in 2024 when 120% was added to its value. So far this year, it is now down by 3%. However, this should not sway investors, with many advising that now is the time to buy the dip.
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What the Dip Means
There have been numerous factors for this sharp sell-off. Part of this was attributed to the increase in bond yields. This is due to possible tariffs in the US that have boosted the US dollar. In these situations, investors tend to turn away from riskier assets, and this is what led to the downturn in cryptocurrencies. With US Dollar sentiment high, investments may favor US Dollar-based tradfi options. Some investors have warned that despite everyone expecting a golden year for Bitcoin and cryptocurrency, it could actually be the opposite for this very reason.
Secondly, last week US nonfarm payroll data was released. This holds key information about the US workforce, not including military personnel and farmworkers. A total of 164,000 jobs were forecast, but this figure ended up being 256,000. This has put the brakes on any potential cuts to interest rates. When interest rates are low, people tend to be more willing to invest in riskier assets like cryptocurrency.
A strong dollar does not necessarily mean that the Bitcoin price will drop. Bitcoin ETFs are a prime example of how crypto is being adopted into mainstream finance. They allow investors to buy into a company that holds Bitcoin as an asset. Introduced in 2024, they have had great success. In November 2024, they managed to have $100 billion in assets. Estimates are that a further $48 billion will be added in the coming year.
Financial behemoth Fidelity has also said that it believes 2025 will be a key year for Bitcoin. A recent report highlights how it believes that the Bitcoin price will be carried upward by financial institution adoption and its use by nation-states. It highlighted El Salvador and Bhutan as countries that have adopted cryptocurrencies and made a quick return from the incorporation of Bitcoin.
There are even more voices saying that this strengthening dollar and its impact on the price of Bitcoin are nothing to worry about. Combined with the Federal Reserve’s silence and the possibility of tariffs, a bullish outlook is still on the cards. This has been echoed by Grayscale, a major crypto asset management company. They believe that increased regulatory frameworks for the use of crypto are imminent and that this alone will be enough to stimulate positive growth.
There are plenty of other market analysts sharing this optimism for 2025. Many believe this regulatory environment will see the coin reach record highs. Institutional adoption will not be far behind and will enhance this even further.
Other Cryptostocks
Other crypto stocks also suffered a bad week. Ether lost 7%, with the rest of the crypto market combined dropping. Companies involved in crypto, such as Mara and Microstrategy, all lost between 5% and 2% in shares. This week could also prove crucial, as a raft of other economic reports are shared. These include the Producer Price Index, Consumer Price Index, and Unemployment Claims. All of this could further test the theory that crypto is a hedge against inflation. This will only get worse if a period of stagflation occurs in major economies. Stagflation is when the prices of goods and services in an economy increase while the production of them slows down. This leads to a fiscally stagnant economy where things keep getting more expensive.
Quite how crypto would fare in this kind of economy remains to be seen. However, it will be directly linked to how financial institutions and the Federal Reserve decide to handle it.
This inclusion of digital assets in nation-states and wealth funds is going to happen. It already has. The key for investors is to decide if now is the right time for them to make a move. They need to decide if 2025 is the year of adoption. If it is, and 2026 arrives, the biggest spoils may have already taken place when it comes to reaping the increased value of Bitcoin.
Macroeconomic factors will always impact a naturally volatile asset like crypto. However, this is a short-term issue. Long term, the future for cryptocurrencies, and Bitcoin remains strong. With further regulatory frameworks and introduction into mainstream finance, Bitcoin looks to be headed for even greater heights.