Unraveling Bitcoin’s 2025 Trajectory: Anticipating $100,000

Unraveling Bitcoinโ€™s 2025 Trajectory logo

Bitcoin forecast 2025! Brace for a macro-driven BTC surge.

The Ascending Bitcoin: Demands and Drivers

Bitcoin’s surge is rooted in escalating demand, though its origins remain elusive. Diverse stimuli can propel a Bitcoin and Altcoin rally.

Simplified, two triggers emerge:

  1. Novel applications or fundamental shifts, akin to ICOs in 2017 or NFTs and DeFi in 2021, can incite fervor and surge prices.
  2. Macro events, such as fluctuating interest rates, can steer movements in the asset class. Often, as witnessed in the exuberant 2021, both elements converge: Hype from fresh applications and invigorating macro conditions propelling capital into risk-laden assets.

Macro Forces Paving Bitcoin’s Way

Despite strides in the crypto sector, macroeconomics will steer the next bull run. Envisioning a $100,000 Bitcoin by end-2025 is grounded in this macro shift. Here’s why:

Setting the Financial Tone

Inflation and dearer loans are curbing disposable income. This inflationary pinch, coupled with steep loan costs, constrains not only homeowners but also governments and firms, dipping into their reserves. The outcome? A dearth of funds for ventures, from bridge-building to Bitcoin stashing.

Simultaneously, bonds boast unprecedented allure. Ten-year US government bonds yield nearly five percent. From a professional investor’s standpoint, diverting investments from stocks or cryptocurrencies seems more prudent. This rings particularly true for cryptocurrencies and companies yet to turn profitable or offer dividends. In short, within the current macro landscape, investing in crypto seems less prudent than ever since Bitcoin’s inception.

Cycles Decipher Bitcoin’s Value

Markets don’t trade in the present but the future. What seems a “foolish” investment today may evolve into a savvy one in half a year or more. Amidst altering underlying asset fundamentals, macroeconomic conditions are the pivotal factor that keeps evolving.

This isn’t mere chance, but cyclicality. Just as sunshine follows rain, low interest rates trail high ones. No system, be it weather or economy, stagnates in a singular state indefinitely. This cyclical nature hints at a new cycle in 2024, propelling Bitcoin and Co. to fresh all-time highs.

The Fiscal Inflection Point

Skyrocketing interest costs loom large over all actors – states, companies, and households. Given the present debt levels and economic growth, new borrowing has mathematical boundaries. After all, debt servicing must be met from earnings or reserves, if available.

Where a creditworthy state could borrow at half a percent two years ago, it’s now easily three percent. Depending on the extent of refinancing needed, a monumental new burden awaits the debtor, punching holes in their budget. With each passing month, the pressure on debtors heightens as more low-interest loans and bonds mature.

Only a handful of states can sustain this state long-term. Nations with debt levels, some surpassing 100 percent of GDP, swiftly approach their limits in the present interest rate climate. Both the European Central Bank and the Federal Reserve Bank are acutely aware of this.

Case Studies: Germany and Italy

Italian government bonds’ spreads over German counterparts are widening for a reason. The gap now stands at two percent, a clear indicator of turbulent times for state finances. An insider speaking to “Handelsblatt” predicts likely activation of the “Transmission Protection Instrument” at 2.5 percent. This would necessitate the ECB to intervene anew and refinance the Italian state, as market conditions no longer sustain it sustainably.

However, even relatively less indebted Germany is increasingly burdened by the new interest rate scenario. As a Handelsblatt article has also pointed out, interest costs for Germany have increased tenfold compared to 2021. In the finance ministry, they’re projecting 37 billion instead of 4 billion in interest costs for the coming year. Already this year, 11.1 percent of federal tax revenues flow into debt repayment (in 2021 it was only 1.3 percent).

If even creditworthy and reasonably indebted Germany has to tighten its belt, this applies all the more to many countries around the world. Especially for emerging markets, the likelihood of defaults is increasing. The strong US dollar and rising interest rates are already putting more and more debtors in a precarious situation. Central banks’ accommodation is becoming increasingly necessary, unless one wants to wait until things “explode” and then have an official reason to lower interest rates again.

Janet Yellen’s Bold Claim: “There Will Be No More Financial Crises”

Back in 2017, former US Federal Reserve Chair Janet Yellen confidently stated that there would be no more financial crises in our lifetimes. Despite the mockery, her words carry weight. The central bank can, at the push of a button, augment the monetary value of assets, ensuring the referencing asset for opposing debts always appreciates.

Disclaimer: This article expresses the author’s viewpoint and is not financial advice. It does not constitute a recommendation to buy or sell any assets.