The recent Bitcoin (CRYPTO: BTC) post-election rally has crypto investors looking ahead with anticipation to 2025. Bitcoin is up 125% for the year as of Dec. 10 and has finally broken through the psychologically important $100,000 price level to set a new all-time high.
So, what can we realistically expect from the crypto market in the coming year? Will Bitcoin turn in an encore performance and once again deliver triple-digit returns? There are three key factors to consider.
A new political and regulatory landscape for crypto
Perhaps the biggest takeaway from Bitcoin's rally is that the political and regulatory landscape has shifted decisively in favor of crypto. It now looks as though the promises that Donald Trump made on the campaign trail are going to be realized in 2025, and that has created tremendous pro-crypto optimism.
For the past two years, the SEC has taken what is widely perceived to be a heavy-handed approach to regulating crypto. However, the current head of the SEC, Gary Gensler, has already announced plans to step down, and Donald Trump recently selected Paul Atkins, a pro-crypto advocate, to take his place. Trump has also created the new position of White House AI & Crypto Czar to oversee technological innovation within the crypto industry.
The hope, of course, is that the cloud of uncertainty that has hovered over the U.S. crypto industry for the past two years will finally lift. That's good news for cryptocurrencies such as XRP (CRYPTO: XRP) , which has been involved in an epic legal battle with the SEC since December 2020. It's also good news for key players within the crypto market, such as Coinbase Global (NASDAQ: COIN) , which has openly criticized the SEC for its regulatory approach.
Bitcoin as a national strategic priority
In 2025, Bitcoin is likely to emerge as a new national strategic priority. That's due, in large part, to new government plans for creating a strategic Bitcoin reserve, similar in concept to the nation's strategic petroleum reserve. Under the proposed BITCOIN Act of 2024, the U.S. would commit to buying 1 million bitcoins over a five-year period. That would ensure that the U.S. owns at least 5% of the total supply of Bitcoin in the world.
So what would the U.S. do with all that Bitcoin? One option, says U.S. Sen. Cynthia Lummis (R-Wyo.), is to use this Bitcoin to help pay down the nation's $35 trillion national debt. As long as the price of Bitcoin appreciates faster than the amount of debt is able to grow, then this is at least a mathematical possibility. At the very least, a strategic Bitcoin reserve could be used as a hedge against economic uncertainty.
Already, the idea of creating a strategic Bitcoin reserve is starting to gain traction around the world. According to a Trump campaign advisor, at least four different nations have plans to create strategic Bitcoin reserves. And a growing number of U.S. states have suggested that they would start to stockpile Bitcoin, even if there is no action at the federal level.
Moreover, Trump's plans to boost the Bitcoin mining industry, first proposed during the summer, could get folded into a much broader strategic initiative related to the nation's energy policy. That's because Bitcoin mining consumes enormous amounts of power, and any attempts to boost this industry could start with overhauling the nation's energy grid.
As an added bonus, this revamped energy grid would tie into the government's support for the artificial intelligence (AI) industry, which also requires significant amounts of computing power and cheap energy.
The growing institutionalization of Bitcoin
The recent Bitcoin rally also highlights the growing institutionalization of Bitcoin. Simply stated, Wall Street -- which once openly resisted the idea of Bitcoin -- is now embracing it. Big Wall Street players are now launching new investment products while also encouraging their clients to get involved with crypto.
The best evidence of this, of course, was the launch of the spot Bitcoin ETFs back in January. Large institutional investors (such as pension funds and hedge funds) are now investing in these ETFs as the easiest way to gain exposure to Bitcoin. The notion of Bitcoin as a stand-alone asset class is gaining traction, and even formerly risk-averse investors are now beginning to allocate at least a tiny portion of their portfolios to crypto.
Should you buy Bitcoin?
Putting it all together, it's easy to see why so many people are bullish on Bitcoin right now. The political and regulatory environment is shifting decisively in favor of crypto. Bitcoin is evolving into a strategic national priority that has the support of the U.S. government. And Wall Street institutions are now embracing crypto as an important asset for portfolio diversification.
But just remember: Bitcoin has historically been a very volatile asset, capable of head-spinning price swings on a nearly daily basis. If you are thinking about investing in Bitcoin, you need to be comfortable with this volatility.
That being said, the recent crypto rally has convinced me that now is the time to buy Bitcoin. I'm bullish on Bitcoin over both the short and long run, and confident that the world's most popular cryptocurrency could soar in price in 2025.
Before you buy stock in Bitcoin, consider this: