As 2024 is drawing to a close, the Bitcoin enthusiast community is abuzz with speculation about the future of this currency in 2025. With only a few days left in 2024, many notable events are approaching that could present opportunities but also create significant challenges for Bitcoin's value compared to fiat money. Besides the increasing demand for ETP products and companies like MicroStrategy continuing to hoard Bitcoin as a reserve asset, there are many external factors that could change the Bitcoin landscape.
1-Day Bitcoin Price Chart | Source: TradingView
Below are four significant economic events that could shape the value of Bitcoin in 2025.
1. Decisions on interest rates by the Federal Reserve of the United States
Unless there are any unexpected changes, economists do not expect new stimulus measures in the coming year.
However, discussions about coordinated interest rate cuts are still being considered. Recently, after the Federal Reserve's interest rate adjustment meeting, Fed Chairman Jerome Powell announced that if there are interest rate cuts, the reduction may be modest in 2024. His cautious stance has put pressure on Bitcoin (BTC) prices. According to CME's Fedwatch tool, the federal funds rate is likely to remain unchanged at the next meeting of the Federal Open Market Committee (FOMC) on January 29.
That meeting will take place just nine days after Donald Trump's inauguration as the 47th President of the United States. The current CME tool shows a 91.4% probability of unchanged interest rates, while the likelihood of a 0.25 percentage point cut is 8.6%. Although the Federal Reserve's decisions sometimes do not have a significant impact on the market, they can influence market sentiment, as seen last week when Bitcoin's price dropped in the context of Powell's recent negative comments.
2. Trade policies and tariffs
The current trade policies of the Biden administration are relatively cautious; however, many predict that once Trump returns as the 47th President of the United States, he may reapply strong tariff policies, which could have significant impacts on the global economy. These changes could affect inflation levels, which are expected to decrease from 5.9% in 2024 to 4.5% in 2025. However, developed economies may achieve their inflation reduction goals faster than emerging markets. Nonetheless, if tariffs continue to be maintained, inflation could remain high, increasing consumer costs in the U.S.
Fluctuations in trade, inflation, and tariffs could have major impacts on Bitcoin's value. Historically, economic instability often drives investors to seek alternative assets like Bitcoin, which is viewed as a 'safe harbor' during turbulent market periods. However, Bitcoin's trajectory will depend on how trade policies, inflation trends, and legal changes interact with one another.
3. Geopolitical risks
Geopolitical tensions, especially the conflict in Ukraine and the tense situation in the Middle East, combined with the rising global public debt, are likely to continue to pose significant challenges to the global economy. These crises disrupt supply chains, drive up oil and many other commodity prices, thereby impacting the global economy. In response, some investors may turn to Bitcoin, viewing it as a 'safe haven' during times of instability. However, there are also many investors who see Bitcoin as a risky asset and will sell in the context of instability.
Moreover, the rise in public debt may undermine confidence in fiat currencies, boosting interest in decentralized currencies like Bitcoin. However, Bitcoin's volatility may still be influenced by many unpredictable factors, especially in the context of military crises or unexpected events, such as a Black Swan.
4. The impact of other factors
In addition to the three factors above, other events such as technological advancements, changes in investment trends, and new regulations will also significantly influence the Bitcoin market. While some factors may boost Bitcoin's value, such as broader acceptance by financial institutions, legal changes or stricter regulations could create substantial barriers to the development of this currency.
Conclusion
The future of Bitcoin in 2025 will be influenced by many economic, political, and social factors. While fluctuations such as rising interest rates, tariff policies, and geopolitical tensions may strongly affect Bitcoin's value, the crypto market still exhibits significant volatility and unpredictability. This requires investors to be cautious and closely monitor economic developments in the near future.
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