Key points
*Bitcoin trades above $100,000 for the first time ever amid optimism over a pro-crypto Trump administration.
*The latest surge comes after Trump's selection of Paul Atkins to head the US Securities and Exchange Commission, a nomination that the crypto industry viewed as positive.
*Bitcoin has been on a downward slide in recent days after a strong post-election rally as some investors took profits. Some experts are warning of a correction in bitcoin prices due to excessive leverage.
Bitcoin (BTCUSD) traded above $100,000 for the first time ever late Wednesday, and then continued to rise.
CoinDesk, the largest cryptocurrency by market cap recently surpassed $103,000. The latest price surge came after President-elect Donald Trump nominated cryptocurrency advocate Paul Atkins to head the Securities and Exchange Commission.
Bitcoin came close to breaking $100,000 in November thanks to a post-election rally, then later dropped to $91,000 amid profit-taking. The recent moves have brought the total cryptocurrency market cap to over $3.7 trillion, according to CoinMarketCap.1
Bitcoin's late-year rally was largely driven by expectations of greater clarity on cryptocurrency regulation and a more crypto-friendly administration since Trump's election victory, with investors pouring money into Bitcoin alongside crypto-related stocks and exchange-traded funds.
“One of the big changes that has occurred in the US since the election is the emergence of a new elite (“counter-elite”) that is more comfortable with innovation and disruption, is pro-liberalization and deregulation, and is generally less risk averse,” Mohamed El-Erian, chief economic advisor at Allianz, wrote early Thursday on X2. “It is a change that will greatly enhance the prospects for broader institutional and retail adoption of crypto assets, and thus their role in the payments ecosystem and as part of investment portfolios.”
Investor optimism continues to support Bitcoin prices
Investors welcomed news that the incoming administration will create a cryptocurrency advisory council, and possibly also create a strategic reserve for Bitcoin.
“One of the big changes that has occurred in the US since the election is the emergence of a new elite (“counter-elite”) that is more comfortable with innovation and disruption, is pro-liberalization and deregulation, and is generally less risk averse,” Mohamed El-Erian, chief economic advisor at Allianz, wrote early Thursday on X2. “It is a change that will greatly enhance the prospects for broader institutional and retail adoption of crypto assets, and thus their role in the payments ecosystem and as part of investment portfolios.”
Investor optimism continues to support Bitcoin prices
Investors welcomed news that the incoming administration will create a cryptocurrency advisory council, and possibly also create a strategic reserve for Bitcoin.
“One of the big changes that has happened in the US since the election is the emergence of a new (‘counter’) elite that is more comfortable with innovation and disruption, is pro-liberalization and deregulation, and is generally less risk averse,” Mohamed El-Erian, chief economic adviser at Allianz, wrote early Thursday on Channel X.
2- It is a change that will greatly enhance the prospects for institutional adoption and broader retailing of crypto assets, and thus their role in the payments ecosystem and as part of investment portfolios.”
Investor optimism continues to support Bitcoin prices
Investors welcomed news that the incoming administration will create a cryptocurrency advisory council, and possibly also create a strategic reserve for Bitcoin.
Atkins’ nomination to head the SEC was another piece of good news for the crypto industry after the agency’s current leader, Gary Gensler, announced his departure. Gensler has often been criticized by cryptocurrency advocates for the SEC’s heavy-handed approach to enforcement under his leadership.
Bitcoin-related stocks have also seen gains recently. Shares of MicroStrategy (MSTR), which holds more than 402,100 bitcoins — worth more than $40 billion at current prices — are up more than 540% since the beginning of the year.
Some Mistakes But Bitcoin's Rise Is Not Backing Down
This has already been a busy year for Bitcoin, with the approval of spot Bitcoin ETFs and the “halving” slowing the rate at which new Bitcoins are released into the supply. The imbalance between supply and demand has helped push Bitcoin prices higher.
However, some experts warn against excessive leverage and over-optimism on the part of investors. Mike Novogratz, CEO of Galaxy Investment Partners, said he expects Bitcoin prices to return to $80,000.
“The crypto community is so over-leveraged that there will be a correction,” he recently said on CNBC.
2-Bitcoin bulls have remained largely steady during the recent Bitcoin price volatility.
In the short term, Bitcoin's price could rise on a wave of corporate buying, as Bitcoin gains a foothold as a major long-term investment, with sudden price volatility providing buying opportunities.
“One of the reasons Bitcoin has been so violent in the past is that every time Bitcoin starts to fall, people start to worry that it will hit $0. That’s no longer the case, and there’s a growing sea of investors looking for an entry point instead,” Matt Hogan, chief investment officer at Bitwise Investment, said in a note in late November.
Bitcoin Price Prediction Based on the Model
Bitcoin Stock vs Flow Model
The stock-to-flow model is a Bitcoin pricing model that effectively treats the cryptocurrency as a finite real asset like gold or oil and estimates the price based on the number available in the market relative to the number produced each year.
It was a model widely used (though heavily criticized) by early Bitcoin proponents, and as you can see in the chart below from Bitcoin Magazine Pro,
His record is mixed.
In 2017 when Bitcoin was trading above $19,000, the stock-to-flow model estimated the price at only $3,900.
Similarly, in December 2022, when the model estimated the price of Bitcoin at around $48,000, the price of Bitcoin itself was trading at only around $16,500.
So, although the model was generally accurate in terms of direction, the actual price varied greatly.
By the end of Q1 2025, Stock-to-Flow estimates that Bitcoin should be worth around $360,000 per coin.
Bitcoin Rainbow Chart
The other model we'll look at today is
Bitcoin Rainbow Chart
which builds a set of possible outcomes around the growth curve.
The rainbow chart has been around since 2014, but since it is based entirely on assumed logarithmic growth, it is considered a "meme" chart.
However, given how heavily sentiment-driven Bitcoin is, it is difficult to prove that any pricing model is “better” than any other better fit (graph matches data points).
By the end of Q1 2025, the rainbow chart (middle yellow curve) estimates that Bitcoin could trade between $160,000 and $215,000.
What Bitcoin's price will do in early 2025 will largely depend on whether the current bull market still has room to continue.
As I mentioned earlier, any short-term weakness that brings Bitcoin back to earth would be far from unexpected.
But given how volatile the asset is, there is also plenty of room for upside surprises.
In this type of scenario, you may want to minimize the capital you spend while also giving yourself a significant amount of exposure to potential upside, and something like an out-of-the-money bull call spread on a Bitcoin ETF might allow you to do that.
For example, a 65/70 call spread on iShares Bitcoin Trust (IBIT) on March 21, 2025, at a net discount of about $1.15, would be a total loss if Bitcoin were to be overshot here, but would be worth $5 if Bitcoin were to rise another 23% or so by late March (a 334% gain).
You can adjust the time frame and strike prices to suit your needs, but one benefit of the spread is that instead of just paying for volatility (as you would with a long call option), you make up for it by selling some of the volatility as well (the short part of the spread).
It's not about lunch money (as my colleague Mike Centolo says), but the upshot for Bitcoin is that if it has any upward momentum it tends to have a lot of upward momentum.
Reference links:
https://www.newsweek.com/can-bitcoin-price-hit-200k-2025-1995948
https://www.bbc.com/news/articles/cqjz04lv5q9o
