Dubai: Bitcoin's rally ever since the latest US election outcome gathered steam on Monday, with the original cryptocurrency hitting a new all-time high above $89,000 (Dh327,000). But will this rally lose steam soon or pick up even further?
Bitcoin first crossed the $75,000 (Dh275,473) mark after Donald Trump sealed the race to the White House. The leading cryptocurrency then surpassed its previous high of $73,750 (Dh270, 882), reflecting a strong positive response from the market. Its peer Ether also saw gains, rising 9.2 per cent to $12,400 (Dh45,500) since the win.
“Bitcoin’s recent surge is attributed to a ‘Trump rally’, which is essentially the current political climate in the world's largest economy, the US, favouring the world’s largest cryptocurrency,” said Brian Deshell, a UAE-based cryptocurrency trader and analyst.
“Trump’s perceived favourability toward cryptocurrencies have contributed to the market’s bullish sentiment. With this win, the crypto markets are likely to see a range of deregulations in the crypto space starting 2025, leading to higher adoption rate.”
Many moving pieces
Predicting whether Bitcoin’s rally will lose steam soon, involves considering many moving pieces, evaluate experts, with short-term price fluctuations potentially being influenced by macroeconomic developments, regulatory changes, and market sentiment shifts.
Brody Dunn, an investment manager at a UAE-based asset advisory, noted that Bitcoin’s long-term trajectory is likely to be driven by “ongoing institutional adoption, technological developments, and its role as an alternative store of value” around the world.
“If the broader market sentiment shifts negatively – due to factors like tightening liquidity, regulatory crackdowns, or waning political enthusiasm – the rally could indeed lose steam in the near term. Bear in mind that Bitcoin has historically seen rapid price increases followed by corrections.
“The nature of the market means that rallies often lose steam once speculative buying subsides, or once external factors like government intervention or economic shifts take hold. Also, like most speculative assets, Bitcoin often experiences boom-bust cycles.”
“We expect the coming two-year period to see similar price gains for digital assets to 2021. As in 2021, existing digital assets are likely to see price rises and new subsectors emerge; this time, real-world use cases are finally poised to go mainstream,” the British bank wrote in its research note.
The lender reiterated its prior forecasts that Bitcoin will reach $200,000 (Dh734,595) and peer cryptocurrency Ethereum will surpass $10,000 (Dh36,729) by the end of next year, a significant spike from the current prices of the cryptocurrencies at $89,567 (Dh328,978) and $12,384 (Dh45,486), respectively.
What risks affect near-term Bitcoin prices?
“If governments, especially in major economies like the US or Europe, introduce more stringent regulations around Bitcoin or cryptocurrencies in general, it could dampen investor enthusiasm. Conversely, positive regulatory developments could support growth,” explained Dunn.
“There is also an added level of legal uncertainty, still. Ongoing lawsuits, like those faced by cryptocurrency exchanges worldwide, and potential future legal actions against prominent players in the crypto space could create market uncertainty.
"Additionally, in times of political or economic instability – such as concerns over geopolitical tensions, or central bank policy changes – Bitcoin has sometimes acted as a ‘safe haven’ investment for investors. If such concerns diminish or markets stabilise, Bitcoin could lose some of its appeal,” added Deshell.
“There is also the risk of traditional assets like stocks and bonds underperforming always, pushing more investors toward alternatives like Bitcoin. However, if inflation gets under control and central banks start lowering rates, risk assets, including Bitcoin, could face pressure as liquidity shrinks.”
Bitcoin’s market dominance to drop by 2026
Much of the current enthusiasm seen in the crypto market stems from Trump’s laundry list of crypto-related commitments made during his campaign trail. “Only time will tell whether or not the pledges from Trump will become a reality, and Bitcoin prices will lose steam if they don’t,” added Deshell.
Although Standard Chartered sees the measures aiding positive price action for numerous cryptocurrencies, the lender also flagged that it expects other new developments to define the crypto ecosystem over the next two years.
“For one, it says that despite Bitcoin’s rocketing price, the world’s top cryptocurrency is poised to decrease in dominance over the digital assets sector – from its current valuation at 60 per cent of the entire crypto industry to just 40 per cent by the end of 2026,” it added, hurting its price prospects.
Dunn noted that as the regulatory landscape for crypto is still evolving, and governments are considering how to regulate digital assets, potential changes in regulation – such as stricter rules or outright bans – could significantly impact the value of cryptocurrencies.
Next steps?
Due to its volatility, both Deshell and Dunn still recommend that investors set aside only 5 per cent to 10 per cent of total portfolio towards Bitcoin or any crypto-related investments.
“A modest crypto holding is still seen as a reasonable allocation for investors who believe in the long-term potential of the digital token but want to mitigate risk. This allows for meaningful exposure without making the portfolio too vulnerable to downturns in the volatile market,” added Dunn.
