(Kitco News) – The launch of multiple spot Bitcoin (BTC) exchange-traded funds ushered in a new era of legitimacy for digital assets and encouraged a new cohort of investors to make their first allocations – and in true crypto form, they have experienced a rollercoaster of price action over the past couple of months as BTC pumped and dumped in record high territory.
While its price has declined roughly 23% since the all-time high set on March 14, many analysts remain bullish on its long-term outlook. And despite the warnings from crypto skeptics like Peter Schiff, they see this as only a temporary pullback before the bull market resumes.
"BTC's proper break below $60K has now reopened a route to the $50-52K range," Geoffrey Kendrick, head of Standard Chartered Bank's forex and digital assets research, told The Block. "The driver seems to be a combination of crypto-specific and broader macro."
The crypto-specific concerns Kendrick referred to include the streak of outflows from spot BTC ETFs in the U.S. – which have recorded declines in ten of the past thirteen days – and the underwhelming response to the launch of spot BTC and Ether ETFs in Hong Kong.
"More than half of the spot ETF positions are underwater and so the risk of liquidation of some of them must be considered as well," he noted.
On the macroeconomic front, Kendrick noted that since mid-April, quantitative tightening in the U.S. has decreased the amount of liquidity available, which has hit cryptos hard as the market performs best in times of ample liquidity.
"Of course, liquidity matters when it matters, but with a backdrop of strong U.S. inflation data and less likelihood of Fed rate cuts, it matters at the moment," Kendrick said, recommending that traders look to “Re-enter BTC in the $50-52k range or if US CPI on the 15th is friendly."
Kendrick previously gave a year-end Bitcoin price prediction of $150,000 and said it could go as high as $250,000 in 2025 if strong inflows into spot Bitcoin ETFs continue and/or if forex reserve managers start buying Bitcoin this year. He continues to maintain that outlook.
"It may take a little while now. But I think when we get closer to a Trump election victory, we can rally hard from, say, Sept. to year-end," Kendrick said.
Bitcoin is the leading indicator for the crypto market
According to analysts at Bitfinex, while many traders are looking for an altcoin rally amid the pullback by Bitcoin, the price action for the top crypto will continue to be the leading indicator for the broader crypto market.
"We expect Bitcoin to continue being the price action benchmark for the crypto market in May and the leading indicator for the entire market cap of asset class,” the analysts said in a note to Kitco Crypto.
"It has also become more correlated with macro indicators and indices in the traditional financial markets, particularly as more financial Institutions take interest in the asset class and also allow a portion of their portfolio to be exposed to Crypto/Bitcoin,” they added. “As a consequence, we expect that in the short term, the economic environment will have a significant impact on crypto asset values.”
"However, even with the expectation that we won't see rate cuts soon, the economic environment today is remarkably resilient, and our belief is that, in general, consumers and businesses are better prepared and informed of the condition of the underlying economy than they have been in previous cycles,” they said.
For that reason, they “see a 1-2 month consolidation in Bitcoin prices, trading in a range with swings of $10,000 on either side.”
“We expect the positive impact of the halving, which has brought about a reduction in Bitcoin supply, will be seen in later months,” they concluded. “At this point, the economy is also expected to be performing better, having achieved a soft landing and avoiding a recession, providing further impetus to crypto assets.”
Another decade before widespread adoption
Looking beyond the short-term price action and current bull market cycle, macro guru Lyn Alden sees it taking another decade, at minimum, for Bitcoin to be a widely adopted asset.
During a recent conversation at an event organized by the What Bitcoin Did podcast, Alden said people tend to think that technologies like Bitcoin will immediately disrupt the incumbent system. But in reality, major changes like that happen over a long period of time, and people are underestimating the impact Bitcoin will have on the financial system.
“It’s not a one-year, three-year, five-year story. It’s not even a 10-year story. That’s a multi-decade story,” she said. “With technologies, people often overestimate the speed and then underestimate the final magnitude, and I think that’s going to be true for Bitcoin.”
“I think people routinely overestimate the speed with which it will fundamentally change the ‘system,’ but I think they underestimate the magnitude of what it can do over, say, a 30-year period or more like the transformational change that can happen with how we do payments, what things we decide to store value in, [and] the success rate of our investments.”
She said that Bitcoin is currently still too small to be compared with more established asset classes, but that will change over time, and eventually, King Crypto will come out on top.
“Bitcoin’s over a trillion dollars in market cap. The global wealth, depending on what measurement you look at, is something like $500 trillion or a thousand trillion, which is a quadrillion [dollars],” she noted. “So Bitcoin is like a fraction of 1%.”
“I think over the long arc of time, it starts eating into savings accounts. It starts eating into sovereign bonds. It starts eating into things that we monetize for a lack of good money,” Alden said. “During the phase where that’s happening, that can be disruptive… Nation-states are going to push back on it in various ways. They already have been in various capacities for the past 15 years. It’s going to be this ongoing story.”