A recent report by Sygnum Bank, a crypto-focused asset manager, has highlighted the potential for significant growth in the price of Bitcoin (BTC) due to surging institutional inflows. The report, titled "Crypto Market Outlook 2025," suggests that as large institutional investors continue to add Bitcoin allocations to their portfolios, demand shocks may cause the price of BTC to skyrocket.
The Multiplier Effect
Institutional capital flows are already exerting a significant multiplier effect on the spot price of BTC. According to Sygnum, every $1 billion worth of net inflows into spot exchange-traded funds (ETFs) drives an approximately 3-6% price move. This dynamic is expected to accelerate in 2025 as more institutional investors join the market.
Accelerating Institutional Participation
Sygnum’s chief clients officer, Martin Burgherr, notes that improving US regulatory clarity and the potential for Bitcoin to be recognized as a central bank reserve asset could lead to a steep acceleration of institutional participation in crypto assets. "Our analysis shows how even relatively modest allocations from this segment can fundamentally alter the crypto asset ecosystem," he said.
Uncertain Altcoin Outlook
While the trend is expected to extend to alternative cryptocurrencies (altcoins), Sygnum notes that it will only do so if the United States passes laws supporting crypto adoption. The report highlights the need for US lawmakers to create rules "tailored to the asset class" that allow projects to pass value to tokenholders without triggering a compliance burden.
Proposed Legislation
The report flags the proposed Financial Innovation and Technology for the 21st Century Act (FIT21) and Payment Stablecoin Act as particularly important for crypto. Sygnum also notes the need for laws governing self-custody, crypto mining, and decentralized finance (DeFi).
Bitcoin’s Unusually Strong Growth Drivers
Until then, "Bitcoin’s unusually strong growth drivers… will cap the relative performance of altcoins," according to the report. The report adds that lackluster user growth for the majority of decentralized applications and use cases has driven speculative investment towards memecoins, risking a bubble.
Strong Bitcoin ETF Demand
On November 21, US Bitcoin ETFs broke $100 billion in net assets for the first time, according to data from Bloomberg Intelligence. The report notes that Bitcoin has dominated the ETF landscape since spot BTC ETFs launched in January. Investor interest accelerated after crypto-friendly President-elect Donald Trump prevailed on November 5 in the US elections.
Growth of Spot Bitcoin ETFs
The growth of spot Bitcoin ETFs is attributed to two main factors: broad Bitcoin adoption and a superior product. "The ETFs allowed new investors to buy Bitcoin for the first time, like those unable to set up a wallet and buy Bitcoin on a cryptocurrency exchange," said Bryan Armour, director of passive strategies research at Morningstar.
Benefits of Spot Bitcoin ETFs
The report highlights the benefits of spot Bitcoin ETFs, including:
- Cheaper trading
- Low fees
- Best-in-class Bitcoin storage practices
Conclusion
In conclusion, surging institutional inflows may send the price of Bitcoin soaring in 2025. As more institutional investors join the market, demand shocks may cause the price to skyrocket. The report highlights the need for US lawmakers to pass laws supporting crypto adoption and creating a favorable regulatory environment for institutional participation.
References
- Sygnum Bank. (2024). Crypto Market Outlook 2025.
- Bloomberg Intelligence. (2024). US Bitcoin ETFs Break $100 Billion in Net Assets.
- Morningstar. (2023). The Growth of Spot Bitcoin ETFs.
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