It’s no secret Bitcoin (BTC 0.78%) has hit a bit of a summer lull. But as its price undergoes a period of volatility, it’s easy to forget that Bitcoin is still up more than 30% from the beginning of the year and more than 125% since August 2023.

While the recent sentiment may have turned somewhat bearish, there are several compelling reasons to remain optimistic as we head toward the end of the year. In fact, there are three key factors that could propel Bitcoin to new heights by 2025.

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1. The impact of spot Bitcoin ETFs

One of the most significant developments in the crypto space this year has been the introduction of spot Bitcoin exchange-traded funds (ETFs). During the first quarter of 2024, these 11 new ETFs played a pivotal role in driving Bitcoin’s price up nearly 60%. At their peak, these ETFs were collectively purchasing more than 10 times Bitcoin’s daily production rate, creating a surge in demand that sent prices soaring.

Since then, the initial frenzy has cooled, but there are signs that the momentum is picking up once again. Just last week, Bitcoin ETFs recorded their best week since July, with over $250 million in net inflows. Although this is a far cry from the peak seen in March when they were raking in over $1 billion in a single day, the pickup in activity suggests that the market could be on the brink of another wave of ETF-driven demand.

The significance of these ETFs cannot be understated. They offer institutional investors a regulated, easily accessible way to gain exposure to Bitcoin, and as more institutions embrace this asset class, the potential for price appreciation grows. If this renewed momentum continues into the final quarter of the year, Bitcoin could experience another major boost, similar to the one earlier in 2024.

2. Federal Reserve policy shifts

The second reason to be bullish on Bitcoin through the end of the year is the anticipated shift in Federal Reserve policy. After more than two years of aggressive interest rate hikes, the Federal Reserve has signaled that it will begin introducing rate cuts, with the first expected as early as September. While this may seem unrelated to Bitcoin, the reality is that lower interest rates tend to create a favorable environment for cryptocurrencies.

Bitcoin is often viewed as a “risk-on” asset, meaning it performs well when investors are willing to take on more risk in search of higher returns. In a lower-rate environment, traditional assets that thrive on high yields, such as bonds, become less attractive. As a result, investors often reallocate their capital into riskier assets like tech stocks and cryptocurrencies, ultimately driving up their prices.

Moreover, lower interest rates typically lead to a weaker dollar. This is where Bitcoin’s unique monetary policy shines. With its finite supply and decentralized nature, Bitcoin offers a hedge against the inflationary pressures that can erode the value of fiat currencies.

As the Fed is expected to implement at least a 25 basis point rate cut in September, followed by the likelihood of additional cuts later in the year, Bitcoin could benefit from the resulting shifts in investor sentiment and capital flows.

3. Historical patterns point to a strong fourth quarter

The third reason for optimism is rooted in Bitcoin’s historical performance. Over its 15-year history, Bitcoin has shown a clear pattern of experiencing a summer lull, followed by a strong finish in the fourth quarter. This year could be following that same trajectory.

On average, Bitcoin has returned -4% in September, 26% in October, 36% in November, and 11% in December. If these historical averages hold true, Bitcoin could see a significant rally in the coming months, potentially pushing its price past the six-figure mark to around $107,000. While past performance is not a guarantee of future results, the consistency of this pattern over the years suggests that Bitcoin could be gearing up for another impressive year-end run.

Zooming out for necessary context

Whether Bitcoin ends 2024 with a major move or not, it’s essential to remember that investing in Bitcoin should be approached with a long-term perspective. The current economic landscape is fraught with challenges, including soaring government spending, record levels of debt, and the ongoing debasement of fiat currencies.

In this environment, Bitcoin stands out as a unique asset with its decentralized nature and finite supply, offering a level of security and potential for appreciation that is unmatched by traditional investments. Just as crypto investors now look back at the days when Bitcoin was valued at $10,000 as a distant memory, so too could they one day view a sub-$100,000 Bitcoin with regret that they didn’t buy more at current prices.