In early 2025, Bitcoin (BTC) embarked on an impressive rally, soaring by 13.5% within just the first month.
This climb is largely attributed to a notable shift in the U.S. government’s approach to the cryptocurrency sector, which has begun to take on a more favorable tone.
However, despite this positive trajectory, Bitcoin’s price has reached a challenging plateau around $105,000, leading traders to ponder the factors that may be contributing to this stagnation.
Key Issues in Bitcoin’s Growth
The potential for a Bitcoin bull market appears bright, but three key issues are standing in the way of setting new all-time highs.
One significant element is the current political climate, particularly the changes under the Trump administration, which have opened doors for banks and hedge funds to manage digital assets more securely without jeopardizing their financial reports.
During a press briefing after the Federal Open Market Committee meeting on January 29, Jerome Powell, the chair of the U.S. Federal Reserve, reassured the public that banks could responsibly serve cryptocurrency clients if they managed the associated risks properly.
He also expressed the Federal Reserve’s support for advancing innovation in the sector.
On January 30, the Czech National Bank’s board approved a plan to integrate Bitcoin into its strategy for international reserve management.
This announcement followed Governor Aleš Michl’s conversation with the Financial Times, where he revealed intentions to invest up to 5% of the nation’s €140 billion reserves in Bitcoin, showcasing a rising acceptance of the cryptocurrency at a national level.
Institutional Investments and Market Sentiment
Further boosting Bitcoin’s appeal, a fund connected to the Norwegian Central Bank revealed a substantial $500 million investment in shares of MicroStrategy on the same day.
Some funds still face regulatory challenges when trying to invest directly in Bitcoin through spot exchange-traded funds (ETFs), which often leads them to invest in U.S.-listed companies as an alternative strategy.
Despite these encouraging developments, Bitcoin has struggled to break through the $106,000 ceiling.
Understanding the reasons behind investors’ cautious stance becomes essential in forecasting when Bitcoin might reclaim its all-time high.
Economic downturn concerns across the globe could trigger a “flight to quality,” enticing investors to seek refuge in cash and short-term government bonds.
In the fourth quarter of 2024, the U.S. gross domestic product (GDP) growth came in at 2.3%, slightly below market expectations.
Similarly, the eurozone displayed stagnant economic growth, based on data released on January 30.
This lackluster performance might push central banks to implement stimulus initiatives, which typically support Bitcoin’s price trajectory in the long run.
However, traders remain anxious about potential immediate negative consequences.
Challenges and Future Prospects
The entry of a cost-effective AI chatbot developed by Chinese startup DeepSeek into the market has created waves, resulting in marked declines in tech stocks and exposing weaknesses within that sector.
While this event doesn’t directly impact Bitcoin, it has dampened risk appetites among investors, especially hedge funds, which often dial back their exposure to high-gain assets—Bitcoin among them.
Although the Trump administration appears to be concluding Operation Choke Point 2.0, widespread acceptance of Bitcoin by financial institutions is not an imminent reality.
Essential elements such as clearer accounting protocols and robust risk assessment frameworks must be established, along with the possible approval of in-kind ETFs, to facilitate smoother integration with traditional financial systems.
Until these foundational aspects are addressed, Bitcoin’s chances of surpassing the $105,000 barrier remain limited.
Nevertheless, a surge in institutional interest, particularly from sovereign entities, could propel Bitcoin’s market value to new heights.
Source: Cointelegraph