Key Takeaways
- Government bitcoin adoption remains slow but could become a major catalyst if central banks act.
- Lower bitcoin volatility since ETF approvals is attracting greater institutional investment and accelerating ETF inflows.
- A shift in U.S. monetary policy toward lower rates and dollar devaluation could further boost bitcoin's appeal.
With bitcoin trading near all-time highs, Bitwise CIO Matt Hougan argues that the market is still overlooking several key factors that could drive prices even higher by year-end.
Government adoption remains a wildcard
Hougan identifies the potential for more governments to buy bitcoin as one of the most significant, yet underappreciated, catalysts.
While ETFs and corporate treasuries have absorbed substantial amounts of bitcoin this year, government reserves remain limited.
The U.S. Strategic Bitcoin Reserve currently only holds seized coins, and other state-led initiatives, such as Pakistan’s strategic bitcoin reserve and Abu Dhabi’s ETF investments, are still minor in scale.
Bitwise notes that central banks, including the Czech Republic, are quietly exploring bitcoin, and even a few high-profile announcements could trigger major price movements.
Changing U.S. monetary policy
Hougan also points to the Trump administration’s signals favoring a weaker dollar and a more dovish Federal Reserve.
The appointment of Stephen Miran, who supports aggressive rate cuts and dollar devaluation, could result in more substantial monetary easing than markets expect.
Such developments would likely support further bitcoin appreciation, as looser policy often fuels demand for hard assets.
Institutional flows and volatility trends
The launch of spot bitcoin ETFs in early 2024 has had a notable impact on the market.
Bitcoin’s volatility has declined to levels comparable to high-volatility tech stocks, which is prompting institutions to increase portfolio allocations.
ETF inflows have accelerated, with $5.6 billion added since July alone.
You can track these trends via the bitcoin ETF inflows chart and monitor ongoing bitcoin volatility.
Industry perspective
Summing up the current environment, Hougan stated in his memo:
“Markets don’t rise on good news. They rise on good news that is not priced in. I think the market in general underappreciates the scale of the bull market taking place in crypto. But I also think it’s overlooking some specific catalysts that will play out in the months and years to come.”
