Bitcoin may sustain momentum in 2025 despite Google’s quantum chip concerns

Bitcoin’s price retraced sharply from recent highs following concerns sparked by Google’s quantum computing advancements. Despite regulatory uncertainties and potential risks, analysts remain optimistic about the cryptocurrency’s long-term outlook.

Bitcoin’s price topped the $100,000 (€95,268) mark this month following Trump’s nomination of the pro-crypto Paul Atkins to be the new leader of the US Securities and Exchange (SEC).

The world’s largest digital token hit highs of more than $103,000 (€98,126) on 5 December before retreating to under $96,000 (€ 91,457) in the early session on Wednesday.

The sharp price decline in Bitcoin was triggered by Google’s announcement of its quantum computing chip, Willow, on 9 December.

The super-powered chip is considered to have the potential to break cryptographic algorithms, raising concerns about cryptocurrency security.

However, industrial experts said that quantum technology would take years and billions of dollars to achieve such an ability. Meanwhile, Google’s parent Alphabet saw its shares surging 5% on Tuesday.

The bullish trend may extend amid easing monetary policies

Despite the recent drop, some analysts believe Bitcoin will continue its bullish trend. Christoper Lewis, FXEmpire’s analyst, believes the pullback offers value each time it dips.

He mentioned that the Fed’s rate decisions and the US inflationary trajectory remain critical influential factors on the crypto markets.

Fed Chair Jerome Powell said that Bitcoin is like gold but only virtual, reinforcing its positive correlation with the precious metal.

Similar to gold, historically, Bitcoin trended up during a rate-cut cycle and went through a downturn when central banks, particularly the Fed, started tightening monetary policy.

This suggests that cryptocurrencies’ trends reflect market liquidity conditions. Hence, Bitcoin may benefit further from the macro tailwind in the new year.

Major central banks are widely expected to continue their easing cycle amid cooling inflation and slowing down economic growth.

Regulatory tailwinds and strategic adoption

Additionally, cryptocurrencies may take further regulatory tailwind from the Trump Administration.

The US president elect proposed to adopt Bitcoin as part of the US strategic reserves, with Senator Cynthia Lummis outlining the purchase of not more than 200,000 Bitcoins annually over five years.

Some institutional researchers, including Bernstein Private Wealth Management and Standard Chartered believe Bitcoin will reach $200,000 (€190,581) by the end of 2025.

Bitcoin has gained 44% since Donald Trump won the US presidential election on 5 November on optimism that the president-elect will impose more crypto-favorable policies.

Trump vowed to “make America the crypto capital” in his campaign.

Year-to-date, the token has rallied by 130%, fuelled by loosening liquidity conditions, the approval of spot Bitcoin ETF by the US Securities and Exchange Commission (SEC) in February, and a Bitcoin halving event in April.

Bitcoin reached fresh highs every 4 years in the past two bullish cycles since 2017. Each cycle experienced a surge of more than tenfold before a setback of between 70% and 80%.

Bitcoin has surged approximately 560% since its low two years ago, suggesting there might be more room for growth if history repeats.

At the Bitcoin MENS event in Abu Dhabi on 10 December, Eric Trump, the executive vice president of the Trump Organisation and son of Donald Trump, said the Bitcoin price could hit $1m (€952,707) one day.

Risks and uncertainties remain

Despite the optimism, risks remain for the volatile cryptocurrency market. Bitcoin’s valuation lacks a fundamental basis, and speculative trading behaviours dominate price movements.

Large trades by significant holders, or “whales,” can create sharp price fluctuations, especially on smaller exchanges or during periods of low liquidity.

While leverage has amplified recent gains, it also heightens the risk of sharp reversals if liquidation events occur,” Dilin Wu, a research strategist at Pepperstone wrote in an email.

Regulatory challenges also persist. The European Securities and Markets Authority (ESMA) introduced the Crypto Assets Regulation (MiCA) in June 2023, with full implementation expected this month.

The framework aims to enhance transparency and consumer protection, potentially introducing stricter regulations compared to the anticipated US approach.