Bitcoin Will Be Back Breaking Records Before Long

After yesterday's bloodbath, dip-buyers are panicking back into bitcoin (in fact all of the crypto ecosystem) today, as Bloomberg Macro Squawker, Conor Cooper, highlights that Bitcoin’s latest selloff won’t deter enthusiasts who have seen downturns of this magnitude before, only to find fresh record highs waiting around the corner.

As Cooper details below, looser financial conditions, growing institutional adoption, and a reliably bullish retail crowd will ensure this time is no different.

Bitcoin fell as much as 36% from its early-October record but there have been signs the worst of the decline may have passed. The token just notched its first weekly gain in five and a reversal of bearish sentiment was also observed across derivatives markets. That shift hit a speed bump on Monday, but call options at the strike of $100,000 are still seeing the most open interest, according to Deribit data.

Monday’s selloff may have been in part a reaction to comments from Strategy Chief Executive Officer Phong Le which fanned growing concerns that the firm could be forced to sell some of its sizable Bitcoin pile. However, an update on Monday revealed it had added to its holdings between Nov. 17 and Nov. 30. The “business-as-usual” guidance and the creation of a $1.4 billion reserve to fund future dividend and interest payments should soothe some of those concerns.

We’ve seen similar retreats from record highs in recent years. Bitcoin fell 32% from its peak earlier this year and dropped as much as 33% from all-time high in 2024.

On both occasions, it hit fresh records only a few months later.

Prior episodes don’t guarantee a similar outcome this time around, but do illustrate how quickly Bitcoin can rebound in a favorable environment and as the market matures.

There is a reliable pillar of support for Bitcoin that should remain in place through next year: loosening financial conditions via interest rate cuts by the Federal Reserve.

Traders see close to 100 basis points of easing by the end of 2026. Rate cuts tend to support assets that are non-yielding, speculative and have a highly leveraged market structure.

Bitcoin ticks all those boxes.

It’s no coincidence that the only negative year for Bitcoin in the last six was in 2022 when the Fed hiked rates by 425 basis points.

Also working in Bitcoin’s favor is the growing interest from institutional investors. Nasdaq’s International Securities Exchange recently proposed quadrupling the daily trading limit for options tied to BlackRock Inc.’s iShares Bitcoin Trust ETF as demand increases. The more tools that are available for investors to manage their exposure to Bitcoin, the more likely they are to include it in their portfolios. The institutionalization of the token is reshaping risk transmission, with implied volatility remaining contained during recent price swings.

That’s not to say that retail investors don’t still have a role to play. A good way to gauge their sentiment is to look at how Bitcoin performs over the weekend, when institutional participation is typically lower. The fact that prices have only fallen over one weekend out of the last 11 suggests the “buy-the-dip” crowd are still a supportive factor to prices.

Its worth noting how large the untapped pool of potential cryptocurrency owners is. A Gallup poll from earlier this year revealed that 14% of Americans own cryptocurrency and that ownership rates are higher among younger age brackets. The cohort effect means that overall ownership should continue to rise.

Of those in the same poll who said they had no interest in ever buying cryptocurrency, almost three-quarters said they view it as very risky. That perception will be hard to shake but Washington is playing its part, with President Donald Trump signing the first federal bill to regulate stablecoins in July. Texas recently took a step toward creating a state-based crypto reserve, according to a report by CoinDesk. Regular intersection between crypto and government policy will help the industry shed its risky label and widen the base of willing investors.

There’s an outside chance of Trump providing Bitcoin with an additional tailwind if he follows through on his pledge to send $2,000 “tariff dividend” checks to US citizens. The Covid stimulus checks were credited with boosting prices in 2021, and prominent crypto commentators are already touting these potential payments as “free Bitcoin.” Those checks may never reach the public, but it’s an upside risk nonetheless.

The probability of more Fed rate cuts is much higher, with traders currently betting on one later this month. That would underpin prices in the near term and support a move back toward $100,000.

Once there, investors will find it hard to resist talking about testing the October peak, given how recent cycles played out and that the retail crowd rarely turn down the opportunity to jump on the early signs of a bullish trend.

If recent history is any guide, Bitcoin could rise back to the current record — just above $126,000 — and beyond early next year.