Will crossing $100,000 further legitimise Bitcoin and reduce crypto volatility?

Hitting that level would push the digital token into uncharted territory and the next key milestone could be $120,000, analysts say

Bitcoin has climbed more than 150 per cent in the last year and over 40 per cent since the US election. EPA

Bitcoin crossing $100,000 appears to be a mere formality now, but this milestone could help to further legitimise cryptocurrencies, reduce volatility and accelerate their adoption by both institutional and retail investors, industry experts say.

The sharp rise in the price of the world’s largest cryptocurrency is due to many factors, including institutional adoption, global economic uncertainty and the inherent strength and security of the Bitcoin network, says Mohamed Hashad, chief market strategist at investment brokerage firm Noor Capital.

Bitcoin's appreciation is expected to accelerate the adoption of cryptocurrencies, making them more mainstream and increasing their legitimacy as an attractive asset class for investors, rivalling traditional, lower-risk assets, he says.

Michael Chu, head of investments at investment platform Sarwa, says Bitcoin has been facing resistance at around the $100,000 mark for the past two weeks. If BTC crosses this mark, there could be a pullback as investors take some profit, he adds.

“We encourage investors to take a long-term view on asset classes. Celebrate milestones if you have seen gains but zoom out beyond short-term price milestones as part of an investment strategy,” Mr Chu says.

According to James Pook, adviser at investment management firm Quilter Cheviot, the $100,000 mark now appears as a formality.

"Once we pass that mark, the most bullish Bitcoin investors will target $250,000, maybe even $1 million per coin. However, at some point, the momentum will fade and the asset will again settle back into a range until the next market event," he says.

Next price target

Bitcoin fell to $95,776 on Sunday after coming within $300 of the six-figure milestone on Friday. It rebounded to $98,316 as of 3.44pm UAE time on Monday, as US president-elect Donald Trump’s pick of hedge fund executive Scott Bessent for Treasury secretary helped sentiment in global markets.

Bader Kalooti, regional growth and operations lead at global cryptocurrency exchange Binance, says crossing the $100,000 mark would not only be “uncharted territory” for Bitcoin, but also mark a historic milestone for the broader industry.

The next key milestone could be $120,000, though any price point beyond $100,000 will carry significant importance, he adds.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says the sky is the limit once Bitcoin hits $100,000. The most enthusiastic forecasts suggest $150,000 to $200,000 levels, though with high volatility, she warns.

There is a clear fear of missing out. Therefore, there are more buyers than sellers, and more demand than supply at the moment, she says.

Bitcoin has climbed more than 150 per cent in the last year and over 40 per cent since the US election on expectations that Mr Trump will loosen the regulatory environment for cryptocurrencies.

The overall value of the digital asset market has surged about $1 trillion since his victory on November 5. Mr Trump has also pledged to set up a national Bitcoin stockpile, although the timeline for implementation and the feasibility of this Bitcoin reserve remain open to question.

Steve, a UAE-based Bitcoin investor who works with start-ups and brands in the industry, first invested in the crypto asset in 2017. He cites the confidence being demonstrated by brands like MicroStrategy and Marathon Digital Holdings by using Bitcoin as a Treasury reserve asset, and billionaire Michael Saylor diluting company stock to buy more BTC, as factors fuelling the rally. The launch of Bitcoin exchange-traded funds in the US also created a huge on-ramp for institutions and retail investors.

“About $150,000 to $200,00 is a price target that’s widely spoken about. A lot of people who understand Bitcoin don't tend to care too much about the volatility of the price in fiat terms. What's more important to me is seeing growth on the network,” he says.

“As we become more dependent on digital infrastructure, the need to settle finances instantly will grow. Within crypto, Bitcoin in specific, the moment money leaves your wallet, it settles instantly to wherever the destination is. That's a huge attraction for a world that is going to ultimately become more digital dependent.”

Steve suggests those sitting on the sidelines to initially buy a small amount of Bitcoin and raise their awareness. “I would try to learn about what the technology is and why it's having such an impact in the world. Also seek out events in the UAE, such as the BitcoinMena 2024 conference in Abu Dhabi, where people with industry experience and knowledge can offer insights,” he recommends.

Will BTC volatility decrease?

Mr Hashad from Noor Capital says that while Bitcoin’s volatility is likely to decrease as it matures as a robust asset and its market capitalisation grows, price fluctuations will remain. The cryptocurrency market remains susceptible to external factors such as economic conditions, geopolitical events and regulatory changes.

“Surpassing the $100,000 mark could lead to increased adoption by major banks and financial institutions, greater acceptance of cryptocurrencies as a means of payment, and increased integration into financial products and services,” according to Mr Hashad. “With Bitcoin’s increasing prevalence, its price movements may begin to resemble those of traditional financial assets, exhibiting less volatility.”

Quilter Cheviot’s Mr Pook clarifies that Bitcoin’s current volatility is no different to global mega cap tech stocks such as Nvidia, Meta and Tesla. Given the asset’s speculative nature, Bitcoin will continue to experience long periods of significant drawdowns and investors should be prepared for these. Understanding the investment time horizon and tolerance for risk will be key factors, he explains.

Mainstream adoption

It’s still too early to say if Bitcoin crossing $100,000 will propel crypto adoption into the mainstream, according to Sarwa’s Mr Chu. However, compared to previous periods, more and more asset managers and hedge funds are including cryptos into their investment strategies.

Mr Kalooti from Binance says Bitcoin's new level legitimises the industry, proving sceptics wrong. “If we look at the Web3 industry five years ago or even a decade ago, digital assets were a niche topic, hindered by a steep learning curve and limited transparency. Today, the narrative has shifted significantly,” he says.

“Governments worldwide are increasingly viewing crypto as an opportunity rather than a risk. This change in perception has prompted more regulatory bodies to establish clear guidelines for retail and institutional investments in the sector. As a result, adoption is continuing to grow and the industry's understanding is becoming more widespread.”

Will enforcement actions reduce under Trump?

Mr Hashad believes that with the incoming Trump administration potentially adopting a more accommodating and crypto-friendly regulatory stance, enforcement actions by the US Securities and Exchange Commission are likely to decrease, fostering a more conducive environment for the cryptocurrency industry.

Mr Trump had revealed plans to dismiss SEC Chairman Gary Gensler on day one of his new administration, following Mr Gensler's history of taking legal action against crypto companies. Mr Gensler has since resigned and will step down on January 20, 2025.

Mr Trump is also establishing a crypto-friendly administration with the likes of Howard Lutnick (Secretary of Commerce), Elon Musk (Department of Government Efficiency) and Robert F Kennedy (Secretary of Health). They are all known crypto advocates, with Coinbase chief executive Brian Armstrong also being touted for a position, according to Mr Pook.

“Mr Gensler’s resignation is a major shift, and the buzz about the US potentially adding crypto as a reserve asset is even bigger,” says Matthew Carstens, director of product experience at neo-broker amana. “All signs point to a landscape that’s becoming more crypto-friendly – especially with a newly elected president who’s not just supportive but also actively involved in the space. With a crypto-friendly administration stepping in, the stage is set for bigger funds to feel confident adding more exposure.”

Should BTC investors cash out now?

Cryptocurrency investors may find it advantageous to hold their Bitcoin assets for the long term rather than selling during the current rally, according to Mr Hashad.

"The underlying technology and limited supply could drive its value higher over time,” he says. “However, it is crucial to assess individual risk tolerance and financial goals before making investment decisions.”

Mr Pook says each individual investor will need to consider their own circumstances to answer whether now is an appropriate time to sell their holdings.

“Are you likely to need the funds across a short-term time horizon (less than five years)? If so, given the volatile nature of the asset, you may want to consider switching to something lower risk to protect your capital value,” he suggests.

“Clearly, if you have funds that have no intended use, are interested in cryptocurrencies and are willing to be patient during the inevitable market drawdowns, then a small holding in Bitcoin may be appropriate for you, but it would be high risk to put needed savings and investments in the asset class. Remember, get-rich-quick schemes very rarely succeed for the vast majority of people.”