Bitcoin is now a factor in the global financial landscape. It is a household discussion, with an estimated 20% of US citizens owning Bitcoin as of 2023 (excluding ETFs and other indirect forms of ownership). The rising interest has sparked conversations about it being a reserve currency due to its limited supply.
These factors, as well as inflation, blockchain advancements, Central Bank and regulatory policies, institutional investment, payment systems, and even AI, will affect the BTC to USD exchange rate in 2025. Here’s how, and where the Bitcoin price may be headed in 2025.
Top 5 FinTech Forces of BTC/USD Ratio
Let’s discuss the main events that will drive the BTC to USD exchange rate in 2025.
1. Blockchain Advancements
The Bitcoin blockchain is not static, and it continues to evolve to handle the additional demands placed on it. This allows for more users and transactions to receive efficient exchanges.
Improving the actual blockchain isn’t the only factor that may help drive down costs and make transactions quicker. The blockchain is the base layer, and additional layers can be built on top of it. These transactions go through less scrutiny and are off-chain, but that means lower costs to receive or send and potentially quicker transactions. An example of this is Lightning, which provides essentially instant payments. It isn’t on the blockchain but is part of the Bitcoin universe. Additional protocols, such as eCash and others, are being built on top of the Lightning network. Just as there are multiple ways to send or pay with fiat currency, that is becoming a reality for Bitcoin as well.
The more ways to use Bitcoin, and the easier it is, potentially the greater the adoption. More users could help lead to steady demand and, eventually, more price stability. This could lead to greater adoption by businesses accepting Bitcoin, which further adds to its demand, helping hold prices higher.
2. Central Bank Digital Currencies (CBDCs)
Central Banks are key in widespread Bitcoin and/or other digital currency adoption. El Salvador’s Central Bank declared that it would use Bitcoin as part of its foreign reserves and benefited from the recent rise in Bitcoin’s price.
Some countries may not opt to use Bitcoin as part of their reserves or may transition to a digital currency of their own. China, India, Nigeria, the Bahamas, Sweden, and Japan are all in various stages of planning or having rolled digital currencies.
Any Central Bank interested in Bitcoin is potentially bullish for the world’s largest cryptocurrency. And movement toward digital currencies is where the world seems to be headed.
3. Institutional Investments
Institutions are the big players in the market next to central banks, and how they view Bitcoin has a big impact on the BTC/USD performance.
If institutions are buying Bitcoin on average, that helps push prices higher. Even if institutions are only holding onto Bitcoin (and not selling), that means fewer Bitcoins are available for others to buy or sell. This theoretically increases demand for the limited number of Bitcoins which are available to freely trade. Recall that Bitcoin has a capped supply of 21 million coins, with nearly 20 million already in circulation.
Institutions do seem to be adopting Bitcoin. Major companies like PayPal, Microsoft, AT&T, Starbucks, Whole Foods, Home Depot, Shopify, KFC, Burger King, Overstock and many more now have cryptocurrency payment options.
One of the largest institutional holders is Tesla, Inc. with more than $1 billion in Bitcoin holdings as of Dec. 17, 2024.
4. AI-Driven Trading
Algorithm trading accounts for 60-75% of U.S. stock market trading volume. Algorithms or AI can act faster than humans, they can trade more, which means each algorithm is buying and selling more. This helps create liquidity; when you want to buy or sell another party is more likely to be there to transact with you.
AI likely won’t push Bitcoin higher on its own, but AI does allow traders and investors to formulate strategies for how to trade Bitcoin. The more users, the more volume, and the more attractive it is as a trading vehicle.
5. Economic Regulations
The regulatory environment for Bitcoin is currently favorable. Countries are considering using Bitcoin as a strategic reserve currency, and the U.S. approved Bitcoin ETFs and futures contracts in recent years.
Taxation is also being handled with countries like the U.S. only allowing certain exchanges that adhere to their guidelines. This allows for regulatory oversight.
Governments are striking a balance between innovation and control. Free markets with some regulation are what lets them operate efficiently and safely. Investors feel more protected and thus more willing to be active in the market.
When institutions and individuals feel a sense of security, they are more likely to engage in that market. Long-term, that is good for Bitcoin price stability.
BTC to USD Exchange: What to Expect in the Next Few Years
While the fintech landscape is favorable for Bitcoin to remain a viable financial asset, so far it has experienced a 70% or greater drop in price approximately every two years. Large rallies have followed those declines historically, but such volatility is simply not acceptable to many individuals, businesses, and governments.
If Bitcoin is to be adopted as a currency, it needs to behave more like one: stable.
Geopolitical Shifts and Their Impact on BTC to USD Trends
Watch for unrest to play a role in BTC/USD trends in the years ahead. Bitcoin exists outside of any single country, which makes it a potential safe haven for those in countries ravaged by inflation, war, or tyranny.
The decentralized nature of cryptocurrencies allowed hundreds of millions of dollars of donations to flood into Ukraine. Essentially, when traditional infrastructure is under fire or distress, Bitcoin exists outside that infrastructure as a way to send, receive, and store funds.
BTC’s Integration Into Payment Systems Will Boost Its Value
More payment systems and businesses are accepting Bitcoin. PayPal, one of the world’s largest payment companies now processes cryptocurrency transactions. This was a major step forward in the widespread acceptance of Bitcoin as a form of payment. Visa also allows crypto withdrawals to a Visa debit card, which can then be used anywhere Visa is accepted.
The list of payment processors accepting Bitcoin is expected to grow. This adds to the legitimacy of the cryptocurrency and could help boost its value as it becomes a prominent form of payment.
Conclusion
Central Banks, governments, and regulators are embracing — or at least not opposing — Bitcoin. Integration with payment processors and being outside a single country’s financial system are all potential tailwinds for Bitcoin long term.
Right now Bitcoin is largely popular because of its price swings and return potential, yet ironically, that is one of the things holding it back from being even more widely accepted.
