Citigroup just hiked its 12-month price target for Bitcoin (CRYPTO: BTC) on Oct. 1, raising it to $113,000 from $82,000. As of Oct. 14, its price is $81,700, so Citi’s estimate implies an upside of about 38%.
There are three catalysts that could help to make that happen. Here’s what each catalyst needs to go right for the digital currency to climb.
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Image source: Getty Images. 1. Citi expects about $5 billion of ETF inflows
Spot Bitcoin exchange-traded funds (ETFs) hold the digital coins, so when the asset managers that issue those ETFs start buying more coins steadily, it inevitably pulls that supply off the open market, and prices then tend to go higher. Citi expects about $5 billion of crypto ETF inflows during the coming 12 months as financial advisors slowly raise their clients’ allocations.
That’s a pretty modest amount. U.S. spot Bitcoin ETFs have taken in $57.2 billion in net capital inflows since being launched in January 2024. It’s not uncommon at all for individual days to have net inflows of close to $1 billion.
But the most recent data point is going the wrong way. The ETFs had $678.9 million in net outflows the week ended Oct. 9, after nearly $7 billion exited in May and June.
Moreover, investors should remain acutely aware that flows and prices feed into each other, and it’s improbable for flows to occur without something else prompting them. A late 2024 study by crypto brokerage FalconX found that ETF flows are somewhat useful for forecasting short-term price movements but explain less than 10% of Bitcoin’s price changes.
In other words, inflows arrive with good sentiment and leave with it, so Citi is essentially predicting that among financial advisors who set allocations for their clients, sentiment will be improving soon.
2. A strong U.S. economy could be good news for Bitcoin
Citi’s emerging second catalyst is what it called “a supportive macro backdrop.” The Federal Reserve’s interpretation of the macroeconomic situation appears to be similar. On Sept. 16, the Fed said that U.S. economic activity is “expanding at a solid pace.” But that same day, the Fed also raised its benchmark interest rate by a quarter point, citing elevated inflation.
Higher rates tend to weigh on assets that don’t generate a cash return for investors, like Bitcoin, so there’s a possibility that more rate hikes could damp the rally. After all, the 10-year Treasury bond yield is now more than 5.2%, per Fed data. Thus investors can earn at least 5% yearly from U.S. Treasury bonds with far less volatility, which makes the digital coin look that much less appealing.
So economic strength could cut both ways. If inflation cools, the Fed can stop hiking, and risk appetite among investors could then rise, which would benefit the crypto. But more rate hikes to tame stubborn inflation could end up draining money from it.
3. The 2028 halving could lift Bitcoin starting in April 2027
Citi didn’t discuss Bitcoin’s supply schedule, but it contains another catalyst, the halving, whose run-up could begin inside Citi’s 12-month window.
Roughly every four years, the network cuts in half the number of new bitcoins paid to the coin’s miners for each block of transactions in an event called a halving. The next halving is projected to occur on April 4, 2028. History says the period leading up to the halving tends to be very profitable for holders.
Bitcoin rose by 380%, 141%, and 19% in the 12 months before the 2012, 2016, and 2020 halvings, per Bitcoin Suisse. It also more than doubled before the April 2024 halving.
Investors who expect fewer new coins to be produced may be prompted to buy ahead of the trickle of new coins becoming even slower. If that habit repeats as it has in the past, the run-up period before the halving would begin in about April 2027, overlapping the last five or so months of Citi’s price target window.
Overall, Citi’s price target is very plausible. In the near term, the economy is the thing to watch, as it’s likely to determine the degree of ETF inflows. But, over the longer term, the same Bitcoin supply dynamics that have always driven its price will be more important, so don’t let any turbulence prevent you from buying it.
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Citigroup is an advertising partner of Motley Fool Money. Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Citigroup Raises Its 12-Month Price Target for Bitcoin to $113,000. These Are the 3 Catalysts Investors Need to Watch. was originally published by The Motley Fool
