Bitcoin has solidified itself as a new asset class, often compared to gold due to its store-of-value properties, but with enhanced features like greater portability and divisibility. Despite short-term volatility, Bitcoin’s long-term trajectory has been marked by significant gains, driven by macroeconomic factors, institutional adoption, and positive regulatory shifts which are all set to continue.

Key Insights:

1. Regulatory Clarity & Institutional Adoption

• The approval of U.S. spot Bitcoin ETFs has expanded access for institutional investors, increasing liquidity and reinforcing Bitcoin’s credibility.
• The U.S. government’s establishment of a Strategic Bitcoin Reserve and softened regulatory stance signal growing institutional acceptance.

2. Macroeconomic Drivers

• Global debt, fiat currency debasement, and rising inflation concerns are pushing investors toward Bitcoin as a hedge, similar to gold.
• Increasing military budgets and fiscal deficits, particularly in the U.S. and Europe, contribute to inflation risks, further driving Bitcoin’s appeal.

3. Long-Term Growth Factors

• Institutional interest continues to rise, with hedge funds, pension funds, and major corporations integrating Bitcoin into their portfolios.
• A generational wealth shift (estimated $84 trillion) is favouring digital assets, as younger investors prefer Bitcoin over traditional financial instruments.
• Emerging markets are increasingly using Bitcoin for cross-border payments and as a hedge against currency instability.

4. Investment Strategy: Cost-Averaging

• Due to Bitcoin’s volatility, cost averaging (i.e. periodically purchasing consistently over long time irrespective of recent price movements) is an effective strategy for mitigating risks and ensuring steady accumulation over time.
• Historical data shows that consistent investments in volatile assets like Bitcoin have resulted in strong long-term returns.
• Structured investment products, such as Jaltech Bitcoin Debentures, offer automated and risk-managed exposure to Bitcoin.

Introduction

Bitcoin represents a fundamentally new asset class – a bearer asset with a number of gold-like features, alongside numerous improvements over the yellow metal, including greater portability and divisibility. Gold has long been viewed by society as a durable store of value, and in much the same way that gold trades at prices vastly higher than its value in many industrial use-cases, Bitcoin’s value is also largely a social construct derived from the asset’s suitability as a censorship-resistant, inflation-resistant long-term store of value. The biggest difference is the lack of long-term history, but looked at more positively, this also means that Bitcoin’s full price potential could still a long way from being realised.

Bitcoin’s recent pullback to levels seen before the surge that followed Donald Trump’s election in the US has led to questions about whether now is a good time to embark on an investment into the flagship cryptocurrency and whether the long-term outlook remains strong. Historically, Bitcoin’s price has seen a strong uptrend punctuated by occasional sharp declines and it is unlikely that this dynamic will change in the short, or medium term.

The current retracement aligns with broader global equity market movements, driven largely by concerns over tariff policies introduced by US President Trump, and should not be cause for concern for long-term investors. Bitcoin does show high correlation to traditional risk assets – although this correlation is much lower over longer timeframes.

When zooming out, Bitcoin remains comfortably above last cycle’s highs and is up over 400% since the start of 2023. Recent declines haven’t diminished the significant long-term growth potential that Bitcoin holds.

Source: TradingView

Regulatory Clarity Supports Long-term Valuations

Regulation has historically been a source of uncertainty for Bitcoin’s potential, often leading to hesitation among investors. However, recent developments suggest a shift toward a more accommodating regulatory environment. The approval of US-based spot Bitcoin ETFs in 2024 has been a landmark moment, allowing institutional investors to gain exposure to Bitcoin through regulated financial products. This has not only increased market liquidity but also enhanced Bitcoin’s credibility as an asset class, reinforcing its long-term viability. Price action since the launch of these ETFs has been reminiscent of that seen for gold markets after the first gold ETFs launched in 2003 – which kicked off a secular bull market for gold.

 Data source: World Gold Council

These Bitcoin ETFs are expected to channel trillions of dollars in institutional capital into the market over time, further cementing Bitcoin’s position as a mainstream investment vehicle.

Additionally, the U.S. Securities and Exchange Commission (SEC) has taken a more measured approach toward enforcement in the first months of Trump’s presidency. The abandonment of multiple lawsuits against cryptocurrency firms indicates a clear shift from aggressive crackdowns to a regulatory stance that is more accommodating of crypto innovation.

This evolving approach suggests that regulators are beginning to recognize the legitimacy of digital assets and the inevitable growth in their role in financial markets. The US government’s creation of a Strategic Bitcoin Reserve during March further underscores this shift.

Although at this time there are no plans for the US government to allocate budgetary resources towards the purchase of Bitcoin – a move that disappointed the Bitcoin investing community – the government will now as a matter of official policy hold onto any Bitcoin forfeited or seized during civil or criminal asset forfeiture proceedings.

As regulatory clarity improves, and governments worldwide become more accepting of the benefits digital assets can offer to their economic strategies, Bitcoin’s integration into mainstream finance is likely to further accelerate, fostering greater adoption and stability.

In the private sector, interest in Bitcoin is growing as major financial players recognize its potential as a long-term investment. Hedge funds, pension funds, and corporations continue to experiment with Bitcoin exposure, further reinforcing its legitimacy in traditional finance.

Beyond investment, Bitcoin’s role as a functional financial tool is also expanding. In emerging markets particularly, its use in cross-border payments and remittances is growing due to low costs when compared to the traditional banking system – despite inherent price volatility. A number of financial firms are experimenting with Bitcoin rails for cross-border payments whilst shielding their users from the inherent price volatility through hedging techniques. Outside of the US, nation-states such as El Salvador have integrated Bitcoin into their economies, while BRICS nations are showing growing interest in incorporating the asset in trade.

As these trends continue, Bitcoin’s relevance as both an asset and a financial instrument seems set to continue.

Generational Wealth Transfer & Bitcoin Preference

Simultaneously, demographic shifts are driving increased Bitcoin adoption. An estimated $84 trillion is set to be transferred from Baby Boomers to their Millennial and Gen Z children over the coming years. Younger generations are set to continue reshaping global investment preferences, and data shows these cohorts are significantly more inclined toward digital assets – boding well for prices going forward.

Source: Blockchain Capital

This generational shift is occurring alongside broader macroeconomic developments, including rising global debt and fiat currency debasement, which are amplifying the effect of these trends.

Fiat Debasement & Global Debt Burdens

Global economic policies are shifting in response to major geopolitical developments – with Trump’s presidency the catalyst. Governments globally are on track to ramp up spending alongside central banks easing monetary constraints. These developments appear to be most pronounced in Europe, where financial priorities are shifting in favour of dramatically increased military spending.

In the US, despite efforts to curb expenditures, the country is projected to see its national debt continue to trend up. With interest payments currently at worryingly high levels, and fiscal discipline proving elusive, it’s no surprise that gold is scaling all-time highs in response to associated inflationary risks. At the same time, Bitcoin’s appeal as a hedge against fiat debasement is gaining renewed attention.

Sources: Federal Reserve Bank of St Louis & US Office of Management and Budget (data), Noah Smith (annotations)

The US’s new Department of Government Efficiency (DOGE) is taking steps to rein in spending, yet markets currently expect minimal impact to the bottom line. After initial optimism, prediction market Polymarket now expects DOGE to cut less than $50bn in government spending in its first year – less than 1% of 2024’s budget. Polymarket has risen to prominence after successfully calling the landslide US government election result against the backdrop of mainstream sources contending the election would be too close to call. This limited fiscal restraint reinforces concerns over long-term dollar stability.

Data source: Polymarket (https://polymarket.com/event/how-much-spending-will-elon-and-doge-cut-in-2025)

In Europe, escalating defence budgets signal a broader commitment to military expansion, a shift largely driven by the evolving US foreign policy stance. As governments allocate more resources to defence, with little room to cut spending in other sectors, borrowing is set to increase, inevitably contributing to pressure on the euro.

Bitcoin, has repeatedly thrived in environments of broad-based monetary expansion. Its decentralized nature makes it an attractive option for those looking to protect wealth from the consequences of unchecked government spending – much like gold. As global financial uncertainties persist, Bitcoin’s role as a financial hedge is becoming more pronounced, solidifying its position in the modern investment landscape.

Data source: BGeometrics.com

Why Cost-Averaging Works for Bitcoin and Other Volatile Investments

Despite a number of fundamental tailwinds, investing in Bitcoin is notoriously volatile, making market timing the greatest challenge for investors. A cost-averaging strategy helps mitigate risk by investing a fixed amount at regular intervals, ensuring steady accumulation regardless of short-term price fluctuations and greatly diminishing the impact of market timing on investment performance.

History shows the effectiveness of a cost-averaging approach in high-potential, but volatile investments. From 1999 to 2010 and beyond, investors who saw the internet’s potential and consistently bought Nasdaq tech stocks saw jaw-dropping long-term gains – despite the massive market crashes in 2001 and 2007/8 that were largely unforeseen.

Similarly, Bitcoin’s history shows the difficulty of predicting price movements. The 2017 bull run, driven by Ethereum and blockchain hype, was followed by a downturn. The 2020 rally, fuelled by COVID-19 liquidity, ended with FTX and Terra Luna’s collapses. Those who have consistently invested during this period of high volatility have managed to reap most of the rewards, whilst keeping volatility of their overall investment under control. The chart below illustrates the power of a cost-averaging approach (light blue line) in recent years. Returns are in line with a lump-sum investment approach over the period, with the added benefits of keeping overall drawdowns under control and requiring no large upfront capital outlay.

Data source: costavg.com

Despite short-term market fluctuations, Bitcoin’s fundamentals remain stronger than ever. With increasing institutional adoption, a maturing regulatory landscape, and long-term drivers like fiat debasement and generational wealth transfer, Bitcoin continues to present a compelling long-term investment case.

Jaltech Bitcoin Debentures: A Smarter Way to DCA

For investors looking to automate and optimize their Bitcoin strategy, Jaltech Bitcoin Debentures offer a structured approach:

• Automated debit orders ensure disciplined, long-term accumulation.
• Removes emotional investing pitfalls, avoiding the risk of poor timing decisions.
• Provides institutional-grade exposure to Bitcoin with built-in risk management.

Learn More About Jaltech Bitcoin Debentures