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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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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.
Source: finance.yahoo.com