After two consecutive years of triple-digit gains, Bitcoin delivered an unwelcome surprise in 2025
The world’s largest cryptocurrency is set to end the year in bear-market territory, down roughly 6% from its starting level and more than 40% below its October peak near $126,000. For many investors, that outcome felt particularly disappointing given the optimism that followed the return of Donald Trump to the White House, widely seen as a tailwind for digital assets.
Yet according to crypto brokerage and research firm K33, the underperformance of 2025 may be laying the groundwork for a powerful rebound. In a recent note to clients, K33 argued that Bitcoin’s weakness this year was driven less by deteriorating fundamentals and more by temporary distortions, including localized speculative bubbles and leverage imbalances within the crypto market. When prices and fundamentals diverge, the firm wrote, long-term opportunities tend to emerge.
From that perspective, K33 enters 2026 with a decisively bullish outlook, projecting that Bitcoin will outperform both global equity indices and gold over the coming year.
One pillar of that view is valuation. Bitcoin has fallen back to what analysts describe as “pre-Trump levels,” erasing much of the policy-driven optimism that once lifted prices. Now trading deep below its prior highs, the asset appears undervalued relative to other major asset classes, especially when measured against its growing institutional adoption and macro relevance. K33 believes this reset has materially improved Bitcoin’s risk-reward profile heading into 2026.
Monetary policy is another key driver. Markets increasingly expect the Federal Reserve to resume interest-rate cuts next year, a backdrop that historically supports risk assets. Futures pricing suggests investors anticipate multiple rate reductions by the end of 2026, a sharp contrast to the restrictive environments that defined Bitcoin bear markets in 2018 and 2022. In K33’s view, easier liquidity conditions significantly reduce the likelihood of a prolonged crypto downturn.
Policy direction in Washington further strengthens the case. The Trump administration has positioned itself as openly supportive of digital assets, appointing crypto-friendly officials, issuing executive orders favorable to the industry, and encouraging deeper integration between crypto and traditional finance. While markets have yet to fully price in that shift, K33 argues that regulatory alignment at the federal level could act as a powerful catalyst over the next 12 months.
An often-overlooked factor is the United States’ growing role as a long-term Bitcoin holder. Estimates suggest the U.S. government controls more than 230,000 bitcoins, largely from seizures, now effectively removed from potential sell-side pressure. Even without additional purchases, the transition from forced liquidation to strategic holding represents a structural tightening of supply — a meaningful positive for price dynamics.
Meanwhile, retirement capital may soon enter the equation. Regulatory reviews initiated by the White House could allow 401(k) plans to allocate to alternative assets, including crypto funds. K33 estimates that even a 1% allocation from U.S. retirement accounts would translate into tens of billions of dollars of incremental Bitcoin demand. Combined with increasingly constructive guidance from major U.S. banks, this could significantly deepen institutional absorption.
Finally, regulatory clarity is approaching. The proposed CLARITY Act, which aims to establish a comprehensive framework for how banks and crypto firms handle digital assets, has already cleared the House of Representatives and awaits Senate consideration. Passage would mark a decisive step toward mainstream adoption, lowering legal uncertainty and accelerating bank participation in crypto markets.
Taken together, these forces suggest that Bitcoin’s disappointing 2025 may prove to be a transitional phase rather than a terminal decline. While short-term volatility remains likely, K33 believes the convergence of attractive valuations, easing monetary policy, political support, institutional access, and regulatory clarity positions Bitcoin to reclaim leadership among major asset classes in 2026.
If that thesis plays out, the asset that lagged stocks and gold this year could emerge as next year’s standout performer.
