Bitcoin Is Down 25% From Its All-Time High. Here's Why It's Still a Buy.

The price of Bitcoin (CRYPTO: BTC) has now fallen through the $80,000 level, and some analysts are now warning that $70,000 is next. Bitcoin is now down nearly 25% since it reached an all-time high of $109,000 on Inauguration Day, and investors are understandably concerned.

However, there are three strong factors in Bitcoin's favor that appear to suggest that markets are overreacting right now. Let's take a closer look.

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Spot Bitcoin ETFs

Admittedly, there has been a net outflow of the spot Bitcoin exchange-traded funds (ETFs) over the past few weeks. That makes sense. Many investors are panicking and pulling their money out of risky assets such as Bitcoin. Some of this money is likely flowing into gold ETFs as investors shift their focus to gold as the ultimate safe haven right now.

Despite this, large institutional investors (those with $100 million or more in assets under management) continue to pile into Bitcoin. According to the latest 13F filings with the Securities and Exchange Commission (SEC), these institutional investors now have $38.7 billion invested in spot Bitcoin ETFs. According to Coinbase Global, that's more than three times the amount ($12.4 billion) that was invested just one quarter earlier.

The long-term trend is definitely positive, and the spot Bitcoin ETFs have been one of the most successful product launches in Wall Street history. Over $100 billion flowed into them in just the first 12 months. I'm bullish that, as soon as the current market volatility subsides, money will soon flow back into these Bitcoin ETFs, helping to push up the price of Bitcoin.

Strategic Bitcoin Reserve

The second big factor is the creation of the Strategic Bitcoin Reserve in early March. Given the current bearish sentiment in the overall market, it's perhaps no surprise that even this move disappointed crypto investors. That's because they were expecting the U.S. government to announce a splashy new Bitcoin buying spree. Instead, the federal government seems content to hoard the nearly 200,000 Bitcoins it already owns.

Image source: Getty Images.

However, there is still a possibility that the U.S. government will start to buy new Bitcoin before the end of 2025. According to the White House, this is possible if they can find a "budget-neutral" way to accomplish this. Proponents have floated several ideas, including using DOGE savings to finance new Bitcoin purchases. Others have proposed clever sleight-of-hand accounting moves in which certain gold assets are revalued (but not sold!) in order to open up room for new Bitcoin buying.

Even if the federal government's Strategic Bitcoin Reserve fails to deliver as planned, there's still hope. That's because over 20 U.S. states -- including Texas -- have now proposed Bitcoin reserves of their own. And, globally, there's suddenly a growing appetite by sovereign governments to establish Bitcoin reserves.

Global crypto adoption

And that brings us to the final factor: global adoption. It's easy to take a U.S.-centric view of the crypto industry. However, the pace of crypto adoption is actually happening much faster elsewhere in the world.

A lot of that has to do with regulation, something the Trump administration fully recognizes. That's why it made pro-crypto regulation a centerpiece of its strategy. Having the right regulation in place clears up market uncertainty and makes it much more attractive to do business.

In Europe, for example, the new Markets in Crypto Assets (MiCA) legislation is now making it much easier for financial institutions to get involved with Bitcoin. The same goes for crypto legislation in Latin America, which is rapidly turning into a hotbed for Bitcoin innovation.

In search of a new Bitcoin catalyst

The problem, for now, is that Bitcoin lacks a defining new catalyst. Last year, Bitcoin had the launch of the new spot Bitcoin ETFs in January and the election of a pro-crypto president in November. In the first month of 2025, Bitcoin benefited from pro-crypto euphoria as market participants eagerly looked forward to a new approach to crypto from the Trump White House.

So, until a new catalyst emerges, Bitcoin will likely move up and down with the broader market. Any bad news about tariffs, inflation, or recession will send it lower. Instead of focusing on metrics relevant to the Bitcoin blockchain, investors will be digging into Consumer Price Index (CPI) numbers.

It's important to keep a long-term outlook on Bitcoin. Over the next few months, there could be more pain for Bitcoin holders. But if history is any guide, Bitcoin will soon recover and continue its market ascent to a new all-time high.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.