Bitcoin experienced a decline in its status as the "hottest trade" of 2025, primarily due to changing institutional flows and risk appetites. This shift is characterized by a notable repositioning from major financial entities.
Alex Thorn, Head of Research at Galaxy Digital, observed a cooling in market optimism as investors rotate from crypto to AI and traditional equities. Thorn remains optimistic about Bitcoin's structural bull case and expects institutional focus to return. He stated, "While macro factors and shifting market anxieties have temporarily moved attention away from Bitcoin, the structural bull case remains intact, and we anticipate institutional flows returning as macro conditions stabilize."
Bitcoin Volatility Drops Amid Institutional Outflows
The decline affected Bitcoin's volatility and fund movements among ETFs and large custodians. ETH and other altcoins experienced indirect impacts as capital flowed toward narratives such as AI and real-world assets.
Galaxy Digital has revised its year-end Bitcoin price target to $120,000 from an earlier $185,000, a reflection of ongoing macroeconomic pressures. Funding allocations show diversified interests, yet institutional engagement persists at a slower rate.
Bitcoin Mirrors Past Cycle Shifts, Experts Weigh In
This market shift mirrors patterns from previous Bitcoin cycles like 2017–2018 and 2021, where Bitcoin lost narrative dominance to assets such as DeFi and AI-linked tokens. Such rotations emphasize the evolving nature of investment trends.
According to experts, while Bitcoin's recent pullback is seen as a late-cycle consolidation, its long-term structural trend remains solid. Raoul Pal notes a classic pattern of macro headwinds, anticipating a return in focus to Bitcoin.