3 concerns I have about this popular cryptocurrency

Back in mid-March, Bitcoin (BTC 1.14%) it hit an all-time high of $73,750 and it looked like the sky was the limit. But a lot has happened since then, and Bitcoin is currently trading at less than $64,000. While Bitcoin may still be up 45% for the year, the past six months have been disappointing to say the least.

So is it time to sell? Not at all. If you take a long-term view, Bitcoin’s growth potential remains unmatched among major cryptocurrencies. But that doesn’t mean the concern isn’t warranted.

What’s Next for Bitcoin ETFs?

More than $30 billion has already flowed into new Bitcoin exchange-traded funds (ETFs) since the beginning of the year, and as long as people continue to invest in them, it is believed that Bitcoin has nowhere to go but up. No wonder it had such a meteoric rise in the first three months of the year, when investor flows were positive every day.

But investor flows began to decline over the summer and finally came to an abrupt halt in August after the so-called crypto flash crash. In short, investor inflows turned negative. This was a clear warning signal that Bitcoin ETF flows could suddenly stop and that is what worries me so much.

Image source: Getty Images.

Furthermore, if you crunch the numbers to see who is buying the new Bitcoin ETFs, you still won’t see the widespread institutional buying that many expected at the start of the year. For example, some of the biggest buyers were hedge funds and quantitative trading firms. Not exactly long-term buy-and-hold money. If Bitcoin has a prolonged decline, that’s money that could go out very quickly.

It would be reassuring to know that big pension funds and other risk-averse institutional buyers have gotten in on the act. I’m keeping my ear to the ground for news of big pension funds, endowments or sovereign wealth funds making big moves into Bitcoin via new spot ETFs. If that happens, I’ll be much more confident in the ETF investment thesis heading into 2025.

Bitcoin halving was a mistake

So far, the Bitcoin halving has been a big zero. The event, which took place on April 19, should have sent the price of Bitcoin skyrocketing. But it just didn’t happen. In mid-April, Bitcoin was trading close to $64,000. Nearly six months later, it’s still trading close to $64,000.

This is very concerning as Bitcoin’s halving has historically been one of the fundamental catalysts for Bitcoin’s price appreciation. Every four years, Bitcoin has another halving, and every four years, Bitcoin hits a new all-time high. This happened three times: in 2012, 2016 and 2020.

Of course, there is still time for it to happen again with this halving. It usually takes a few months for the Bitcoin halving to take effect. But now it’s October and we’ve been saying this for almost six months. As Yankees great Yogi Berra would say, “It’s late early.”

“Cryptochoice” could fail

Over the summer, there was much fanfare about this becoming the first presidential election in which crypto emerged as a viable campaign issue. And yes, the initial signs were very promising. Former President Donald Trump led the way, promising to turn America into the “crypto capital of the world” and even showed up in person at the Bitcoin 2024 event in Nashville, Tennessee, to deliver a keynote speech.

The good news is that other politicians on both sides of the aisle have picked up on this pro-crypto rallying cry. Most visibly, Vice President Kamala Harris tried to soften the perceived anti-crypto approach of the Biden administration with campaign promises to the Bitcoin faithful.

But there is always a chance that the crypto election will not take place. In such a partisan political environment, how much will really get done in Washington once the election is over? There are certainly bigger priorities in America right now than Bitcoin, and campaign promises have a way of disappearing once the votes are tallied. If you’re counting on the November election to spark a major Bitcoin rally, prepare to be disappointed.

Where is Bitcoin headed next?

I am still bullish on Bitcoin long term. By all accounts, the new Bitcoin ETFs continue to be a big success overall. And there is still reason to believe that the residual effects of the 2024 Bitcoin halving are yet to come. And the crypto picks could turn out to be a huge win for Bitcoin investors.

But while a $100,000 price is certainly within reach for Bitcoin this year, I’m becoming much more skeptical of all those multi-million dollar predictions that proliferated earlier in the year.