(Kitco News) - After hitting all-time highs above $100,000 last month, Bitcoin has struggled to attract new momentum, and one research firm says that the rally has run its course.
In its latest report, cryptocurrency strategists at BCA Research said that while they remain long-term bulls in the crypto market, the trade has become too crowded.
“While institutional adoption is broadening, there are also signs of excessive exuberance, speculation, and optimism,” the analysts said in the report. “Given these conditions, a near-term correction appears likely. We are booking profits and will look to re-enter the market at $75,000.”
The comments come as Bitcoin currently trades at $95,855 per token. King crypto has dropped more than 12% from its all-time highs in January.
BCA noted that it has been bullish on Bitcoin and the crypto market since early 2023 when prices were trading around $23,000. Although institutional investors are now starting to embrace digital currencies through exchange-traded funds, the Montreal-based research firm said that there appears to be too much euphoria in the marketplace, creating a dangerous environment for latecomers.
The analysts used the growth of meme currencies and President Donald Trump as an example of euphoria. Ahead of his inauguration, Trump launched his very own memecoin, $TRUMP, hosted on the Solana blockchain. Two days after the launch, the coin had a market cap of over $75 billion.
“In a matter of hours, President Trump had created multiple times more wealth for himself through a memecoin than through a lifetime of real estate investments, enough to make him one of the richest people on Earth,” the analysts said.
However, since its launch, $TRUMP has fallen roughly 80% from its highs.
“The surge in memecoins is a symptom of a larger trend: The consensus is now very bullish on crypto. After the dramatic rise of Bitcoin and other cryptocurrencies over the past two years, investors have embraced the previously maligned asset class with open arms,” the analysts said.
It’s not just Trump who is cashing in on Bitcoin and cryptocurrencies. BCA noted that last year, after getting approval from the Securities and Exchange Commission, Bitcoin-backed ETFs attracted $40 billion in net inflows, the biggest ETF growth in history.
At the same time, BCA noted that BlackRock CEO Larry Fink, who manages the world’s biggest Bitcoin ETF, said that he thinks the digital currency can climb to $700,000 as large pension funds and sovereign wealth funds actively discuss allocating 2% to 5% of their portfolios into Bitcoin.
“We are concerned that this raging optimism is a sign that we are near a top,” BCA said.
Along with sentiment concerns, BCA added that rising risks of weak economic activity and higher inflation will create a challenging economic environment for Bitcoin.
Although BCA has turned bearish on cryptocurrencies, the analysts said that they see two risks to their bearish expectations. The first would be the U.S. government’s proposal to create a Bitcoin reserve.
“To be clear, this reserve will not involve buying any new coins. The U.S. government currently owns roughly 200,000 Bitcoin that it has obtained through law-enforcement seizures. The reserve would only commit the federal government to hold on to these coins. Still, the news would be marginally positive in the short term,” the analysts said.
The second risk is broader and would represent a systemic shift in global financial markets.
“The second risk is that, against our expectations, we have entered a new paradigm where memecoins are the standard for raising capital. A world where financial guardrails have been completely abandoned and everyone with a few social media followers can raise billions of dollars at will,” the analysts said.
