4 Reasons Bitcoin Has Given up Its Gains From the Summer

Key Points

• Bitcoin soared to a record high in mid-August.

• But some macro and competitive headwinds are driving away the bulls.

• Its recent dip still looks like a long-term buying opportunity.

• 10 stocks we like better than Bitcoin ›

Bitcoin's (CRYPTO: BTC) price reached a new all-time high of $124,291 on Aug. 13. But as of this writing, it's pulled back to about $112,500 -- and some bearish investors expect it to drop even further. Let's see why the top cryptocurrency is gradually giving up some of its massive gains from the summer.

1. A murky outlook for future rate cuts

Bitcoin's price was driven higher by the Federal Reserve's three interest rate cuts in 2024, which drove many investors back toward riskier assets like cryptocurrencies. At the start of 2025, most investors expected the Fed to keep cutting its rates as inflation cooled off.

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Yet the Fed didn't cut its rates at all this year. Many analysts expect at least one more rate cut by the end of 2025, but the Trump administration's recent clashes with the Fed -- including its attempt to fire Fed governor Lisa Cook -- are casting dark clouds over that forecast. Without a clear outlook for interest rates, many investors shunned Bitcoin.

2. It's lapping some game-changing catalysts

In addition to lower interest rates, two other catalysts drove Bitcoin's price higher in 2024: the approvals of its first spot price exchange-traded funds (ETFs) in January 2024, and its latest halving, which reduced Bitcoin mining rewards in half. The former made it easier for retail and institutional investors to buy Bitcoin, while the latter tightened up its supply as the market's demand swelled. Bitcoin didn't benefit from any comparable catalysts this year, and its investors likely shifted toward more exciting cryptocurrencies.

3. The rise of Ethereum

One of those cryptocurrencies was Ether (CRYPTO: ETH), the native cryptocurrency of the Ethereum blockchain. Ether's price reached a new all-time high of $4,953 on Aug. 24, the same day a "whale" triggered a flash crash by selling $2.7 billion in Bitcoin. That timing suggested that Bitcoin's top investors were rotating to Ether.

Those whales might be more interested in Ether for two reasons: It's more than tripled in value since this April, and it has a much smaller market cap ($540 billion) than Bitcoin ($2.23 trillion). Therefore, it makes sense to swap the slower-growth market leader for the higher-growth underdog with more upside potential.

Unlike Bitcoin, which can only be mined, Ethereum supports smart contracts -- which are used to develop decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets. So while Bitcoin is valued by its scarcity, Ether's value is pegged to the growth of that ecosystem.

4. Competition from stablecoins

Lastly, some investors might be selling their Bitcoin and rotating toward stablecoins like Tether (CRYPTO: USDT) and USD Coin (CRYPTO: USDC), which are pegged to the U.S. dollar. Those stablecoin prices are set at $1, so they aren't designed to appreciate in value or beat inflation. However, they can be transferred much faster than actual U.S. dollars and be staked (or locked up) on various platforms for interest-like rewards. That stability makes them more practical for digital payments and cross-border money transfers.

So, does Bitcoin's recent dip represent a buying opportunity?

Bitcoin faces some near-term headwinds, but there are still plenty of catalysts on the horizon. The Trump Administration's crypto-friendly stance and its recent establishment of a Strategic Bitcoin Reserve indicate it will become as widely accepted as a safe asset. The next halving, which is scheduled for 2028, should further boost its value. Lower interest rates, bigger purchases from institutional investors, and its increased adoption as an official currency could all drive its price higher. Therefore, I believe Bitcoin's summer swoon won't last too long. It might sink a bit deeper before it bounces back, but investors who buy these dips could reap some big rewards in the future.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.