Citigroup lowers Bitcoin and Ethereum projections as U.S. cryptocurrency regulations face delays.

The Wall Street investment bank noted a decline in ETF inflows, diminished network activity, and a tightening timeframe for U.S. regulatory developments.

Citi reduces bitcoin and ether targets as U.S. cryptocurrency legislation encounters delays. (Unsplash, modified by CoinDesk)

Key points:

• Citigroup has revised its 12-month forecast for bitcoin down to $112,000 from $143,000, and for ether to $3,175 from $4,304.
• ETF inflows remain the main factor, although Citi has decreased its 12-month demand expectations to $10 billion for bitcoin and $2.5 billion for ether.
• Advancement in U.S. digital asset legislation is slowing, with the likelihood of passage this year dropping to approximately 60%, according to the report.

The Wall Street investment bank Citigroup has adjusted its 12-month price estimates for bitcoin BTC$73,765.35 and ether (ETH), referencing the deceleration in legislative progress in the U.S., reduced network activity, and lower expectations for ETF inflows.

Citi now anticipates bitcoin will reach $112,000 and ether $3,175 over the coming year, a significant reduction from previous expectations of $143,000 and $4,304.

The updated targets continue to imply considerable potential for growth. Bitcoin was trading near $74,000 at the time of this publication, while ether was priced at $2,330.

The investment bank stated that inflows remain the primary positive driver, though it has revised its 12-month demand predictions downward, even as recent ETF interest has seen a slight increase amid geopolitical uncertainties.

"ETF demand, where we have adjusted the projection to $10 billion BTC$73,765.35 and $2.5 billion (ETH) is still the most significant positive aspect," stated analyst Alex Saunders in the report released on Monday.

Cryptocurrency markets have faced challenges in regaining momentum following bitcoin’s surge to all-time highs in October, with prices declining amidst a lack of risk appetite and waning enthusiasm post-halving. BTC has traded below essential technical levels, while ether has underperformed further due to weak on-chain activity. Despite the subdued price movements, ETF inflows have remained robust, aiding in market stabilization even as broader macroeconomic uncertainties and geopolitical issues persist.

According to Saunders, the future outlook is heavily contingent on U.S. regulatory actions. The analyst noted that the opportunity to enact digital asset legislation this year is diminishing, with market-implied probabilities dropping to around 60%. While global policy remains generally favorable, he contended that major U.S. legislation would act as a more substantial catalyst for institutional inflows than incremental regulatory changes.

The CLARITY Act, a comprehensive U.S. crypto market-structure proposal, has successfully passed the House but is currently stalled in the Senate as lawmakers negotiate differing proposals, creating uncertainty about its future.

This legislation is considered vital as it would clarify how digital assets are categorized and define which agencies are responsible for their oversight, addressing a longstanding jurisdictional conflict between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), which has resulted in legal ambiguity for investors and firms.

By delineating token categories and establishing registration frameworks for exchanges, the bill seeks to mitigate regulatory risks and deliver the certainty that many institutional investors require before committing additional capital to cryptocurrency markets.

The analyst also highlighted a decline in momentum in the crypto market since bitcoin’s peak in October, pointing to futures liquidations, positioning fatigue, and prices remaining below key technical thresholds. Bitcoin may continue to trade in a range, with approximately $70,000 viewed as a significant psychological barrier linked to pre-election pricing.

In the bank’s framework, the bullish scenario relies on heightened end-investor adoption, especially through ETFs, with a target of $165,000 for bitcoin and $4,488 for ether. Conversely, the bearish scenario reflects recessionary macroeconomic conditions, with targets of $58,000 for BTC and $1,198 for ETH.

The outlook for ether is described as more uncertain, according to the report, due to its responsiveness to on-chain activity, which has recently been lackluster. Nonetheless, there exists potential for upside driven by stablecoin growth, trends in tokenization, and possible regulatory attention on DeFi, which could enhance usage and demand.

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