Citigroup trimmed price targets across crypto-related stocks following Bitcoin's disappointing fourth quarter performance, but the Wall Street banking giant maintains its bullish long-term thesis on digital assets. The moves reflect the sector's recent volatility while highlighting the disconnect between short-term price action and institutional conviction about crypto's future.
Despite recent token volatility, analysts led by Peter Christiansen wrote in a Friday report that Citigroup remains constructive on digital asset stocks. Circle, the stablecoin issuer that recently went public, remains the team's top pick, followed by Bullish and Coinbase.
The report comes as Bitcoin trades around $88,000—well below its October peak above $126,000 and reflecting a nearly 30% decline that has sent shockwaves through crypto equity markets. Companies with significant Bitcoin exposure have seen their stock prices hammered, forcing Wall Street analysts to recalibrate near-term expectations.
The Q4 Bitcoin Disappointment
Bitcoin's fourth quarter performance has been brutal by any measure. After touching highs above $126,000 in early October, the world's largest cryptocurrency has spent the past two months in steady decline, breaking through key support levels and shaking confidence among both retail and institutional investors.
The selloff accelerated in November after crypto's October futures wipeout shattered sentiment, sparking nearly $4 billion in Bitcoin exchange-traded fund outflows since October 10. With fresh flows drying up, Bitcoin has slipped back toward the average cost basis of ETF holders—a psychologically critical level that often determines whether institutional money doubles down or cuts losses.
Citi noted that long-term holders are growing increasingly cautious as the historically weak second year of the halving cycle sets in. Bitcoin underwent its most recent halving in April 2024, reducing miner rewards and new supply. Historical patterns suggest the second year post-halving tends to be choppy as markets digest the supply shock and await the next major catalyst.
Without renewed ETF inflows, Citi warned that Bitcoin could drift toward its year-end bear case target of $82,000—still above current levels but representing continued weakness from October's highs.
Why Crypto Stocks Got Hit Harder
Crypto-related equities have experienced even more pronounced declines than Bitcoin itself, a typical pattern when the underlying asset class turns bearish. Mining stocks, Bitcoin treasury companies, exchanges, and other crypto-exposed equities amplify both upside and downside moves in digital assets.
Strategy (formerly MicroStrategy), the largest corporate holder of Bitcoin, has become a bellwether for crypto equity sentiment. The company recently lowered its 2025 earnings forecast, citing Bitcoin's prolonged weakness as a contributing factor. Investor's Business Daily reported that Strategy purchased more than 20,000 Bitcoin in early December for approximately $1.94 billion, but analysts expressed concerns that the firm's ability to maintain this aggressive accumulation pace may be constrained as its stock price weakens and funding dynamics deteriorate.
When a company's primary business strategy involves accumulating Bitcoin, and Bitcoin declines 30%, the equity inevitably gets repriced. This dynamic has played out across the sector, forcing Citi and other Wall Street firms to reduce near-term price targets while maintaining longer-term conviction.
The Silver Lining: Still Bullish on Digital Assets
Despite trimming price targets to reflect current market conditions, Citigroup's fundamental thesis on digital assets remains intact. The bank's base case forecast calls for Bitcoin to reach $143,000 within the next 12 months—representing approximately 62% upside from current levels around $88,000.
This projection relies on several key assumptions: renewed ETF demand as institutional investors return to the market, passage of comprehensive digital asset legislation likely in the second quarter, continued strength in traditional equity markets providing a supportive macro backdrop, and regulatory clarity reducing uncertainty and encouraging wider adoption.
Citi analysts Alex Saunders, Dirk Willer, and Vinh Vo emphasized the importance of the $70,000 level as key support—roughly Bitcoin's price just ahead of Donald Trump's 2024 election victory. They believe this level represents both technical and psychological support that should hold barring a major macro shock.
The bank's bull case scenario is even more optimistic, projecting Bitcoin could reach $189,000 driven by surging institutional demand and accelerated adoption. However, Citi also outlined a bear case of $78,500 if a global recession materializes, acknowledging the downside risks that keep conservative investors on the sidelines.
Regulatory Catalysts Could Change Everything
One of Citi's most important arguments for maintaining bullish conviction centers on regulatory developments. The firm highlighted a significant shift by financial authorities toward frameworks specifically designed for digital assets, moving away from the enforcement-first approach that characterized previous administrations.
Several high-profile enforcement actions and lawsuits against major crypto platforms have been withdrawn or settled, reducing the regulatory overhang that has suppressed valuations. The passage of the Clarity Act through the House of Representatives represents a major milestone, providing clear regulatory frameworks that institutional investors have demanded before deploying significant capital.
If the Clarity Act becomes law—which appears increasingly likely given bipartisan support and the Trump administration's pro-crypto stance—Citi expects a surge in institutional adoption and fund flows. This regulatory clarity addresses one of the primary concerns that has kept traditional financial institutions on the sidelines despite growing interest in digital assets.
Circle, Bullish, and Coinbase: Top Picks
Within the crypto equity universe, Citi maintains particularly strong conviction on three names:
Circle (CRCL): The stablecoin issuer remains Citi's top pick following its recent public offering. Circle's USDC stablecoin has become infrastructure for the crypto economy, with usage spanning trading, payments, and decentralized finance. Unlike Bitcoin miners or pure-play crypto exchanges, Circle's business model generates consistent revenue regardless of token price volatility, making it a more defensive way to play the sector.
Bullish: The cryptocurrency exchange backed by Block.one offers institutional-grade trading infrastructure and has positioned itself as a bridge between traditional finance and crypto markets. Citi views Bullish as undervalued relative to its technology platform and growth potential.
Coinbase (COIN): Despite recent stock price weakness, Coinbase remains the dominant U.S. cryptocurrency exchange with regulatory clarity that competitors lack. The company's diversified revenue streams—spanning retail trading, institutional services, staking, and blockchain infrastructure—provide resilience during market downturns.
All three companies benefit from the sector's long-term growth thesis while offering more stability than pure Bitcoin exposure or highly leveraged mining operations.
The Halving Cycle and Historical Patterns
Citi's analysis places significant weight on Bitcoin's four-year halving cycle, which has historically driven major price movements. The most recent halving occurred in April 2024, reducing miner rewards from 6.25 BTC to 3.125 BTC per block.
Historical patterns suggest a predictable sequence: the halving creates a supply shock, prices initially consolidate or decline as miners adjust to reduced revenue, institutional investors accumulate during the consolidation phase, and explosive growth typically occurs 12-18 months post-halving as supply constraints meet increasing demand.
If this pattern holds, Bitcoin's current weakness represents a natural consolidation phase before the next major leg higher. Citi expects Bitcoin to range between $80,000-$90,000 into early 2026 before renewed ETF inflows and regulatory catalysts drive the next rally.
ETF Flows: The Make-or-Break Factor
Bitcoin ETFs, launched in January 2024, have become the single most important driver of institutional adoption. These products allow traditional investors to gain Bitcoin exposure without the complexities of custody, security, and operational infrastructure that previously created barriers to entry.
However, recent ETF flows paint a concerning picture. Nearly $4 billion in outflows since October 10 have erased year-to-date gains and suggest institutional investors are reducing exposure rather than buying the dip. Days with positive inflows have become rarer, while outflow days have grown more frequent.
Citi emphasizes that sustained ETF inflows are essential for Bitcoin to achieve the $143,000 base case target. Without this institutional bid, Bitcoin risks drifting lower toward the bear case scenario around $78,500.
The ETF flow dynamic creates a self-reinforcing cycle: positive flows drive prices higher, attracting more flows; negative flows drive prices lower, triggering more redemptions. Bitcoin currently sits in the dangerous zone where the cycle could tip either direction depending on upcoming macro catalysts.
Macro Crosscurrents: Fed, BOJ, and Risk Appetite
Bitcoin's recent weakness doesn't exist in a vacuum—it reflects broader macro dynamics affecting all risk assets. The Federal Reserve's hawkish pivot, signaling fewer rate cuts in 2026 than markets expected, has reduced liquidity expectations and hurt speculative assets across the board.
Simultaneously, the Bank of Japan's rate hikes threaten to unwind the yen carry trade that has provided cheap leverage for global risk assets. When Japan raises rates, investors borrowing yen at near-zero rates to invest in higher-yielding assets face increased costs, forcing position unwinding that cascades through crypto and equity markets.
These macro crosscurrents create near-term headwinds that explain Bitcoin's struggle to regain momentum despite positive long-term fundamentals. Citi acknowledges these challenges while maintaining that macro conditions should improve as markets adjust to the new rate environment and liquidity conditions stabilize.
The Path Forward: Volatility Before Victory
Citi's analysis suggests crypto investors should expect continued volatility into year-end before conditions improve in 2026. Options expiry, thin holiday liquidity, and ongoing macro uncertainty create a toxic mix for near-term price action.
A multi-billion-dollar Bitcoin and ether options expiry hitting the tape can increase volatility during thin holiday liquidity, with BTC clustering around $88,000—often associated with "max pain" dynamics where options hedging magnetizes price. Bloomberg warned that approximately $23 billion in options contracts expire in the coming weeks, which could amplify volatility into year-end.
For investors with conviction about crypto's long-term trajectory, current weakness represents opportunity. Citi's message is clear: the fourth quarter disappointment changes near-term price targets but not the fundamental thesis. Digital asset adoption continues accelerating, regulatory clarity is improving, and institutional infrastructure is maturing.
Bitcoin may test lower levels in the near term, potentially reaching the $70,000 support zone Citi highlighted as critical. But the bank's base case remains $143,000 within twelve months, with a bull case extending to $189,000 if adoption accelerates faster than expected.
The crypto market has always moved in cycles—explosive rallies followed by brutal corrections that shake out weak hands before the next leg higher. Institutions like Citigroup trimming price targets while maintaining long-term conviction suggests the current consolidation is exactly that: a pause before resuming the broader uptrend, not the beginning of a sustained bear market.
For crypto investors, the message is patience. The fourth quarter was disappointing, equity price targets are coming down, and near-term volatility will continue. But the fundamental drivers that could push Bitcoin to $143,000 or higher remain intact—they just need time to materialize.