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Citi Raises Ether Forecast, Trims Bitcoin Outlook as Investor Preferences Shift

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Citigroup has revised its year-end cryptocurrency forecasts, raising its target for ether (ETH) while slightly cutting its outlook for bitcoin (BTC), citing changing investor behaviour and macroeconomic headwinds.

The Wall Street bank said that investors are increasingly gravitating toward ether’s yield-generating features, while bitcoin continues to rely primarily on price appreciation for returns.

NEW TARGETS AND PRICE OUTLOOK

Citi set a year-end target of $133,000 for bitcoin, representing a 12% upside from its current trading price of around $118,747, as of 05:30 GMT.
For ether, the bank now expects the token to reach $4,500 by year-end — a 3% gain from its current level of $4,375.

The brokerage maintains a positive long-term view, forecasting 12-month targets of $181,000 for bitcoin and $5,440 for ether.

BITCOIN: STRONG NARRATIVE, MIXED MACRO HEADWINDS

Citi slightly reduced its bitcoin forecast due to offsetting macroeconomic factors, including a stronger U.S. dollar and weaker gold prices, which tend to reduce demand for alternative stores of value.
Still, analysts said bitcoin’s “digital gold” narrative remains robust, continuing to attract institutional and retail inflows as global interest in hard assets persists.

Citi’s base case assumes year-end inflows of roughly $7.5 billion into bitcoin, while its bull case depends on rising equity markets and stronger demand from digital asset funds.
Under its bear case, however, the bank warned that a global recession could push bitcoin prices down to $83,000.

ETHER: INSTITUTIONAL INTEREST AND STAKING GAINS

Ether’s upgraded outlook comes after a sharp summer price rally, fueled by institutional buying and ETF-related inflows. Citi analysts said ether’s potential for yield generation through staking and decentralised finance (DeFi) continues to attract capital from long-term investors.

Citi expects ether to remain supported in 2025 by strong inflows from ETFs and digital asset treasuries, which have emerged as a growing segment of crypto demand.
While ether’s downside is harder to quantify, given uncertainties around network usage and value accrual, analysts said the token benefits from a broader use case compared with bitcoin.

INVESTOR FLOWS WILL DRIVE YEAR-END PERFORMANCE

Both cryptocurrencies, Citi noted, are trading above user-activity-based metrics, highlighting the speculative component of current valuations. Sustained investor demand and macro stability will be essential to keeping prices elevated into 2026.

“Ether’s yield advantage and utility-driven narrative are drawing steady inflows,” Citi wrote, “while bitcoin continues to hold its place as digital gold — but faces short-term macro friction.”

US Investors Shift Focus from Chipmakers to Software Amid AI Investment Evolution

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As the AI investment boom slows, U.S. chip stocks, which were the biggest beneficiaries of last year’s surge, are struggling in 2025. The spotlight has shifted to software companies, which are now seen as the next big play in AI. This shift comes as volatility driven by tariffs and concerns about diminishing demand, coupled with the rise of lower-cost AI models from China’s DeepSeek, have weighed on semiconductor shares.

The shift towards software is being viewed by several analysts as a long-term evolution of the AI investment landscape. According to David Russell, global head of market strategy at TradeStation, there’s been a noticeable “rotation” in investor focus, especially in light of the developments surrounding DeepSeek, the semiconductor outperformance of 2024, and the ongoing restrictions on U.S. chip exports to China. “Investors are looking for the next three-to-five-year stories… those companies that will benefit from what Nvidia has already done,” he added.

So far in 2025, the Philadelphia SE Semiconductor index has fallen 5.6%, with Nvidia, a major player in the industry, down nearly 13%. In contrast, several software companies have seen significant gains, with stocks like Atlassian, CrowdStrike Holdings, Palantir Technologies, and Cognizant rising between 7% and 19%. Exchange-traded funds (ETFs) tracking software companies have also seen substantial inflows. For example, the iShares Expanded Tech-Software Sector ETF has attracted over $1.87 billion in 2025, already surpassing last year’s total inflows.

Analysts argue that this shift is a natural progression for AI investments, as the primary use cases for AI technology are in software. Adam Turnquist, chief technical strategist at LPL Financial, emphasized that LPL prefers software stocks over semiconductors, a sentiment shared by Morgan Stanley. “The second stage of the innovation cycle is when people start utilizing products, and that’s when the software companies start getting paid… we’re now starting to see the ascendancy of the software part of the equation,” said Keith Weiss, equity analyst at Morgan Stanley.

This trend is driven by concerns about how long chip stocks can sustain their growth rates, with some investors rethinking the value of these stocks as software companies continue to improve their market position. The rise of DeepSeek’s more affordable chatbot, which competes with expensive direct-to-consumer AI products, is one factor contributing to a more cautious outlook on semiconductors. According to Brian Mulberry, portfolio manager at Zacks Investment Management, competition will likely reduce profits for these products, while enterprise software companies may find it easier to monetize new AI technology.

The shift toward software stocks is also influenced by the ongoing Sino-U.S. trade tensions, which have hurt semiconductor companies. Analysts have named companies such as Palantir, Microsoft, Oracle, and Salesforce as key players in the software space, though their performance has been mixed in 2025. Palantir, which offers AI software to businesses, has seen its stock rally, while Microsoft and Salesforce have struggled, down 4.9% and 12.6%, respectively.

Despite these fluctuations, some investors remain optimistic about the long-term prospects for software companies. While valuations for software giants like Microsoft and Oracle are still considered high—trading at 27 and 23 times forward earnings, respectively—investors like Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, argue that the focus should be on AI applications, not just chips. “We don’t need more Nvidia chips, we need applications,” she said.