Is the purchasing window for Bitcoin still open, given its potential to reach $100,000?
Cryptocurrency fans are celebrating as Bitcoin continues to hit new record highs, recently surpassing its previous peak of around $74,000 and pushing towards $100,000. In just a few weeks, Bitcoin has gained over 25%, making this ambitious target within reach.
The timing of this surge in Bitcoin's value is not a mere coincidence. The incoming administration is seen as being favorable towards Bitcoin and cryptocurrencies in general. Investors are hopeful that the president-elect will keep his campaign promises, although the specifics of his policies remain to be seen. He has made it clear that he aims to position America as the global leader in crypto.
With Bitcoin approaching the $100,000 threshold and a wave of crypto excitement sweeping across the market, should investors buy now?
Exchange-Traded Funds (ETFs) reached new heights
The Securities and Exchange Commission (SEC) approved Bitcoin ETFs in January, allowing giants like BlackRock to enter the market. This move expanded investment opportunities for individuals and institutions alike.
These ETFs are bought and sold through traditional brokerages, making it easier than trading through cryptocurrency exchanges. The ETFs are overseen by the SEC, giving investors a sense of security and legitimacy. This increased trust and comfort level has drawn in a wider range of investors.
The introduction of ETFs has attracted institutional interest in Bitcoin. Alongside the regulatory approval and ease of access, ETFs provide improved liquidity and contribute to a more "efficient" market, where Bitcoin's value more accurately represents its true worth.
Institutions are essential for Bitcoin's long-term success
For Bitcoin to thrive and grow, it needs to do so in a way that justifies the perceived risk in the minds of investors. Although the introduction of ETFs and the influx of institutional capital over the recent years have reduced the perceived risk, Bitcoin is still viewed as a riskier investment option compared to stocks. To grow at a pace that outpaces the stock market, Bitcoin needs to attract a significant amount of additional capital.
Bitcoin has made progress in expanding its investor base, but it still remains a relatively niche market, with only around 15% of adults owning digital assets. Fear is still prevalent; nearly 63% of U.S. adults express uncertainty about the safety of crypto.
Fascinatingly, despite their late entry, over 60% of institutional investors have some exposure to Bitcoin, with at least 1% of their assets invested. Increasing their exposure may not be difficult for these institutions. On the other hand, convincing the more risk-averse retail investors to embrace Bitcoin may require more time and effort. However, even a small increase in institutional investment can generate substantial capital, potentially attracting more retail investors.
The crucial question
Warren Buffett once advised investors to "be fearful when others are greedy and to be greedy only when others are fearful." With Bitcoin setting new records, it seems that greed has taken over the market, making this an uncertain time to invest. If you are a more risk-averse investor, it might be prudent to wait.
However, the fear of missing out on potential gains is prevalent. With over 63% of Americans still apprehensive about crypto, we may still be in the "fearful when others are greedy" mindset. Despite the challenges of predicting market bottoms, it is important to remember that the penalty for buying in at the peak of bull runs is not as severe as one might think. Over the past 70 years, investing at each all-time high of the S&P 500 would have yielded only around 1% less than investing across a longer period.
If you had purchased Bitcoin when it hit a multi-year high in November 2021, you would currently be up nearly 50%. This return is more than double what the S&P 500 has achieved over the same period. This illustrates the high potential returns that can be gained by investing in Bitcoin, even when buying at what seems like the peak of the market.
In light of the SEC's approval of Bitcoin ETFs and the influx of institutional investment, the finance world is seeing a shift towards cryptocurrencies as a viable investment opportunity. With notable institutions like BlackRock entering the market, individuals and institutions alike now have more accessible and regulated ways to invest in Bitcoin.
Given the recent surge in Bitcoin's value and the introduction of ETFs, many are reconsidering their investment strategies in finance, particularly in the realm of cryptocurrencies and digital assets.
