When Should You Buy Bitcoin?
Bitcoin, the world’s largest cryptocurrency, is having a historic month, with all-time highs being set over the past few weeks. While the Bitcoin market fluctuates every day, the long-term story is of unprecedented growth and optimistic forecasts by everyone, from long-time believers to, increasingly, many institutions.
A lot of Bitcoin proponents would say that the best time to buy Bitcoin was a month or a year ago, and that the second-best time is right now. But assuming that you haven’t bought Bitcoin yet, this will help you answer the question “should I invest in Bitcoin” by narrating the trends that make Bitcoin a compelling digital asset to buy into.
A Brief Story on Bitcoin’s Price: Where Will My $1,000 Go?
To begin this narrative, a good starting point would be Bitcoin’s price. For example, if you bought $1,000 (about P48,000) worth of Bitcoin on January 1, it would have been $1,116 (P53,000) by January 25. Not bad for just 25 days of buying in, right? But what if we told you that your $1,000 in Bitcoin was worth $1,449 (P69,000) on January 8? By then, you would have stressed about your purchase and complained about how fickle Bitcoin can be.
Now, let’s stretch the timeline even further and include last year. If you bought $1,000 in Bitcoin on January 1, 2020, it would be worth $4,499 (P216,248) today. Even better, if you bought in during March 16, 2020, around the time when many markets around the world were falling because of the pandemic, your $1,000 would be $6,498 (P334,000) today.
While those 350 percent to 650 percent gains are tantalizing to look at right now in hindsight, it’s important to understand that if we look at price alone, Bitcoin has its boom and bust cycles, just like any openly traded asset class. To further illustrate this point, we’re going to compare this recent rise in Bitcoin to a similar market cycle in 2017-2018, around the time you’re most likely to have heard about Bitcoin for the first time.
Bitcoin’s Rise: Haven’t I Seen This Before?
Here’s a quick recap of Bitcoin from the previous up-and-down cycle of 2017-2018. BTC began 2017 at around $960 (P46,000), crossed $1,000 in February, doubled that amount ($2,000) in May, then did it again ($4,000) in August. It crossed $10,000 (P480,000) in November and reached its then-record high at above $19,000 (P913,000) by December.
But 2018 was a different story. Bitcoin fell below $10,000 as early as February and, after a month-long rebound, stayed below that level from March until December when the low point was set at around $3,500 (P168,000). Some would look at this in bleak terms, but at the end of the day, your $1,000 at the beginning of 2017 still grew 250 percent even at the lowest point of the bust cycle. Sure, you would have rued at the lost chance for 1800 percent growth, but you’re still at a pretty good place.
Fast forward to 2020, we saw BTC at around $7,200 (P346,000) in January, then it crossed $10,000 in February, fell below $5,000 (P240,000) in March, gradually rallied to $10,000 in late July, accelerated to $20,000 (P961,000) in December, and ended the year at $29,000 (P1.394 million).
But what about 2021, you ask. Indeed, Bitcoin rose to as high as $42,000 P2.01 million) in eight days, then fell briefly below $30,000 (P1.44 million) around 14 days after. Is this just a blip in Bitcoin’s rise or will we see 2018 all over again? This is where we point out a few differences between the recent bull run and the previous one.
Why is Bitcoin Rising? Institutions Now Believe There is an Upside.
One thing that makes the current Bitcoin bull run more compelling is the increased participation of institutional investors, from mutual funds to publicly traded companies. Here’s a rundown of some of the recent major moves related to Bitcoin.
1| PayPal launched its crypto trading unit late last year. The company traded more than $242 million (P11.63 billion) worth of digital assets in a single day on January 11.
2| Grayscale Investments started reporting its Bitcoin holdings with the U.S. SEC back in 2020. As of January 2020, the company is estimated to hold more than three percent of the total bitcoins in circulation, at 643,801 BTC or around $20 billion (P961.31 billion).
3| MicroStrategy became the first publicly listed asset manager to declare Bitcoin holdings in its treasury. The company declared ownership of $425 million (P20.4 billion) worth of Bitcoin in September and borrowed $650 million (P31.24 billion) from investors to buy more Bitcoin.
4| Marathon Patent Group, the second publicly traded company to declare Bitcoin in its treasury, bought $150 million (P7.2 billion) in BTC at $31,135 (P1.5 million) this month.
5| BlackRock, the world’s largest asset manager with $8.7 trillion in funds handled, is opening two new funds that include Bitcoin futures.
The entry of major corporate entities is identified as the key factor that was missing during the crypto bull run of 2017. Back then, analysts said that retail traders who were intrigued with the fast growth of newly created cryptocurrencies were the main drivers of that particular bull run, which meant higher risk.
This time around, analysts see the entry of even typically conservative entities like insurance company Massachusetts Mutual (with $100 million in Bitcoin) as a sign that the Bitcoin market is maturing. Also, various investing and corporate giants are providing favorable insights on Bitcoin that they would not have made in 2017.
Ray Dialo, the founder of the world’s biggest hedge fund, went from declaring Bitcoin as a potential “outlaw” in November 2020 to something of a “gold-like asset alternative” one month later. Bill Miller strongly recommended Bitcoin even during its recent rise, while Paul Tudor Jones compared Bitcoin to an early investment into Apple or Google. Meanwhile, payment giants Visa, MasterCard, and PayPal went from cracking down on crypto transactions in 2018 to expanding into crypto in 2020. And finally, even the world’s richest man is interested in Bitcoin. Does Elon Musk own bitcoins? He recently revealed owning just 0.25 BTC, and he’s asking around if he should invest more.
So will 2020-2021 mirror 2017-2018, or will the future be different? CEO Changpeng Zhao (CZ) has this to say about it: “It took three years [for Bitcoin] to recover from the 2017 peak. And now we’re in [price] discovery, I think [BTC] is going to go another 5x, 10x, 20x, we don’t know. And if that happens, it’s going to take a couple of years.”
So when should you buy Bitcoin?
Based on the narrative above, we can say that with more individuals and companies getting into Bitcoin, there is a more compelling case to be made for buying Bitcoin this time around. But the timing for your purchase will depend on what you intend to get from Bitcoin. You’re either one of the two:
1| Short-Term Gains. If you’re excited about the high growth rates we showed above, you’re probably into Bitcoin to actively trade, and you have a high tolerance for risk. Bitcoin offers you the potential for fast gains at certain times in the market, and even if you lose out on a few trades, Bitcoin’s emergence into the mainstream should give you comfort that what you’re trading is a compelling asset for years to come.
If you’re curious to learn the basics of Bitcoin trading, here’s a tutorial from Binance Academy: A Complete Guide to Cryptocurrency Trading for Beginners.
2| Long-Term Gains. If you’re into Bitcoin for the long-haul, like some of the institutional investors we mentioned above, you likely believe in a bright future for Bitcoin. You’ll probably be interested in what we have written in the past about Bitcoin’s performance versus gold and stocks. And if you're unsure of your entry point for Bitcoin, try dollar cost averaging to reduce the risks.
Regardless of your motive, Binance offers the widest range of options for buying Bitcoin, whether now or in the next five minutes, and whether you’re buying $20 or $2,000 worth of Bitcoin. All it takes to enter the crypto-fueled future is just a few clicks.
If you're intereste din buying Bitcoin or any other cryptocurrency, visit Binance.com. Cryptocurrency investment is subject to high market risk. Binance is not responsible for any of your trading losses. The opinions and statements made above should not be considered financial advice.
This article originally appeared on Binance.com, a cryptocurrency exchange platform. Minor edits have been made by the Esquire Philippines editors.