Half of the Internet thinks Bitcoin’s price peaked in March and will spend the next few years in a bear market.
The other half thinks March’s new all-time high marked a waypoint on the journey to $300,000 by the end of 2025.
Does that make Bitcoin a good investment?
Yes, but not as good as it was in 2023.
It’s all relative
Bitcoin’s price is up almost 330% since November 2022.
In the long term, you’re still probably getting the best risk/reward for any asset you or I can easily buy: a CAGR of 35% plus massive tailwinds, buy-in from Wall Street, and a massive network of users.
But “good” is a relative term. It’s trading near its previous all-time high. That’s normally not where you find value or bargains.
Bitcoin always has big downturns that give you great buying opportunities, such as 2022 or 2023.
If you wait for those big downturns, it’s a no-brainer.
Today, I’d exercise some caution and keep your expectations in check. Under the best, most optimistic scenarios that fit historical benchmarks, you might get a return of 150% over the next few years.
That’s still really good, but probably not what you have in mind. Certainly not what other people are telling you to expect.
Know your realistic limits
I’d refer to this chart, which gives you a range of realistic outcomes.
The top two lines should serve as the upper limit of the next major “peak” within a larger upward trend.
The highest is roughly $100,000 as of today. The next-highest sits at roughly $85,000.
Which of those top lines will Bitcoin’s price reach?
I don’t know.
Both lines will keep rising, but not so much that you need to get super-excited. At the same time, Bitcoin’s price is closer to the upper bands than any “low” price. Not as much room to go up.
Would you be sad with a 20% annualized gain for the foreseeable future? That’s a lackluster return for Bitcoin, but it’s still better than most other assets.
(Don’t pull the old, “just because it did it before doesn’t mean it’ll do it again.” That’s correct, but it doesn’t stop you from buying gold, silver, stocks, and bonds. Why should it stop you from buying crypto?)
Risk and reward
Keep it simple. As prices go lower, you get more upside.
People look back on 2022 as a year of disaster for cryptocurrency, while viewing 2023 as a year of rebirth.
Yet, if you bought crypto on any random day in 2022 and put cash into a money market fund for 5% in 2023, you came out ahead of everybody who put cash into a money market fund for 3% in 2022 and bought crypto on any random day in 2023.
- In 2022, bitcoin’s average price was $28,100. In 2023, bitcoin’s average price was $28,800. You got a better deal in 2022.
- In 2022, your cash got, on average, a 3% annualized return. In 2023, your cash got, on average, a 5% annualized return.
In 2024, Bitcoin’s average price is higher than any year prior. Its price would have to collapse from now until December to have any chance of coming close to 2023.
On that basis, 2024 is the worst year to buy Bitcoin, ever.
“The worst” is still pretty good
That doesn’t mean you shouldn’t buy Bitcoin.
If I had to guess the cause of your concern or doubt, I suspect a gap between expectations and reality.
On the one hand, on-chain and technical data created the impression that we should’ve had a bigger drop-off than we’ve gotten since March’s boom to $74,000.
At that time, we reached near-extremes on many metrics. With such a strong rise, you would expect a bigger fall than the 25% drop we saw this summer.
On the other hand, the mania of early 2024 created the impression that this market would go much higher, much more quickly than it has. Our recent price action has shattered that consensus.
Because nobody’s getting what they expected, everybody’s on edge.
Let’s keep it simple.
Bitcoin’s still a good investment, just not as good as it used to be.
Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top Bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio and connect with him on Tealfeed.
