Despite an extremely volatile journey, in the past five years, Bitcoin's (BTC 0.25%) price has skyrocketed 1,190%. It has benefited greatly from more bullish sentiment in the past year and a half.
But after hitting a fresh all-time high of almost $74,000 in March, the world's most valuable cryptocurrency has taken a breather. As of April 24, it sits 9% below that peak price. That dip tracks the broader cryptocurrency market.
Does the current setup make Bitcoin a once-in-a-generation investment opportunity?
Why is Bitcoin worth owning?
It's important to take a step back and first consider what makes Bitcoin such a unique asset. It clearly has something working in its favor that has helped drive up the price so much in the past several years.
Before the arrival of Bitcoin, there was no way for two people to send money to each other digitally without the use of intermediaries. Just think about all of the various parties involved in an online transaction today, with all of them taking a cut. Bitcoin's pseudonymous founder, Satoshi Nakamoto, wanted to develop a decentralized monetary network that transcended borders and was open to anyone.
Additionally, perhaps Bitcoin's most valuable trait is that it has a fixed supply cap of 21 million. As demand to buy and hold this digital asset has risen over time, it's no surprise that its price has as well.
A completely decentralized network with a hard supply cap has tremendous value in and of itself. Just look at the current monetary system. In the U.S., for example, we have a currency that is constantly being devalued, as well as a ballooning debt problem. Bitcoin is an alternative to this financial ineptitude.
Over time, a larger number of market participants and greater pools of capital are learning more about Bitcoin's attractive qualities. And this has pushed up its price. The recently approved and launched spot exchange-traded funds also opened the floodgates in terms of institutional involvement.
CRYPTO: BTC
Key Data Points
Should you wait for a better entry price?
After such an impressive run, investors are probably wondering how much more upside Bitcoin has. I believe there is still some serious potential to achieve returns that outperform the broader stock market.
According to Unchained Capital, a Bitcoin-focused financial services firm, only 1 in 4 adults in the U.S. own some Bitcoin. That's compared to more than 60% who own stocks. I suspect in developing countries Bitcoin's penetration is substantially lower. As more people educate themselves, they will likely want to gain some exposure.
Because Bitcoin's primary use case is as an excellent store of value, it often draws comparisons to gold. The value of all the gold on Earth that has been mined is estimated to be worth almost $16 trillion. Given that Bitcoin has properties that make it superior to gold, it's totally reasonable to assume that one day, the digital asset's market cap, now at $1.3 trillion, could match or even exceed the precious metal's.
I believe that 10 years from now, the price of Bitcoin will be significantly higher than it is today. And if history is any indication, we might not see it go that much lower than where it currently trades. This means investors should look to buy the crypto on the dip.
But to be clear, I also think it's a smart idea to consider dollar-cost averaging into Bitcoin. If this is an asset that you plan to own for an extremely long period of time, then taking advantage of multiple price points might be a worthwhile endeavor. Just be mentally prepared for the inevitable volatility.
