After hitting an all-time high of $73,750 in March, the price of Bitcoin (BTC -1.77%) has recently slipped back under $61,000. The upcoming distribution of assets from the notorious Mt. Gox exchange is stirring the pot right now, and inflationary pressures are still doing funny things to volatile asset classes such as growth stocks and cryptocurrencies.
But don't let the short-term noise fool you. With the recent halving of Bitcoin mining rewards, a capped lifetime supply, and new exchange-traded funds (ETFs) making Bitcoin more accessible than ever, there are some strong reasons to consider buying now. Let's dive into three of them.
1. Historical post-halving price increases
Bitcoin's halving eventshave historically been strong catalysts for price appreciation. After the halving, which reduces the rate at which new bitcoins are created, you typically see a supply squeeze that drives prices higher. The effect is never immediate and the next cyclical peak usually appears between 12 and 18 months later. As such, Bitcoin prices might wobble over the summer before surging over the upcoming fall, winter, and spring. The precise timing cannot be predicted but the general theme is pretty reliable.
This pattern has repeated in previous cycles, with significant price increases occurring several months to a year and a half after each halving. The next substantial bull run should be right around the corner. I don't know how high the Bitcoin price chart may jump in this halving cycle, but it should be far above the roughly $64,400 peak of the 2020-2024 round.
2. Institutional investors are coming
The introduction of the first spot Bitcoin ETFs in February 2024 was a watershed moment for Bitcoin. These ETFs offer institutional investors a straightforward way to gain exposure to Bitcoin, potentially leading to a massive influx of capital into the market. At the same time, ordinary investors like you and me may have access to spot Bitcoin ETFs like the iShares Bitcoin Trust (IBIT -1.03%) and Fidelity Wise Origin Bitcoin Fund (FBTC -1.08%) in standard retirement savings accounts.
This institutional interest can drive demand and prices higher over time. So far, the new ETFs have absorbed about $50 billion of direct Bitcoin holdings. roughly 4% of the total Bitcoin market.
3. Bitcoin's built-in scarcity
There's only ever going to be 21 million Bitcoins, and that's set in stone. This hard cap makes Bitcoin one of the few assets with a truly limited supply.
Noted growth investor Cathie Wood realized that the supply of new Bitcoin coins is now increasing at a slower rate than the mining of physical gold is boosting gold supplies. As demand keeps climbing and the total supply remains fixed, the basic rules of economics suggest that prices will go up over the long haul. It's like owning a piece of digital gold -- a goal that was explicitly stated in Bitcoin's original design documents. That mysterious Satoshi Nakamoto figure sure had some long-range ambitions in 2009.
It's high time to get into Bitcoin
There's a lot more to say, but those are the basics of Bitcoin investing in the summer of 2024. Scarcity is not changing, halvings build value, and wider Bitcoin availability should boost the market.
If you don't have any Bitcoin in your portfolio yet, this pullback could be the perfect time to get started. Just remember that the road ahead may be bumpy, and you shouldn't let the occasional pothole scare you off the road to digital currency riches. As with any other asset class or industry, crypto investing is a marathon and not a sprint. Patience tends to be rewarded by the market in the long haul.
