If you’ve been watching Bitcoin prices in 2021, you saw that it has been on a record-setting run. There are no longer any hurdles to buy Bitcoin, and the rate of accessibility is higher than ever.
However, the bullish build-up switched to a falling trajectory over the last few weeks. Any substantial drop reawakens memories of the 2017 crash. Some investors see the dip as an opportunity to steel their nerves and buy. Let’s investigate.
Bitcoin’s Performance in 2021
Before you consider investing, you need to be aware of all the spikes and drops that have taken place just in the first two months:
- January 10 – $40,767 – Fourth-richest man invests in crypto mining;
- January 26 – A crash down to $31,879;
- February 22 – $56,190 – Another rise, possibly caused by crypto skeptics’ FOMO;
- February 28 – A big sell-off leading to $44,920.
These ups and downs continued:
- March 14: $60,680 vs March 26: $52,591
- April 14: $64,339 vs April 23: $48,803
- May 10: $58,892 vs May 17: $44,759
Where Is Bitcoin Headed?
There are discussions about Bitcoin hitting $100,000 before the end of the year. The perceived increased demand for Bitcoins is only fuelling these highly optimistic forecasts.
Many BTC bulls focus on the limited total supply of 21 million (at the time of writing, around 18.5 million Bitcoins have been mined). So, when the number of existing coins reaches the limit, it’s likely to contribute to a higher price.
Bitcoin’s growth has happened even despite a modest uptick in corporate buying. A growing institutional interest hasn’t had the chance to make an impact. Wall Street players, such as Stanley Druckenmiller and Paul Tudor Jones, are known supporters. Famed investor Bill Miller also recently shared a positive view on BTC in his monthly letter to clients.
The Earning Potential and the Risks
Bitcoin remains a riskier investment option compared to most other asset classes (including other cryptocurrencies like, for example, Ethereum (ETH)). While stock prices fluctuate as a reaction to the fundamental performance of a company, BTC isn’t tied to something specific and observable. If you’ve just started your investing journey, allocating most of your portfolio to crypto may not be the best option.
The final decision depends on your risk tolerance. Some investors find the higher risk attractive due to higher rewards.
From the historical perspective, Bitcoin shows superior risk-adjusted returns over time. And even though it may not be for everyone, you might as well give it a thought. Or, if the time is right, give it a chance. A small portion of your total investment portfolio can go a long way with Bitcoin.
Tips to Do It Right
Follow these tips to minimize the mistakes you make with BTC investments:
- Keep it safe and secure: Store your coins in a reputable wallet, possibly in an offline device like Ledger or Trezor. If you purchase large amounts, you may also want to add a seed backup.
- Learn technical analysis: Understand how things like candles, moving averages, RSI, and the order book can show you a potentially profitable moment to buy BTC. If you’re not good at TA, at least get familiar with TradingView.
- Have a buy-and-hold mentality: If you’re not prepared to watch the market daily, think of it as a long-term investment. Thus, you won’t need to follow Bitcoin’s heightened day-to-day volatility.
Overall, Bitcoin tends to recover from crashes and reward those who show the virtue of patience.