The current price of Bitcoin is at the lowest point since last November. The following are analysts' views on "buy the dips" investment.
Bitcoin performed strongly in early 2024, hitting a new all-time high in January against the backdrop of the Federal Reserve's interest rate cuts and the federal government's support for the crypto industry. However, over the past few weeks, these gains have largely evaporated. While this is bad news for many digital asset holders, the decline has also led some investors to wonder: Is now a good time to "buy the dips"?
Although the crypto industry appeared to have a favorable outlook under the leadership of President Trump, the value of Bitcoin has plummeted nearly 30% since Trump took office, briefly dipping below $78,000 earlier this month. Even if Trump fulfills several crypto-related promises - including establishing a national Bitcoin reserve - the crypto market remains suppressed by the president's aggressive tariff policies and inflation concerns.
Investing in digital assets is not suitable for everyone, and there are many factors to consider before investing in risky assets. However, some insiders in the crypto industry say the market downturn may be a good opportunity to enter at lower prices.
Ryan Rasmussen, head of research at Bitwise (a crypto asset management firm that issues Bitcoin and Ethereum exchange-traded funds), told Fortune: "I do think that concerns about tariffs, rising inflation, rising unemployment, and the risk of the U.S. entering a recession are certainly weighing on investors' minds. But I think that creates opportunities for investors."
Invest or not?
The Bitcoin decline does not mean that everyone should start buying cryptocurrencies. In fact, digital assets have many opponents who point out that cryptocurrencies have only recently entered the financial realm, are highly volatile, and have a history of fraud.
"My view is that cryptocurrencies are unvalued," Artie Green, a certified financial planner from California, told Fortune. "We can determine the value of stocks, bonds, BDCs, but cryptocurrencies are purely speculative."
He advises anyone interested in investing in cryptocurrencies to first assess their financial situation, ensure they have enough funds to cover unexpected expenses, and then only invest surplus funds. "The only way I would recommend buying Bitcoin is if you first have a comprehensive financial plan in place to determine how much money you'll need for the rest of your life to cover all your living expenses and goals," he said.
For those who want to invest, there are several factors to consider before actually making a purchase, including technical proficiency and risk tolerance. Those who don't want to engage in active trading can consider investing in exchange-traded funds (ETFs) - financial products sold on the traditional stock market that track the price of an asset. Major institutions like BlackRock and Fidelity offer Bitcoin ETFs to investors, but there are also some ETF issuers specifically focused on cryptocurrencies, such as Grayscale and Bitwise.
"There are many ways to invest in Bitcoin and cryptocurrencies, and there is no single right answer," said Zach Pandl, research director at crypto asset management firm Grayscale. "Investors should first consider their own circumstances before making a decision."
For those who want to actively trade cryptocurrencies, holding Bitcoin directly through a cryptocurrency exchange can provide investors with more flexibility and control over their held assets. Crypto exchanges like Kraken and Coinbase allow investors to buy, sell, trade, and store cryptocurrencies, but the exchanges manage the assets for the investors. The downside is that if the exchange mismanages funds like FTX or is hacked like Bybit, investors are more vulnerable to losses.
Self-custody wallets like Metamask or Coinbase Wallet allow investors to actively use their cryptocurrencies in transactions and maintain control over their assets. However, this requires a certain level of understanding of blockchain technology. There is also the issue of remembering login information: there is no "forgot password" option to recover funds.
How much Bitcoin should you invest?
Those who want to purchase Bitcoin should carefully consider the amount they want to invest.
Crypto analysts and financial advisors have different views on this question. BlackRock, one of the world's largest traditional asset management firms, recommends that investors limit their Bitcoin allocation to within 2% of their portfolio, believing this proportion can maximize returns while limiting risks associated with volatility.
However, investment platforms focused on cryptocurrencies are more lenient, believing Bitcoin is an excellent addition to a portfolio as a diversified asset, and therefore investors should allocate a larger proportion of their portfolio to this currency. Grayscale, a crypto ETF issuer, recommends allocating 5% of a portfolio to Bitcoin, while Bitcoin-focused firm Swan suggests allocating up to 10% of funds to Bitcoin.
Looking ahead, some crypto observers believe the current decline will not last too long. James Butterfill, head of research at crypto asset management firm CoinShares, expects Bitcoin to stabilize soon.
"We're getting close to that kind of extreme pessimism peak," he said, adding that Bitcoin "seems to be showing quite strong support around the $80,000 level."
