Should you buy Bitcoin with less than $70,000?

In the typical way, Bitcoin (BTC -3.10%) 2024 continues to be unstable. After surging around 60% in the first three months of this year, it has traded in a relatively narrow range since then. As of September 26, the world's top digital asset was 11% below its all-time high from March.

Bulls are hoping for Bitcoin to break out and return to conditions that produce monster returns. Should you buy this cryptocurrency while it’s trading below $70,000?

short-term concentration

This year has been an exciting year for Bitcoin. In January, the long-awaited Spot Bitcoin Exchange Traded Fund (ETF) has been approved. The ETF launch was a huge success, with total inflows of $17.8 billion.

Then, in April, Bitcoin underwent a halving, when the number of new tokens entering the market was halved. This event occurs approximately every four years, and cryptocurrencies typically experience a bull market a year or so afterward. It is not yet clear whether this will be the case this time as well.

Another catalyst working in Bitcoin’s favor is the actions of the Federal Reserve. Earlier this month, the central bank cut interest rates for the first time in more than four years, and investors are hoping this will lead to policy gains. Starting a more relaxed posture.

You may be wondering what the relationship between falling interest rates and Bitcoin is. There is no direct relationship. However, lower interest rates encourage investors to take on more risk in order to generate better returns. When interest rates fall, the return on cash held in a savings account decreases, so it makes sense to buy riskier assets like Bitcoin.

Indeed, investors can't help but be bullish on the cryptocurrency given the successful ETF launch, Bitcoin's recent halving, and the prospect of further interest rate cuts from central banks.

think long term

I believe it is wise to buy Bitcoin while it is trading below $70,000. However, I don't plan on holding it for just a few months or a year. This is an asset that requires investors to have a very long-term mindset. Because investor sentiment is constantly changing, we don't know what will happen in the short term, and it will take years, even decades, to know the final outcome of Bitcoin.

But this virtual currency certainly has value. The system was created more than a decade ago and for the first time made it possible to send money electronically without the need for an intermediary. Citizens of developed countries may not care much, but for people living in emerging countries, Bitcoin provides access to the financial system.

Bitcoin’s fixed supply limit of 21 million coins is also very important for investors to understand. The US dollar, the world's reserve currency, has continuously declined in value for many years. Central banks continue to increase the money supply, in part to fund the government's continuing deficits. The fact that there are assets that anyone can own and whose supply is constant may make it more persuasive for investors to keep at least some of their savings there.

It is difficult to test how much Bitcoin will one day be worth. Gold is an apt comparison because it is an established store of value, which is what Bitcoin aims to be. All of the gold ever mined is estimated to be worth $18.1 trillion. If Bitcoin were to one day reach parity with precious metals, its price would rise roughly 1,300% from its current level of around $65,000. And as digital assets become even more popular, the profit potential becomes even greater.

It makes sense to buy Bitcoin now as part of a well-diversified portfolio.