For much of the year, Bitcoin (BTC -0.89%) has been the talk of the crypto market. And that talk has only intensified in the wake of the U.S. presidential election. At one point, Bitcoin was up 45% in a stunning postelection rally, finally breaking through the highly anticipated $100,000 price.
For the year, Bitcoin is now up a staggering 132%. But is Bitcoin a buy? The answer to that question might not be as obvious as you think. Let's take a closer look at the case for and against investing in Bitcoin.
The case for buying Bitcoin
It might sound counterintuitive, but Bitcoin at a price of $100,000 might actually be a bargain. That's because there are plenty of analysts, investors, and crypto enthusiasts who think Bitcoin is going to soar much higher over the next decade.
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Cathie Wood of Ark Invest, for example, thinks that Bitcoin could hit $1 million within the next five years. Taking an even longer-term view, Michael Saylor of MicroStrategy (MSTR -3.24%) thinks that Bitcoin will hit $13 million within the next two decades. If they are right, then you could get a tenfold or even a hundredfold return on your investment in Bitcoin.
A key factor will be the new spot Bitcoin ETFs, which launched at the start of the year. They have unquestionably been a huge success story for the crypto market. The iShares Bitcoin Trust (IBIT -1.14%), for example, has already accumulated over $40 billion in assets to become the largest of the new spot Bitcoin ETFs.
All of that buying pressure from the ETFs is what continues to send Bitcoin higher. As long as both individual and institutional investors put money into these ETFs, it's within reason to expect that Bitcoin will continue to trend higher in the future. And that's especially the case if investors decide to boost their Bitcoin allocations.
Add the fact that the incoming Trump administration is very pro-Bitcoin, and it's easy to see why the future looks very bright indeed. One of Donald Trump's ideas, for example, is to create a strategic Bitcoin reserve. This would result in the U.S. government buying 200,000 Bitcoins per year over the next five years. That's some serious buying pressure, and will almost certainly force the price of Bitcoin higher.
The case for not buying Bitcoin
All of the above would seem to make a strong case for investing in Bitcoin, right? But there are still plenty of investors convinced that Bitcoin is just a speculative bubble. Some even suggest that Bitcoin is nothing more than a Ponzi scheme, with new Bitcoin investors being used to pay off older Bitcoin investors.
Even if that's not the case, there will likely be some profit-taking now that Bitcoin has hit the $100,000 mark. Investors are going to lock in their gains, and that's going to induce a fair amount of selling pressure. So Bitcoin might struggle to move significantly higher over the coming months.
Moreover, relative to other cryptocurrencies, Bitcoin no longer looks as attractive as it did just a few months ago. Yes, it may be up 132% for the year, but there are plenty of cryptocurrencies keeping pace with Bitcoin, or even surpassing it.
For example, 75 of the top 100 cryptocurrencies by market cap have actually outperformed Bitcoin over the past 90 days. That has led some to claim it's "altcoin season" now. During altcoin season, investors rotate out of Bitcoin and into smaller-cap cryptocurrencies, some of which have the potential to deliver stratospheric gains within a very short time.
And the verdict is...
I think the case for investing in Bitcoin is far more compelling than the case for not investing in Bitcoin. I'm bullish on Bitcoin over both the short and long terms.
The new spot ETFs are helping to tip Bitcoin into the mainstream, and we're now seeing widespread adoption of Bitcoin by both small retail investors and large institutional investors. If the U.S. government moves ahead with its plan to create a strategic Bitcoin reserve, the next stage in Bitcoin's upward trajectory could be the embrace of Bitcoin by governments around the world.
Admittedly, a price of $100,000 for Bitcoin might seem absurdly high. But that's the same thing people said when Bitcoin hit $100. And then when Bitcoin hit $1,000. And then when Bitcoin hit $10,000. If the Bitcoin bulls are right, then it's likely to be the same thing people say once Bitcoin hits $1 million.
