Here's What Bitcoin's New All-Time High Means For Investors

For the second time this year, Bitcoin bulls have reason to celebrate. Early this morning, Bitcoin's price reached $75,359 -- smashing March's previous all-time high, per CoinGecko data. Bitcoin's recent rise was fueled by an influx of institutional money into spot crypto ETFs and increasing economic optimism. The election result pushed it to break new ground.

If you're thinking of buying Bitcoin, you might be wondering what this means for investors.

Does Bitcoin's recent price action mean it's here to stay?

Positive price action is certainly reassuring, but the true test of whether Bitcoin is here to stay will be long-term adoption. There's a lot we don't know about how cryptocurrency will develop. It's a relatively new and unregulated industry, and it's still unclear what people will use Bitcoin for in the long term.

That said, Bitcoin does appear to be maturing. Don't get me wrong, it continues to be a volatile and high-risk asset. But the price swings have become less drastic. Its price has barely sunk below $55,000 since March's high of $73,738. That's a very different picture from previous years.

Indeed, research by Fidelity shows that the top cryptocurrency was less volatile than several popular S&P 500 stocks. For example, its analysis shows that Netflix was more volatile over the two-year period ending March 2024.

Even so, Netflix is still a totally different asset class. The stock market has existed for hundreds of years, which is plenty of time for various regulations and investor protections to evolve. In contrast, Bitcoin is less than two decades old and still has the sword of changing regulation hanging over it.

Three questions to consider before you buy Bitcoin

Before you buy any investment, it's important to be clear on why you're buying. Think about your tolerance for risk and how cryptocurrency fits with your overall investment strategy. Here are some questions to consider.

1. How will you buy and store it?

Cryptocurrency assets do not have the same protections against institution failure or theft as money in the bank or stocks in a brokerage account. As an investor, that means being conscious of security when buying and storing digital assets.

Here's how that looks with some of the most common ways you can add Bitcoin to your portfolio:

• Top cryptocurrency exchange: Cryptocurrency exchanges have a broad mix of cryptos and crypto-related products. It is easy to move your assets to a crypto wallet you control, which gives you extra protection against platform failure.
• Crypto broker: A couple of popular brokerages offer cryptocurrencies. They don't have as much functionality or as many cryptos as exchanges, but the fact that they're registered with the SEC to trade other assets makes them feel more secure.
• Spot Bitcoin ETF: The SEC greenlighted spot Bitcoin ETFs at the start of the year. This means many investors can buy them from a brokerage account, just as they would other ETFs and stocks. One big advantage is that the fund managers are responsible for storing the Bitcoin safely.

Robinhood has broken the mold in terms of crypto offerings. You can buy several cryptocurrencies directly, as well as spot Bitcoin and Ethereum ETFs. Plus, it's the only brokerage with a crypto wallet that lets you deposit and withdraw crypto. WARNING SCL [brokerage slug=robinhood field=apply_url] does not generate a link. Anchor tag will not render in production.Click here to learn more about Robinhood's crypto offer and open an account.

2. Have you researched Bitcoin and its long-term potential?

Think about why you're buying cryptocurrency. If it's because you see the price rising and worry about missing out, pause and do a bit more digging. Look at the different arguments on how Bitcoin will develop -- both critical and optimistic.

Some argue that Bitcoin has value as a type of digital gold or the future currency of the internet. Others see it as taking a chunk out of the global money transfer market. On the other hand, critics say it's a speculative asset with no intrinsic value.

3. How does it fit with the rest of your portfolio?

Risky assets like cryptocurrency should only make up a small percentage of your wider portfolio. Think about what level of risk you're comfortable with and how to balance your investments accordingly.

Building a diversified portfolio can be a great way to safeguard your funds. If one sector or asset performs badly, you're insulated against losses. If it does well, you'll still reap the rewards.

Don't buy Bitcoin just because it hit an all-time high

Not only has Bitcoin more than erased the losses of recent years, it's also becoming less volatile. However, it's still a high-risk asset that could fall to zero.

Only invest money you can afford to lose, and do your own research into the blockchain and Bitcoin. Positive short-term price action is one thing, but if you're a buy-and-hold investor, long-term value is a lot more important.