Should You Invest in Bitcoin Right Now?

Muhammad Naeem

Blogger

Bitcoin, the leading cryptocurrency by market cap, is again in the spotlight. After Donald Trump won the presidential election on Nov 05, 2024, Bitcoin shot up to its new all-time high of $93,434 on Nov 13, 2024. Many crypto geeks are of the view that Trump will be a favorable president for the cryptocurrency industry. During Trump’s electoral campaign, he stressed making the US a “crypto capital of the planet.”

However, to answer the question of whether Bitcoin should be a part of your investment portfolio, you need to peer beyond the daily news. Bitcoin is generally deemed as a high-risk investment with high risk-reward ratios.

Therefore, it should be undertaken only where the investor has a relatively high-risk tolerance, good financial standing, and is prepared to face the probability of losing their invested amount.

Bitcoin's Technical Analysis: A Bullish Outlook?

The year 2024 started with some positive signals for cryptocurrencies such as Bitcoin and Ethereum, which created quite optimistic sentiments among crypto investors. The approval of Bitcoin ETFs by the SEC on January 10 has proved to be one of the most significant milestones in crypto adoption, which resulted in Bitcoin shooting up over 50% in the following two months.

Source: CNN

However, the positive narrative came only after a prolonged period of turbulence. The year 2022 was majorly dominated by downward movements as the overall crypto community was caught off-guard by a series of unfortunate events, including the Terra Luna collapse, FTX sinking, macroeconomic factors, and Binance getting tangled up in legal questions. Nonetheless, the market displayed signs of recovery throughout the next year, especially with BTC indicating some good rally in its value.

Now after a year of bullish sentiment and positive narratives around the crypto industry, Bitcoin has finally surged up across the previous resistance zones to set up a new all-time high of $93,434 on Nov 13, 2024. The cryptocurrency has tripped its all-time high several times after Trump’s win. This price hike was accompanied by an increase in BTC’s market capitalization upto $1.8 trillion, supporting the global crypto market capitalization of $2.9 trillion and representing outstanding performance.

Yet, despite the recent developments, for several experts, the future of the crypto market stands uncertain. Retail investors must be more cautious about every green and red move of Bitcoin as it has a history of volatility.

Furthermore,  many governments are trying to regulate this new financial market, which can be a contributive factor regarding the industry’s future. For instance, a survey indicated that 75% of Americans are not confident in crypto’s reliability.

Several countries continue to remain clear with their hardline approach to cryptocurrencies, with the Indian government recently including all crypto transactions under the Money Laundering Act.

Fundamental factors like US election results, BTC ETFs, and Chinese government policies regarding crypto have played crucial roles in deciding future price action. BTC has the potential to record a new high and reach $106,797.

Is it the right time to invest in Bitcoin?

Though the recent price hikes and developments on the regulatory landscape paint an overall positive picture for the foreseeable future in the crypto space, a significant portion of experts still consider it a volatile investment instrument, which many investors prefer to avoid. Investment data shows that the success of Bitcoin Investments are largely determined by the time of entry and exit.

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A study by the Bank for International Settlements found that 75 % of people who bought Bitcoins between 2015 and 2022 probably lost their investments even though the price of the digital asset has skyrocketed. The report data also suggest that these numbers are most probably because many investors got into the market at the wrong time.

Javier Molina, the market analyst for the eToro investment platform, has pointed out that despite increasing volatility and interesting outlooks offered by cryptocurrencies in the wake of Mr Trump’s presidency, there are also risks. He adds: “As we can observe, some of the so-called “meme coins” such as DOGE have risen by 20% against such expectations, which to me seem to be rather hard to meet.”

A majority of Bitcoin investors are retailers, but large investors or institutions have also been playing an important role in the market. These investors or institutional investors are normally known as the “Bitcoin Whales.” Stats show an increase in the Bitcoin holdings of these Whales’ wallets.

According to the CoinMarketCap data as of Nov 14, 2024, the Bitcoin whales have 248.60K BTC in their wallets. This shows that bigger investors have been loading up their wallets with a significant amount of Bitcoins. The increase in this accumulation may help in pushing the price of Bitcoin higher.

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Effect of Bitcoin Halving Event

Over the years, Bitcoin Halving has proven to be one of the more significant factors in determining a potentially good time of entry in the market. Once again, it is among the reasons crypto experts are optimistic about the Bitcoin surge in 2024.

The BTC halving occurs after four years. Through this algorithmic event, the rewards allotted to the Bitcoin miners are cut by 50%. After the recent halving event in April 2024, the payout made to the miners was reduced to 3.125 BTC. Historically, halvings have been positive for the price of Bitcoin since it helps contract supply.

Many investors see halvings positively, more so as a start of a bull market. Over the course of the previous three halvings, this narrative has continued to remain true, with BTC and the overall crypto market experiencing phenomenal gains post-halvings. Nevertheless, some analysts have also observed a slowdown in the post-halving effect.

This year's halving, which happened on April 20, 2024, has so far not induced the expected BTC boost. While it may act as a sign of worry for some, others are hopeful that the expected gains are to come in the coming months.

Experts Opinion on the Speculative Surge

Damon Polistina, head of research at Eaglebrook, said,

“What you've seen since the election is the market hoping or realizing what that could mean for Bitcoin in the medium to long term – a pro-Bitcoin administration, Senate and potential legislation that not only gives U.S. citizens the right to self-custody Bitcoin but potentially for Bitcoin to be a strategic reserve asset for the U.S. Treasury."

JJ Kinahan, CEO of IG North America and president of Tastytrade retail brokerage, said, “Many people believe that we will inevitably get to Bitcoin at $100k. I expect Bitcoin to continue building momentum, at least until after the inauguration when we find out what the real plans to get there are.”

Il Capo of Crypto writes on his official channel,

People ask me how I can stay so calm in moments like these. The truth is, I don’t like to buy breakouts, especially when they are not planned and there's emotion involved… However, I prefer to be cautious still, and have little to no exposure right now.

No FOMO...

Final Thoughts

On the one hand, Bitcoin enthusiasts think of it as a digital revolution that will outstrip them in the future; on the other hand, critics regard it as an asset that is too unstable.

Ultimately, whether Bitcoin fits your investment strategy hinges on your tolerance for risk, financial goals, and consideration of its volatility. The history of Bitcoin is like no other – it has gone from upswings and downturns to practically no movement at all because of the influence of global affairs, licensing, and the market.