In case you haven't heard, Bitcoin (BTC 1.48%) is officially back. After an impressive 2023, Bitcoin has maintained momentum in 2024. In just the past month, the world's premier cryptocurrency jumped by more than 40% and notched a new all-time high of more than $73,000.
Now that Bitcoin is once again in the spotlight, investors may be curious if it's too late to buy. Such concerns are warranted, but with a deeper exploration it becomes clear that there is still considerable upside in the short term and that the long term holds even more promise.
The short-term angle
With Bitcoin hovering above $67,000 at the time of this writing, it's clear that the huge gains that could have been made when it was trading for just $16,000 during the crypto winter are likely gone. However, that doesn't mean it isn't worthy of an investment today.
When taking a holistic view of Bitcoin's current position relative to past bull markets, there is a plethora of data that shows that we are only in the beginning stages of Bitcoin's resurgence. In other words, Bitcoin has considerable room to run.
CRYPTO: BTC
Key Data Points
We can look at metrics derived from its blockchain for proof of this. One of the best indicators of Bitcoin's current position within this cycle is the market value to realized value ratio, or MVRV. Market value is calculated by multiplying Bitcoin's circulating supply by its current price. It is the same as the market capitalization.
Then there is realized value, which is calculated by determining the price of each Bitcoin the last time it was transacted. This provides a more granular insight into market dynamics as it removes the generalization that every Bitcoin in circulation was purchased at the most recent price.
By dividing the two, we get MVRV, and a much better picture of Bitcoin's current position. In fact, MVRV has proven to be a timely indicator of market tops as well as bottoms. Today, Bitcoin's MVRV sits at just over 3, far from the higher levels of 7.5 that usually mark bull market peaks.
Image source: Glassnode.
The long-term perspective
After going over the short-term potential for Bitcoin, it's time to zoom out a bit. Arguably the most appealing reason to invest in Bitcoin is its long-term potential.
To spare you from reading about my personal conviction and quasi-philosophical belief in Bitcoin, I'll resort to the data to prove why there really is no bad time to buy Bitcoin -- so long as you plan on investing for the long haul.
In a recent post on X, Willy Woo, a prominent Bitcoin analyst, highlighted the consistent pattern of Bitcoin's price appreciation over four-year cycles. He demonstrated that holding Bitcoin for at least four years has always resulted in a profit, translating to an average annualized return of about 30%. This showcases Bitcoin's resilience even when it occasionally loses half to three-quarters of its value.
For those considering #Bitcoin. Remember to hold for 4 years. It's never returned below 30% annualised for a 4 year investment, no matter how badly timed...
-- Willy Woo (@woonomic) February 22, 2024
BTC: 30-60%, 75% drawdowns
SP500: 10%, 35% drawdowns
Real Estate: 10%, 30%+ drawdowns
VC Funds: 15%-27%, 10 year lock up pic.twitter.com/UjxCQAHM5l
The consistent performance of Bitcoin can be attributed to various factors, including its finite supply and the reduction every four years in the rate at which new coins are created. However, what further enhances Bitcoin's appeal over the long term is its ongoing evolution as a legitimate asset.
A prime example of this evolution is the recent approval of spot Bitcoin exchange-traded funds (ETFs). These ETFs have demonstrated early success, signaling the beginning of Bitcoin's journey toward broader legitimacy. As these ETFs continue to gain traction, the demand for Bitcoin is likely to increase, exerting additional pressure on its limited supply. This trend could potentially lead to a cascading effect.
As its distinct functionality and ability to give portfolios a boost becomes more well known, it could kick off widespread adoption of Bitcoin by individuals, corporations, and maybe even governments. From this standpoint, it only reinforces that today remains an opportune moment to grab the world's premier cryptocurrency. It's still early.
