Now that the Bitcoin (BTC +3.38%) halving hype is in the rearview mirror and an array of spot Bitcoin exchange-traded funds (ETFs) is available, it's a good time for investors to ask, "What's next?" The prospect of earning seven figures by HODL-ing (crypto lingo for holding) Bitcoin sounds enticing when the price is rising, but choppy consolidation periods can dim one's enthusiasm.
Yet the boring periods can offer opportunities. After all, the millionaire mindset isn't about chasing rallies and following crowds. They key to crypto prosperity is, as the old saying goes, putting time in the market rather than timing the market.
This isn't a get-rich-quick scheme
Making $1 million with Bitcoin will, first and foremost, require a substantial investment. Even if you expect Bitcoin to go from today's price of $63,000 to $630,000, you'd need a $100,000 investment to make your way to $1 million (and the IRS will surely demand a piece of that, by the way).
So, don't get caught up in get-rich-quick fantasies -- and don't put too much stock in commentators' predictions. Sure, analysts as Bernstein expect Bitcoin to hit $150,000 by 2025 and Ark Invest Chief Executive Officer Cathie Wood said it will reach $3.8 million by 2030, but these forecasts are a dime a dozen, and a dozen of them might not even be worth that dime.
Also, don't conclude from the Securities and Exchange Commission's (SEC) approval of spot Bitcoin ETFs that the regulatory war is won. Even the staunchest bulls shouldn't forget that the SEC is suing Binance and Robinhood Markets for their crypto activities, with the regulator's latest warning hinting at a potential enforcement action.
CRYPTO: BTC
Key Data Points
Perhaps the market's realization that the regulatory war isn't over yet is among the reasons Bitcoin is directionless now. This shouldn't be a problem, however, if you're a long-term Bitcoin bull and haven't made the mistake of pouring all of your investable capital into Bitcoin. Now that Bitcoin has pulled back from its record high of $73,000, investors can lower their cost basis by buying on the dips and capitalizing on quiet periods.
Watch the Fed for clues
Bernstein analysts cited various reasons for their bullish stance on Bitcoin. They observed robust inflows into spot Bitcoin ETFs, noted corporate interest in Bitcoin, and suggested that there's "continued discipline in the Bitcoin mining cycle" due to the halving events, which reduced the reward miners receive by half.
Fair enough, but there's an 800-pound gorilla that could have a greater impact than all of those factors. Bitcoin is among the riskiest of risk-on assets, and just a word or phrase from Federal Reserve Chairman Jerome Powell can cause risk-on assets to sink or soar.
Currently, the phrase that pays is "it's unlikely," as in: "I think it's unlikely that the next policy rate move will be a hike. I'd say it's unlikely." That's Powell's response to a question about the probability of an interest rate raise in the next Federal Open Market Committee meeting, which is scheduled for June.
That, along with the Labor Department's surprisingly weak April jobs growth numbers, lends credence to the idea that the economy is slowing, inflation will cool, and government-bond yields won't be higher for longer. If the dollar softens in response to a more accommodative Fed, that would provide a significant tailwind to Bitcoin.
Or at least, that's the assumption. Theory and practice are frequently at odds in the financial markets, and assumptions of future interest policy trajectory can be harmful to one's financial well-being.
Not knowing, but always learning
It's perfectly fine, then, to be agnostic about the future and resist the temptation to time the cryptocurrency markets. At the same time, being agnostic doesn't mean being uninformed. Central bank policy shifts will be impactful for years to come, and HODL-ing doesn't preclude paying attention to the relevant facts and circumstances.
Along with staying informed, being patient will be necessary in the journey to crypto-millionaire status. Consider it a marathon and not a sprint, with pit stops along the way as Bitcoin's dips and boring phases allow opportunities for research, reflection, and small crypto-stake additions.
